SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 10-K
(Mark One)
[X] Annual Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act
of
1934 (Fee Required)
For the fiscal year ended December 31, 1995
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange
Act
of 1934 (No Fee Required)
For the transition period from ________ to ________
Commission file number 0-12081
CAMBRIDGE BIOTECH CORPORATION
(Exact name of registrant as specified in charter)
Delaware 04-2726626
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
365 Plantation Street,
Worcester, Massachusetts 01605
(Address of principal executive offices) (zip code)
Registrant's telephone number
including area code: (508) 797-5777
Securities registered pursuant
to Section 12(b) of the Act: None
Securities registered pursuant
to Section 12(g) of the Act: Common Stock, $.01 par value
(Title of Class)
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_____ No__X__
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of shares of voting stock held by non-
affiliates of the registrant as of March 15, 1996, was
approximately $30,700,543 based on the average of the high and low
price of such stock on such date.
Common Stock Outstanding as of March 15, 1996: 26,057,006 shares
DOCUMENTS INCORPORATED BY REFERENCE
NONE
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CAMBRIDGE BIOTECH CORPORATION - FORM 10-K
Part I
Item 1. Business
OVERVIEW
Cambridge Biotech Corporation ("CBC" or the "Company") is in
the business of developing, manufacturing and marketing products
for the prevention, detection and treatment of diseases in humans
and animals. Its Biopharmaceutical Division creates products
which stimulate the immune system to control or prevent infectious
diseases and cancer. The Diagnostic Division has developed an
extensive line of diagnostic products for the detection of
infectious diseases.
On July 7, 1994, CBC filed for protection under Chapter 11 of
the United States Bankruptcy Code and is a debtor in possession
pursuant to a voluntary petition filed in the United States
Bankruptcy Court for the district of Massachusetts, Western
Division, Case No. 94-43054-JFQ. Since the commencement of the
Chapter 11 Case, CBC has been aggressively restructuring its
business and refocusing its business strategy. CBC has made
significant progress in developing and implementing its strategy
of emerging as a refocused, recapitalized Biopharmaceutical
company. To that end, CBC has sold off its unprofitable Irish
subsidiary and other non-essential assets and is negotiating the
sale of its diagnostics business. CBC has given considerable
attention to resolving a class action lawsuit filed against the
Company and several of its former officers, and has successfully
negotiated a settlement with the plaintiffs which has been
preliminarily approved by the District Court. In order to
maximize the value of the diagnostics business, CBC devoted
significant effort to litigation commenced by Institut Pasteur and
Genetic Systems Corporation alleging patent infringement with
respect to CBC's commercialization of diagnostic tests for the
HIV-2 strain of the AIDS virus and CBC's Western Blot confirmatory
test for HIV-1. This litigation has now been favorably
adjudicated by the Bankruptcy Court.
In April 1995, CBC engaged Dr. Alison Taunton-Rigby as its
new President and Chief Executive Officer. Jeffrey T. Beaver
became Chairman of the Board of Directors. Under Dr. Taunton-
Rigby's leadership, CBC has developed and begun to implement a new
strategic business plan. This plan contemplates sale of the
Diagnostic Division and the focusing of the Company after its
emergence from Chapter 11 on the business of the Biopharmaceutical
Division. The Company is currently actively negotiating with
potential buyers for the sale of the Diagnostic Division. Any sale
is subject to the approval of the Bankruptcy Court.
BIOPHARMACEUTICAL DIVISION
The Company's Biopharmaceutical Division creates products
which stimulate the immune system to control or prevent infectious
diseases and cancer. The Company's first vaccine, for feline
leukemia virus, has been sold commercially since 1989. The
Company is currently developing human vaccines for streptococcal
pneumonia, malaria and tick-borne diseases, and animal vaccines
for Lyme disease and bovine mastitis. Company scientists have
purified a family of compounds that are potent immune stimulants
which can be used as adjuvants. Adjuvants are important
components of vaccines that, in conjunction with the antigen (the
disease-related component), stimulate the immune system to produce
a protective response. One of these adjuvants, QS-21, is being
formulated with various human vaccines and has been tested in over
500 people. The Company is commercializing this family of
adjuvants under the tradename StimulonTM, both by licensing other
pharmaceutical companies to incorporate StimulonTM adjuvants into
their vaccines and by using them in the Company's own vaccine
development programs.
The worldwide vaccine market was estimated in 1993 by Frost &
Sullivan to total approximately $2.5 billion per year, of which
50% is in North America and almost 30% in Europe. Frost &
Sullivan project that the total worldwide vaccine market will
exceed $5 billion by 1999. Vaccines are widely considered to be a
cost-effective method of delivering significant public health
benefits, and government and industry are committing substantial
resources to developing new vaccines and other immunotherapy
products for use in the prevention and treatment of disease. The
advent of biotechnology has enabled scientists to develop a new
generation of vaccines, known as subunit or recombinant vaccines.
Since these new recombinant vaccines contain only immunologically
important portions of the infectious agent, they are often safer
than classical vaccines, but sometimes less effective in
stimulating adequate immune responses. Adjuvants heighten the
immune response generated by vaccination. New, more effective
adjuvants such as QS-21 are often necessary to make the new
generation of recombinant vaccines effective.
The Company conducts research and development in the adjuvant
field and maintains its own vaccine and immunotherapy product
development programs. The Company developed the first recombinant
vaccine against a tumor-causing virus in mammals, a vaccine
against feline leukemia virus (FeLV). As part of the FeLV vaccine
product development effort, it developed a new family of
adjuvants. QS-21 is part of the StimulonTM family, and is the
basis for much of the Company's vaccine-related activities.
The Company has licensed other vaccine manufacturers to use
QS-21 and other StimulonTM adjuvants in their own vaccine programs,
including SmithKline Beecham p.l.c., Pasteur Merieux Serums &
Vaccins S.A., Wyeth-Lederle Vaccines and Pediatrics, Genentech,
Inc., NABI, and Progenics Pharmaceuticals, Inc. These licensees
have completed nine clinical trials thus far. The Company has
received substantial license fees and anticipates that it will
receive additional license fees and royalties, as well as revenues
from the manufacturing and supply of adjuvant.
In the human health field, the Company is developing a
vaccine to prevent pneumococcal infections in the elderly
population. It is also developing a combination vaccine for tick-
borne diseases to protect against human Lyme disease and human
granulocytic ehrlichiosis ("HGE"), a disease which has only
recently been identified as a significant human health concern.
The Company believes that it was the first to successfully
cultivate the HGE organism in tissue culture, and has filed patent
applications on infected cell lines, methods of growing the
organism, and vaccine antigens and diagnostic reagents derived
from the cell lines. In addition, CBC is working with the World
Health Organization to develop two vaccines against malaria, and
with outside collaborators on vaccines for the prevention or
treatment of other infectious diseases and cancer.
In the animal health area, CBC is completing development of a
canine Lyme Disease vaccine and is also developing a vaccine
against bovine mastitis, the leading healthcare concern in the
dairy industry. CBC also manufactures an FeLV vaccine.
The Company has experience manufacturing clinical
pharmaceutical products and animal vaccines, through manufacturing
the FeLV vaccine and QS-21. The Company intends to manufacture
certain of the products which it develops.
BIOPHARMACEUTICAL PRODUCTS MANUFACTURED BY CBC FOR
HUMAN CLINICAL RESEARCH AND VETERINARY HEALTH CARE
GenetivacTM FeLV (1)
FeLV Antigen (1)(2)
StimulonTM QA-21 Adjuvant (2)
StimulonTM QS-21 Adjuvant (3)
____________________________
(1) Licensed by the USDA
(2) Sold for manufacture into veterinary products
(3) Constituent material currently sold for research
The Company's Business Strategy
The StimulonTM Adjuvant. Continued success of the StimulonTM
adjuvant program is considered central to the future success of
the Company. It has licensed major vaccine manufacturers to
incorporate QS-21 and the other StimulonTM adjuvants into their
own vaccine programs. The Company intends to devote considerable
effort to monitoring the licensees' diligence in pursuing their
development programs, conducting experiments and sharing technical
advances believed likely to further these programs, optimizing
adjuvant manufacturing processes, and conducting additional
adjuvant development. The Company expects to grant new licenses
for the adjuvant in applications which will not conflict with its
own vaccine development programs. It will continue to pursue
opportunities, such as the malaria vaccine program which, if
successful, could create a substantial market for bulk adjuvant.
Human Vaccine Development. The Company intends to focus its
own product development efforts on emerging diseases, such as Lyme
disease and HGE, and emerging problems, such as the pressing need
for an improved pneumococcal vaccine. The Company believes that
its technical strengths and available resources are best suited to
taking product from late-stage research through to proof of
principle in humans. The Company has demonstrated its product
development capabilities in its development of the FeLV vaccine
and the first recombinant diagnostic test for HIV. In addition to
its own development efforts, the Company has established a large
network of independent academic collaborators to supplement the
flow of product development opportunities. The Company expects to
seek marketing partners for most of its products in this area,
although it will be alert to opportunities to complete product
development and even market products directly. Cancer vaccines
may present such an opportunity.
Animal Health. Historically, animal health was a focus of
CBC and it continues to present an important opportunity.
However, the Company believes that the advantages of animal
health--the ability to carry on development in the host animal and
the relatively rapid regulatory process--tend to be offset by
smaller market sizes and profit potential. Therefore, it will
only devote its development resources to animal health if the
product opportunity addresses a large market with attractive
margins (such as bovine mastitis), or if the development is funded
by a partner (such as with its FeLV vaccine) or if the opportunity
in animal health is a by-product of a human program (as may be the
case with HGE).
Products and Programs
Licensing for Infectious Diseases and Cancer. The Company
has licensed a number of other companies, including three of the
world's four leading vaccine manufacturers, to use StimulonTM
adjuvants in a variety of infectious disease vaccines. At the
same time, the Company reserved its own right to use StimulonTM
adjuvants to develop selected vaccines.
The licensees have completed a number of clinical trials and
have development programs underway for a significant number of
diseases, as summarized in the tables below:
StimulonTM Vaccine Product Development Programs:
Clinical Trials Completed
Disease Market Trial
Influenzaa 50 million infections per year Phase I
Phase I
Herpes 125 million people infected Phase I
simplex Phase I
HIV-1 >1 million people infected in U.S. Phase I
Hepatitis B 300,000 new cases per year in Phase I
U.S.
Melanomaa 30,000 cases per year in U.S. Phase I/II
Phase I/II
Phase I/II
a. Multiple partners and/or different antigens
StimulonTM Vaccine Product Development Programs: Ongoing
Clinical Trials Ongoing
B-Cell Lymphomaa (Phase I) Influenzaa
Breast Cancer (Phase I) Malaria
Colon Cancer (Phase I) Melanomaa (Phase I)
Hepatitis B Melanomaa (Phase II)
Herpes simplex Melanoma (2, Phase II)
HIVa (Phase I) Respiratory Virus (Phase I)
Influenzaa (Phase I)
Pre-Clinical/Research
B-Cell Lymphomaa HIV-Ia
Chlamydia Melanomaa
CMV Para influenzaa
EBV Rotavirus
Gonococcus Strep-pneumaa
Hepatitis C Toxoplasmosis
Herpes Zoster
a. Multiple partners and/or diffrent antigens
The license agreements with strategic partners typically
provide for the payment of initial license fees, additional fees
either annually or based on the licensee's achievement of
development milestones, and royalties on product sales. In
addition, the Company will be the sole supplier of QS-21 used in
the vaccines. Through December 1995, the Company has received
over $15 million in license fees.
The principal licensees are:
SmithKline Beecham has licensed QS-21 for a number of
different applications, including influenza, herpes,
hepatitis, and Lyme disease. The world's leading
manufacturer of Hepatitis B vaccine, SmithKline is
aggressively marketing its existing portfolio of vaccines,
while developing new and improved products. SmithKline has
completed a number of Phase I clinical trials of potential
vaccines containing QS-21 and is also investigating the use
of combinations of different adjuvants. The Company believes
that SmithKline will initiate additional trials in 1996, and
has QS-21 in its pre-clinical development programs for
several vaccines.
Pasteur Merieux Serums & Vaccins has licensed QS-21 for
use in its influenza and HIV vaccine programs. The world's
leading manufacturer of influenza vaccines, Pasteur Merieux
has since 1990 increased its presence in North America
through its acquisition of Connaught Laboratories. Pasteur
Merieux has completed a low dose QS-21 Phase I clinical trial
for influenza. Pasteur Merieux expects to initiate a high
dose QS-21 influenza Phase I trial in 1996 and also plans to
initiate two HIV vaccine Phase I trials in 1996 incorporating
QS-21, using two different antigen approaches.
Wyeth-Lederle Vaccines and Pediatrics licensed QS-21 in
1992 for use in five vaccines. Wyeth-Lederle, formed as a
result of the acquisition of American Cyanamid by American
Home Products, is a leader in pediatric vaccines. Wyeth-
Lederle initiated its first Phase I clinical trial using QS-
21 in 1995, and expects to continue trials in 1996.
Progenics Pharmaceuticals, Inc. licensed QS-21 in 1995
for use in therapeutic vaccines for cancer. Progenics' most
advanced program involves the use of QS-21 with a ganglioside
preparation to treat melanoma. Phase I/II clinical trials of
this vaccine, which was initially developed by physicians at
Memorial Hospital for Cancer and Related Diseases ("Memorial
Sloan Kettering"), were completed in 1993. The product is
expected to enter pivotal human trials in 1996 under the
aegis of the Collaborative Oncology Groups. Other potential
antigens have been tested in Phase I/II clinical trials. One
Phase I/II trial is still ongoing and will be completed in
the fourth quarter of 1996. Memorial Sloan Kettering has
licensed technology to Progenics, and the Company has
licensed Progenics to use QS-21 in exchange for a license
fee, an equity interest in Progenics, and royalties.
In addition, the Company has granted two other licenses to
use QS-21 for infectious diseases. Genentech has licensed QS-21
for use in its HIV-1 vaccine program. Genentech has conducted
Phase I clinical trials in healthy volunteers with a vaccine
formulated with QS-21, under the auspices of the National
Institutes of Health ("NIH"). This trial was expanded in 1994
after improved neutralizing antibody responses were observed in
volunteers receiving vaccines containing QS-21. Genentech hopes
to initiate two additional studies in 1996, one with infants born
to HIV-positive mothers and another evaluating a low-dose vaccine
formulation in normal volunteers. The NIH is sponsoring both of
these trials. However, the NIH has not agreed to fund large-scale
efficacy trials of the Genentech vaccine, or any HIV vaccine, and
has sharply limited the progress of HIV vaccines to pivotal
clinical trials. The Company understands that Genentech is
currently re-evaluating its HIV vaccine program.
NABI has licensed QS-21 for use in production of
immunoglobulin for prevention and treatment of gram-negative and
gram-positive bacterial infections. NABI is currently evaluating
its conjugate vaccines in clinical trials without using adjuvants
and is evaluating QS-21 in preclinical studies. NABI is also
testing the efficacy of its immunogloblin in a target population
of children with cystic fibrosis, and is testing its Staphyloccal
vaccine in other clinical trials. The Company is uncertain if or
when NABI will commence clinical trials using QS-21.
Manufacturing and Scale-Up
As part of each Stimulon_ licensing agreement, the Company
has retained the right to be the exclusive QS-21 supplier. The
QS-21 license agreements stipulate the supply prices, within
certain ranges. The Company believes that it will be able to
manufacture adjuvant at a cost which will yield reasonable
manufacturing margins. Pursuant to the license agreements, the
Company will also receive royalties on its licensees' product
sales.
The Company currently manufactures QS-21 for commercial
animal health use and for use in early stage human clinical
trials. The Company has successfully scaled the QS-21
manufacturing process to a point where the average batch size is
sufficient for approximately 100,000 vaccine doses. Product for
use in Phase III clinical trials has been produced on a contract
basis at BASF BioResearch Corporation, in Worcester, MA. The
Company plans to begin manufacturing additional product for use in
Phase III clinical trials in its Worcester facility. The Company
is currently scaling the process to produce a batch size suitable
for commercial production of between 500,000 and 2,000,000 doses,
and expects that its process will be commercially feasible.
QS-21 is currently classified by the FDA as a constituent
material used in drug preparation. As a result, the FDA does not
require licensure of facilities used in its manufacture. The
Company believes that classification as a constituent material
affords it the flexibility to postpone investment in commercial
manufacturing facilities until after the safety and effectiveness
of QS-21 have been demonstrated in Phase III trials. By that
time, the Company expects to be in a position to reasonably
project the required plant capacity. Product for early
commercialization may be produced on a contract basis.
Adjuvant Research and Development. While QS-21 is the first
adjuvant developed by the Company, research and development is
proceeding to identify and create other adjuvants and to develop
new methods of using adjuvants. The Company currently has in
development QS-7, another molecule isolated from the Quillaja
saponaria bark extract. QS-7 appears to have similar
immunogenicity and a better toxicological profile in animals than
QS-21, which may make it more suitable for use in certain
vaccines. The Company and its licensees may initiate human pre-
clinical testing with QS-7 in 1996.
The Company maintains an active research program expanding
the use of QS-21 and other saponins. Company scientists are
working internally and in conjunction with outside collaborators.
Significant efforts are underway in the following areas:
Trans-mucosal Delivery of Vaccines. If vaccines could be
administered across the mucosa--e.g., nasally or vaginally--the
ease of use would increase compliance and the vaccine may offer
improved protection against pathogens which infect via this route-
-for example, sexually transmitted diseases and certain
respiratory diseases. In addition to their adjuvant properties,
StimulonTM adjuvants alter the permeability of mucosal membranes,
and this quality may enable such vaccines to be developed. The
Company has demonstrated in a mouse model the ability of a vaccine
containing QS-21, delivered nasally, to induce both antibody and
cell-mediated immune responses. The Company is working with
academic collaborators to develop this approach.
Nucleic Acid ("Naked DNA") Vaccines. An intriguing new
vaccine technology, known as "Naked DNA," involves injecting DNA
sequences directly into muscle tissue. The muscle cells then take
up the DNA and produce the encoded protein. The Company is
collaborating with an academic researcher developing this
technology to determine if QS-21 can improve the effectiveness of
such vaccines.
"Tuning" of Vaccines. Some vaccines derive their
effectiveness primarily from the induction of an antibody
response, while others depend primarily on a cell-mediated
response. The Company believes that it is desirable to "tune"
some vaccine formulations to achieve the most effective immune
response to the target disease. One such program currently
underway is a collaboration with the Immune Response Corporation
to test the hypothesis of the late Jonas Salk that an effective
HIV vaccine must be tuned to induce a cell-mediated response with
little or no antibody response. Salk's hypothesis is that a low
antigen dose plus an adjuvant that promotes cell mediated immune
response is the approach to use to elicit an effective immune
response to HIV.
The Company and its collaborators are also conducting
research aimed at better understanding how QS-21 and other
adjuvants work, testing adjuvant and carrier combinations, and
discovering new adjuvants.
Human Vaccine Programs
In addition to its licensees' programs, the Company is
developing its own vaccines for human use as set forth below:
Human Product Development Programs
Program Primary Market Status
Population
S. pneumoniae Adults > 50 yrs. old Pre-clinical
vaccine to prevent > 20 million people development
pneumococcal in U.S. Trials planned for
infections 1996
Lyme - HGE vaccine Persons at risk for Pre-clinical research
for Lyme disease and tick bites
Human Granulocytic
Erhlichiosis
Malaria vaccine 1-2 billion persons Pre-clinical
(SPF66) to prevent at risk development Trials
malaria from planned for 1996
Plasmodium falciparum
Streptococcus Pneumoniae Vaccine for the Elderly.
Pneumococcal infections remain a major cause of death in the
world. Increasing antibiotic resistance of certain pneumococcal
strains has resulted in growing awareness of the importance of
prevention in controlling these infections. Various strains of S.
pneumoniae are responsible for most community-acquired cases of
pneumonia (500,000 cases per year) and are the second most common
cause of bacteremia (50,000 cases per year, with 25% mortality).
S. pneumoniae also causes half of childhood otitis media, the most
frequent reason (one out of three) for visits to pediatricians. In
some developing countries, pneumococcal pneumonia kills
approximately 10% of the children under the age of five, making it
the single leading cause of death. Public health officials now
place a high priority on the development of new pneumococcal
vaccines, and are considering expanding the population for which
vaccination would be recommended.
There are currently 83 recognized serotypes of pneumococci,
each with varying geographic and age-group prevalence. The
currently available vaccines cover 23 serotypes, which cause 93%
of United States and European infections. These vaccines are
composed of purified capsular polysaccharides, which typically are
not potent immunogens. Although approved by the FDA for use in
adults, these vaccines are not recommended for children under two
years of age or immune-compromised patients, and are less
effective in elderly individuals. Development efforts are
underway by several companies to improve the immune response in
children by conjugating the polysaccharides to immunogenic carrier
proteins. This approach was used in developing the successful Hib
vaccines. However, the manufacturing expense and cumulative mass
of the conjugated components make it very difficult to include all
23 conjugates. The companies developing conjugate vaccines have
therefore chosen to focus on the five to seven strains most
prevalent in infants. The resulting vaccines, if successfully
developed, would likely not be appropriate for immunization of
adults and the elderly. It is also likely that these vaccines
would be too expensive for widespread use in the developing world.
The Company has been developing a new formulation of a 23-
valent polysaccharide vaccine incorporating QS-21. This
formulation is intended to be more effective in elderly patients
against most of the 23 serotypes common in the United States and
Europe. If this formulation is successful, similar vaccines could
be developed for other geographic areas using strains prevalent in
those areas. The target market would be the 12 million Americans
over age 65, a market which could be expanded to include persons
over age 50.
The Company's technical approach to the development of a
pneumococcal vaccine for the elderly is to formulate the existing
23-valent capsular polysaccharide vaccine with QS-21 or QS-7.
Research in various mouse models indicates that such a formulation
could significantly improve the existing vaccine. For instance,
many polysaccharides to which mice do not typically respond induce
antibody production when mixed with QS-21. The effect may make
use of a lower antigen dose feasible, which could make the vaccine
less expensive and also reduce side effects. QS-21 also appears
to cause an antibody isotype class switch which may make the
immune response more effective. Finally, mice re-vaccinated with
the prototype QS-21 vaccine experience a booster effect for many
strains, a response not seen with existing vaccines. This effect
may enable the administration of periodic booster shots to
maintain immunity levels. The Company is working with the
National Institutes of Health ("NIH") to initiate Phase I clinical
trials. These trials, expected to commence in 1996, are intended
to determine the safety of the formulation and to test whether the
addition of QS-21 increases the immunogenicity of the vaccine or
reduces the amount of antigen required to produce an effective
immune response. If the Phase I results are positive, the Company
intends to proceed with additional clinical trials required for
regulatory approval.
Based on QS-21's ability to make mucosal membranes more
permeable and elicit an immune response, the Company intends to
investigate the development of a nasal pneumococcal vaccine. This
approach may have advantages in ease of administration and for
increasing protection in the respiratory mucosa, which is the
typical route of infection for the pneumococcus.
Tick-borne Disease Vaccine. Tick bites can cause a variety
of diseases, including Rocky Mountain Spotted Fever, Babesiosis
and Lyme disease. Lyme disease was first discovered in 1969, and
its cause, bites by ticks infected with Borrelia burgdorferi, was
not identified until 1981. According to the Centers for Disease
Control and Prevention ("CDC"), Lyme disease is now the leading
tick-borne infectious disease in the United States, with over
40,000 reported cases, including cases in all 50 states. In 1991
scientists reported the discovery of a newly recognized disease,
human granulocytic ehrlichiosis (HGE), caused by a microorganism
in the genus Ehrlichia transmitted by the bite of the same tick
that carries Lyme disease. HGE's flu-like symptoms include fever,
headache and muscular aches, as well as joint pain, nausea,
vomiting and cough. HGE is believed to have caused at least four
deaths in immune-compromised patients.
Company scientists found the HGE-causing organism in dogs in
1994 in the course of the efficacy trials of the Company's canine
Lyme disease vaccine, described below, and traced its source to
the ticks. The Company believes that it was the first to
successfully cultivate the HGE organism in tissue culture. The
Company has filed patent applications on infected cell lines, the
methods of growing the organism, and potential vaccine antigens
and diagnostic reagents derived from the cell lines.
The Company has been working with the CDC to develop a blood
test to be used in epidemiological surveys that will determine how
widespread the disease may be. Prior to the Company's development
of the cell lines, diagnosis of the disease was extremely
difficult, and impractical for survey purposes. The Company has
been conducting additional internal research to better
characterize the organism and to develop additional vaccine
antigens and diagnostic reagents, and has recently initiated
collaborations with leading academic researchers to do work in
this area. In the course of the canine Lyme disease vaccine
program described below, the Company has made progress toward the
development of a human Lyme disease vaccine. It believes that a
combination vaccine could be developed against HGE and human Lyme
disease. The Company will also investigate the inclusion of
Ehrlichia chaffeensis antigens and other tick borne diseases in a
combination vaccine. The Company believes that its work in HGE
may also have applicability for animal health applications. The
HGE organism appears to cause illness in dogs. Once the
epidemiology is better understood, the Company may seek
development funding from an animal health partner.
Malaria Vaccines. According to estimates in published
reports, over two billion people reside in malaria-infected areas.
The yearly incidence of malaria is estimated by the World Health
Organization at over 300 to 500 million cases, with a death toll
of 1.5 to 3 million persons. While anti-malarial drugs have been
in use for decades, they are expensive and resistant malarial
strains are becoming increasingly common. The World Health
Organization has identified malaria as a priority vaccine target
in developing countries. In addition, the Company believes a
traveler's vaccine presents a significant market in developed
countries. The Company has two separate malaria vaccine
development programs, one partially supported by grants.
In collaboration with the WHO, the Company has been working
with the SPF66 antigen, which was developed in Colombia by Dr.
Manuel Pattaroya. This antigen has been extensively studied in
several clinical trials. Two separate studies showed that SPf66
vaccines formulated with alum provided protection against malaria
for 31% of adults and children who received the vaccine. However,
a large antigen dose was used in these studies and such a
formulation is unlikely to be economically feasible. Based on
animal studies, the Company believes that formulating SPf66 with
QS-21 may raise protection levels while reducing the amount of
antigen required. The Company has contracted with Dr. Pattaroya
to conduct malaria challenge studies in Aotus monkeys, and the WHO
has agreed to fund human trials if these studies show improved
efficacy. The Company's principal strategic interest in the
malaria vaccine is to be the adjuvant supplier for a high volume
vaccine.
A second program, in collaboration with the Walter Reed
Institute for Research ("WRAIR") and supported by a WHO grant, has
been investigating the use of a different antigen, EBA-175. This
antigen is an essential element in the binding of the malaria
parasite to target red blood cells. The Company is developing and
supplying the antigen for further research by WRAIR. Clinical
trials would be conducted by WRAIR and WHO.
Cancer Vaccines. Cancer is a major health care concern in
the United States and Europe. While substantial progress has been
made treating some cancers with surgery, radiation therapy and
chemotherapy, those treatments are arduous and often not
effective. Immunotherapy for the treatment of cancer is showing
increasing promise, most often in conjunction with traditional
therapy, although the approach faces substantial technical
uncertainty. The potential market for cancer immunotherapy has
been estimated to be $1-3 billion, with the largest markets in
breast, colorectal and prostate cancer.
Cancer is the uncontrolled replication of cells, typically
initiated by the occurrence of one or more mutations. The promise
of cancer immunotherapy lies in the belief that the healthy immune
system is able in most cases to eliminate cells which, due to
mutation, appear "foreign." Cancer results, however, if the
immune system fails, whether due to its failure to recognize the
abnormal cells or because the system is simply overwhelmed by the
number of cancer cells. Cancer immunotherapy aims to improve the
immune system's ability to recognize cancerous cells and to
increase and broaden the immune response. Studies of cancer
vaccines in laboratory animals have shown immune stimulation and
protection from experimentally induced cancer. Initial human
trials of certain cancer vaccines shows evidence of the desired
activation of the immune system. However, clinical success,
measured by decreased tumor burden, increased tumor-free
intervals, or prolonged life, is yet to be fully demonstrated.
The Company believes that QS-21 can contribute to the
effectiveness of cancer vaccines by augmenting the immune
stimulus.
Much of the cancer vaccine research in the United States is
performed at academic institutions, the Federal government's
National Cancer Institute ("NCI"), and small companies. The
Company has adopted a strategy of supporting selected, promising
clinical trial efforts. This support may be (i) technical support,
such as antigen characterization or mouse studies; (ii) supply of
QS-21 which, because of its apparent ability to induce a cellular
immune response, is thought to be particularly suited to cancer
vaccines; or (iii) financial assistance, typically small amounts
of funding at a critical juncture in development. In this way,
the Company hopes to gain valuable clinical experience with QS-21
and obtain an early look at the safety and efficacy of a wide
range of different vaccine approaches and antigens. In addition,
the Company typically has an opportunity to acquire an interest in
the project should it be successful, or an opportunity to license
another manufacturer to use QS-21 in conjunction with that
vaccine.
The Company presently is involved in several active programs
for treating melanoma. The first potential product entered
clinical trials in 1992, and several more products are expected to
enter clinical trials in the near future. The most advanced
program in which the Company is involved is Progenics' program
using QS-21 with a ganglioside preparation to treat melanoma.
This vaccine is expected to enter human trials in 1996 under the
aegis of the Collaborative Oncology Groups.
In recognition of the difficulty of predicting which antigen
formulations are most promising, the Company has arranged for QS-
21 to be used in melanoma clinical trials with other types of
antigens by other collaborators. In most cases, the decision to
move to human testing was made by the collaborator after
preclinical work indicated improved immune response to the
melanoma vaccine using QS-21. These studies include:
A polyvalent vaccine developed by Dr. Jean-Claude
Bystryn of the Kaplan Cancer Center of New York University;
An anti-idiotype GD2 vaccine developed by Dr. Kenneth
Foon of the Markey Cancer Center at the University of
Kentucky; and
A peptide designed to induce a cell mediated response
identified by Dr. Donald Hunt and Dr. Victor Englehart of the
University of Virginia.
The Company presently has two different programs underway to
treat adenocarcinoma. One, in collaboration with Dr. Robert Fenton
of NCI, is expected to enter the clinic in 1996 with a ras onco
protein antigen for pancreatic, lung and colon cancer. Another,
also scheduled for 1996, will be conducted by Dr. Neal Meropol of
Roswell Park Cancer Institute using a ras peptide for pancreatic
cancer. Finally, another clinical trial began in 1995 in
collaboration with Dr. Ronald Levy of Stanford University to test
an anti-idiotype vaccine against B cell lymphoma.
The Company recently entered into a clinical trials agreement
with the NCI under which scientists working with NCI will conduct
research combining QS-21 with a broad range of cancer vaccine
candidates, with the most promising formulations entering the
clinic under NCI auspices. Under the agreement, the Company will
have the opportunity to negotiate commercial rights to any
resulting vaccines. Over 10 other academic collaborations
relating to cancer are in place, with the research in the
preclinical phase.
Animal Vaccine Programs
The Company has historically devoted considerable resources
to the development of animal health vaccines. Its first vaccine
project, funded by the French animal health company Virbac S.A.,
resulted in the successful development of a vaccine against FeLV.
FeLV is a highly contagious and commonly fatal disease of cats.
The Company's FeLV vaccine was the first recombinant vaccine ever
developed against a tumor-causing virus in mammals. An important
by-product of the program was the discovery and development of QS-
21. The Company presently manufactures bulk formulated FeLV
vaccine for the United States and Australian markets, and supplies
Virbac with bulk antigen and adjuvant for further manufacture for
the European market. The vaccine is the leading FeLV vaccine in
Europe, and in a recent independent study was found to be the most
effective of three leading FeLV vaccines on the market.
The development process for animal vaccines is different from
that required for human vaccines. Animal vaccines can be tested
in the host animal very early in the development process, which
shortens development time frames. In addition, the U.S.D.A.
regulatory process is relatively rapid. However, many animal
health applications are characterized by small market sizes and
low product margins. Therefore, the Company plans to focus its
efforts on human vaccines, and intends to develop animal health
applications only if one of three following criteria is met: (i)
the product opportunity addresses a large market with attractive
margins; (ii) the development is funded by a partner; or (iii) the
product is a by-product of a human vaccine development program.
Animal Product Development Programs
Program Primary Market Status
Population
Bovine mastitis 32 million milk cows Field trials for
vaccine for in the U.S. and immunogenicity
infections caused by Europe completed
S. aureus and E. coli
in dairy
cattle
Canine Lyme vaccine 10 million dogs at Efficacy trials
to prevent infection risk in endemic areas completed. Safety
in dogs field trials in
progress
The Company currently has two active animal health vaccine
development programs:
Bovine Mastitis Vaccine. Mastitis is an inflammation of a
dairy cow's udder caused by infection with Staphylococcus aureus,
Escheria coli or Streptococcus agalactiae plus other organisms.
The Company is developing a bivalent vaccine designed to prevent
both S. aureus and E. coli, which together account for the
majority of mastitis infections. The development program is 50%
funded by Virbac. The Company has exclusive marketing rights in
North America; Virbac has exclusive marketing rights in Europe.
The parties share marketing rights in the rest of the world. If
the product is effective, the Company believes it could add a
streptococcal component in a next-generation vaccine.
The S. aureus component of the vaccine is based on patented
anti-adhesion technology. A single S. aureus protein known as
fibronectin binding protein is primarily responsible for
attachment of S. aureus to host tissue and establishment of
infection. In the Company's mastitis vaccine program, fibronectin
binding protein is used as an antigen to induce an antibody
response to block attachment of the bacterium in the cow's udder.
Recent field trials have indicated that this formulation, using
QS-21, is safe and immunogenic, and the Company has commenced
efficacy trials. If efficacy is successfully demonstrated, the
Company expects to seek a partner for additional development
funding in exchange for North American marketing rights.
Canine Lyme Disease. The Company is developing a vaccine
pursuant to a 1991 agreement with Mallinckrodt Veterinary Inc.
("Mallinckrodt") against Lyme disease in dogs. There are
approximately 50 million dogs in the United States, with perhaps
one fifth of them living in areas infested with the tick which
transmits Borrelia burgdorferi, the cause of Lyme disease. The
potential market for a canine Lyme disease vaccine may be as much
as $50 million. A vaccine introduced by another company in 1991
was well-received in its first year, but sales have decreased
since then. There have been published reports raising questions
concerning that vaccine's safety and efficacy.
During 1993-94, the Company conducted efficacy trials on its
canine Lyme disease vaccine using a protocol approved by the USDA.
The studies showed that use of the Company's vaccine resulted in
protection from infection in 79% of the dogs, and protection from
symptoms in 89% of the dogs. Data from this trial, which included
injection site reaction and fever score index in addition to
efficacy data, was submitted to the United States Department of
Agriculture ("USDA"), which reviewed the data in support of
licensure and found the outcome to be satisfactory. The vaccine
incorporates two outer surface proteins of Borrelia and QS-21, a
formulation which the Company believes offers better protection
against multiple strains of the pathogen. A patent is pending on
this formulation.
In 1994, the Company manufactured several bulk lots of canine
Lyme vaccine to the same final specifications and, following QC
release, shipped these lots to Mallinckrodt for further
manufacture in their facilities to final vialed product.
Mallinckrodt conducted a USDA approved field study using this
final product as part of the required licensing process. The
Company has been informed by Mallinckrodt that adverse reactions
to the final product were observed following administration of the
vaccine to dogs and that the rates of reaction were
unsatisfactory. The Company has not been able to duplicate these
observations, and the cause of the reactions in the Mallinckrodt
study has not been determined. Subsequently, the Company has
manufactured additional lots of bulk vaccine, and Mallinckrodt has
completed manufacture of final vialed product. Mallinckrodt is in
the process of conducting an additional field safety study. The
Company is unable to predict the outcome of these studies.
Should a canine Lyme vaccine be successfully developed, under
the Mallinckrodt agreement, the Company will supply Mallinckrodt
with bulk formulated vaccine, which Mallinckrodt will then fill,
finish, and distribute. The Company will be paid a supply price
for the vaccine and receive a royalty on Mallinckrodt's sales.
Other Programs
Drug Delivery. The Company is developing a drug delivery
technology which is an outgrowth of the adjuvant development
program. In characterizing the properties of QS-21, CBC
discovered that QS-21 could enhance permeability of mucosal
membranes allowing antigens and other biomolecules to pass through
this barrier. The Company recognized the potential to use this
feature to deliver drugs, and modified QS-21 so as to retain the
permeation-enhancing characteristics while eliminating the
adjuvant properties. The resulting molecule, known as DS-1, has
been successfully used in animals to deliver by nasal drops a
variety of drugs, including gentamicin, insulin and growth
hormone. The Company intends to conduct further bio-availability
and toxicology studies, including a human safety and tolerance
trial, to define further the potential of DS-1. The Company
believes it is important to bring DS-1 into early human testing to
assess its commercial potential. The Company plans to
commercialize DS-1 through companies that specialize in drug
delivery technology.
Mycobacterium avium Vaccine. The Company is in the early
research phase of a vaccine development project against
Mycobacterium avium. The project is funded by a grant
from the NIH. M. avium poses an increasing risk to immune-
compromised patients, particularly AIDS patients, among whom the
infection rate approaches 50%, with the median survival rate of
infected patients reduced by 60%. M. avium is related to
Mycobacterium tuberculosis, a disease once believed to be under
control but now considered by the WHO to be a global health
emergency. The Company believes that its M. avium efforts will
enable it to become involved in tuberculosis collaborations should
appropriate opportunities arise. Two of the Company's current QS-
21 collaborators are now working in the area of tuberculosis.
Osteoporosis. The Company has entered into a joint venture
to pursue the use of growth hormone releasing factor ("GRF") to
treat osteoporosis and related diseases with OT Company, a
principal of which patented the use of GRF to treat osteoporosis,
and BioNebraska, Inc., which developed a proprietary, commercially
viable method of manufacturing GRF. The difficulty and cost of
manufacturing GRF has stymied previous efforts to use GRF
therapeutically. The joint venture commenced a pilot clinical
study in late 1994, which has not been completed. An estimated 20
million women in the United States suffer from osteoporosis, and
the cost of care is estimated to be greater than $10 billion.
Academic Collaborations. The Company has entered into over
50 collaborations with academic, government and corporate
researchers in which the Company supplies adjuvant to the
researchers for use in vaccine research programs. Included among
the diseases in research are cryptosporidiosis, helicobacter,
toxoplasmosis, tuberculosis and autoimmune diseases. These
collaborations have given Company scientists a window to important
early-stage research, as well as an opportunity to negotiate for
commercial rights to any resulting products. The Company intends
to continue these collaborative efforts and believes these
collaborations will play an important role in expanding its
research base and providing development opportunities in the
future.
DIAGNOSTIC DIVISION
The Company's Diagnostic Division has developed a line of
screening and confirmatory diagnostic products for retroviruses
and other infectious diseases. The sale of diagnostic products
represented approximately 63% and 72% of the Company's total
revenues in 1995 and 1994, respectively. The Company contemplates
the sale of the Diagnostic Division and focusing on the business
of the Biopharmaceutical Division after emergence from Chapter 11.
The Company is currently actively negotiating with potential
buyers for the sale of the Diagnostic Division. Any sale is
subject to the approval of the Bankruptcy Court.
The Company's diagnostic products utilize one of two formats:
Enzyme immunoassays ("EIA"), which utilize specific
enzymes linked to specific antibodies or antigens. These
enzymes produce a color change when exposed to a sample
containing the corresponding specific antigen or antibody,
and this color change can be read either visually or using a
specialized instrument;
Western blot assays, which are prepared by using an
electric field to separate multiple antigens of an infectious
organism. The separated antigens are transferred, or blotted
onto a strip of nitrocellulose paper. When the strip is
incubated with a serum or plasma sample, specific antibodies
in the sample, if present, will bind to the corresponding
specific antigen. The presence of bound specific antibodies
can be detected with a color development reagent and visually
observed.
The diagnostic products manufactured by the Company that are
currently on the market include those in the following table.
DIAGNOSTIC PRODUCTS FOR CLINICAL OR RESEARCH USE
MANUFACTURED BY CBC
Adenovirus EIA (1)
Adenovirus EIA Type 40/41 (1)
Clostridium difficile EIA (1)
HIV-1 Western blot (1)
HIV-1 EIA Recombigen (env & gag) (1)
HIV-1/2 EIA Recombigen (2)
HIV-2 Western blot (2)
HTLV-I/II Western blot (2)
HTLV-I (rp21e-enhanced) EIA (1)
Human Lyme EIA (1)
MicroTrakR HIV-1 EIA (env & gag) (1)
MicroTrak II HIV-1/HIV-2 EIA (2)
Rotavirus EIA (1)
__________________________
(1) Licensed (or approved for marketing, as appropriate ) by the
FDA.
(2) Product License Application (PLA) pending; sold in selected
countries in Europe.
Retroviral Products
Overview of AIDS. AIDS is a major worldwide health problem.
In 1992, the World Health Organization estimated that eight to ten
million adults and one million children worldwide were infected
with HIV-1, the causative agent of AIDS.
The current method for the diagnosis of AIDS includes testing
for the presence of antibodies specific for HIV-1 in a blood
sample. A positive test result indicates that the individual has
been previously exposed to the virus. Typically, a blood sample
will initially be tested using a relatively simple inexpensive
test, such as an EIA, which can provide results within a few
hours. This is commonly referred to as a screening test. If a
sample tests positive on a screening test, a more specific and
expensive test, typically a Western blot assay, is performed to
confirm the screening test result.
In addition to HIV-1, several other retroviruses have been
isolated and identified as clinically important infectious agents.
These include HTLV-I and HTLV-II, and HIV-2. In the United States
blood banks now routinely screen all blood not only for HIV-1 but
also for HIV-2 and HTLV-I. HTLV-I, which is endemic to Japan and
certain areas of the Caribbean, is associated with certain
neurological disorders and with a form of T-cell leukemia.
Exposure to HIV-2, a virus similar to HIV-1, can also cause AIDS.
Although specific disease association with HTLV-II has not been
firmly established, HIV-1 infected individuals who are also
infected with HTLV-II may develop clinical symptoms and AIDS more
rapidly than those infected with HIV-1 alone.
Screening Tests. Screening tests for retroviruses are
typically used by blood donor centers, hospitals, public health
laboratories and other laboratories that conduct routine screening
of blood. In 1991, the Company received an FDA license for
Recombigen_ HIV-1 (env & gag) EIA to detect the presence of HIV-1
antibodies. In 1995, the Company received an FDA product license
for its HTLV-I (rp21e-enhanced) assay, an improved sensitivity
blood screening test.
The Company has filed Product License Applications ("PLA")
with the FDA for two new EIA tests to simultaneously detect
antibodies to HIV-1 and HIV-2. These tests have been approved for
use in selected countries in Europe.
Confirmatory Tests. The Company has products and expertise
in viral lysate technology, especially as applied to Western blot
confirmatory testing. In 1987 the Company introduced the first
confirmatory test for HIV-1 antibodies to be licensed by the FDA.
A Western blot which confirms and detects HTLV-I or HTLV-II
antibodies is in clinical use in selected countries in Europe, as
is an HIV-2 Western blot. The Company has completed clinical
trials for these tests and has filed PLAs with the FDA. The
Company has also filed an amendment to its license for the HIV-1
Western Blot product to permit its use as a confirmatory test for
a urine-based screening test.
Other Diagnostic Products
The Company offers a range of other diagnostic products for
infectious diseases. Certain of these products, such as those for
Lyme disease and various gastrointestinal diseases, were developed
internally. In other cases, the Company has acquired distribution
rights by acquisition, licensing, or private label manufacturing
arrangements.
Lyme Disease. Lyme disease has become a major clinical
disease and is one of the most common tick-borne illnesses
recognized in the United States. This multi system infection can
affect the skin, heart, joints and nervous system. The causative
agent of Lyme disease is Borrelia burgdorferi, a spirochete.
The Company has developed three tests to detect the presence
of antibodies to Borrelia burdorferi: an EIA test, a Western blot
assay to detect the presence of antibodies of the IgM class
(designed to detect early infection), and a Western blot assay to
detect antibodies of the IgG class (designed to detect later
stages of the disease). The Western blot assays are currently
manufactured for the Company by its former subsidiary in Galway
with the Company maintaining the right to resume manufacture of
the product.
Gastrointestinal Disease Diagnostic Products. The Company
manufactures and markets two tests for adenovirus and one for
rotavirus, two highly contagious gastrointestinal diseases which
often afflict infants and elderly adults. The Company's product
to detect rotavirus (Rotaclone_ EIA) has been manufactured and
marketed since 1986. The Company's Adenoclone_ EIA test, which
detects the presence of adenovirus, is manufactured and marketed
in two versions: a version designed to detect the presence of any
of the adenovirus strains and a second version specifically
designed to detect the presence of two of the most common strains
of adenovirus, types 40 and 41. The Adenoclone_ tests were the
first adenovirus tests to be approved for marketing by the FDA.
The Company also markets an EIA test to detect infection by
Clostridium difficile, the leading cause of antibiotic-associated
diarrhea. The Company's test is unique in that it detects both
toxins produced by the Clostridium difficile bacteria. An
improved test for Clostridium difficile, featuring simplified
operation, was introduced in April 1994.
Sales and Marketing
The Company markets its products directly and through
distributors. The Company's principal direct sales customers
include hospitals, reference laboratories, and public health
laboratories. The principal distributor in North America and
Europe for the Company's screening products is Ortho Diagnostic
Systems, Inc. ("Ortho"). In addition, the Company utilizes local
distributors in Europe and Asia and other distributors to reach
targeted markets.
Ortho is the Company's principal distributor in North America
and Europe for retroviral products, which include both screening
and confirmatory tests. Ortho's principal customers include blood
banks and hospital and reference laboratories. Ortho distributes
the Company's Recombigen_ HIV-1 (env & gag) EIA test and HIV-1
Western blot. The Company has licensed Ortho and Chiron
Corporation ("Chiron") to manufacture, use, and sell the HTLV-I
(rp21e-enhanced) EIA product, which license is exclusive (with
exceptions for pre-existing agreements and distribution in certain
configurations) in the United States, Canada, and certain European
countries. Ortho/Chiron has not commenced manufacturing the
product at its facility as anticipated under the license
agreement. The Company is continuing to supply product to Ortho
from its Rockville facility. The license agreement provides that
after manufacturing is transferred to Ortho, the Company will
supply Ortho with certain critical raw materials and receive a
royalty on sales, and Ortho will supply the Company with HTLV
(rp21e-enhanced) EIA product for distribution into the Company's
markets. Sales to Ortho in 1995 represented 30% of the Company's
revenues.
The Company also has some specialized marketing arrangements.
The Company supplies retroviral products and reagents to Behring
Diagnostics ("Behring"), which are sold to customers using
Behring's proprietary instrumentation. Sanofi Diagnostics Pasteur
("Pasteur") and its affiliates distribute the Company's Lyme
disease test under private label.
Manufacturing
The Company currently manufactures its Western blot products
and conducts virus production and purification in its Rockville
facility which has been licensed by the FDA to manufacture certain
products. Specialty tests, such as Recombigen_, and recombinant
antigens which are used in diagnostic tests and vaccines, are
manufactured in the Worcester facility, which has been licensed
for the manufacture of certain products by the FDA, the USDA, and
the European Economic Community (Agricultural Division). The
Company must amend its FDA facility license to manufacture certain
new products.
The Company manufactures most of the critical components of
its products but obtains certain raw materials from outside
vendors. In certain cases, these materials are obtained from a
single source; most of the single source suppliers supply only one
component and are domestic companies with substantial
manufacturing experience. The Company endeavors to ensure a
continuous supply of raw materials through inventory practices,
vendor audits, and multiple sourcing when feasible. The Company
keeps on hand large quantities of certain components used in its
diagnostic products, which are manufactured utilizing specialized
equipment in regulated facilities in large lot sizes to take
advantage of economies of scale.
Other Sources of Revenue
The Company also derives revenue from patent licensing, from
its clinical reference laboratory, and from government grants.
The Company has granted sublicenses to the patent covering
gp120, the envelope protein of HIV-1, to over a dozen different
companies in return for license fees, royalties, and/or
technology. At least three of these licensees, Ortho, Biochem
ImmunoSystems, and Repligen marketed gp120 products and paid
royalties on their sales during 1995. The Company has also
sublicensed Pasteur, Ortho and Chiron, International Murex
Corporation, and Abbott Laboratories to practice the gp61 patent
on the envelope protein of HTLV-I. In addition, the Company has
sublicensed the patents covering agglutinographic slide technology
to Hoffman-LaRoche for testing for drugs of abuse. The Company
may grant licenses to other technologies in its portfolio in
return for license fees, royalties and/or technology, although
there can be no assurance that any licensing attempts will be
successful or that the revenue derived therefrom will be
significant.
The Company operates a clinical reference laboratory in
Worcester which is licensed by the College of American
Pathologists ("CAP"). The reference laboratory offers complete
retroviral antibody testing services and provides technical
support function for the customers of the Company's products. The
license from CAP expires in May 1996. The Company does not intend
to continue operating the reference laboratory.
The Company is from time to time awarded grants from NIH.
PATENTS AND PROPRIETARY RIGHTS
The Company has pursued a policy of obtaining patent
protection both in the United States and in selected foreign
countries for patentable subject matter in its proprietary
technologies. The Company has filed or has rights to more than 20
U.S. patents and patent applications and their foreign
counterparts. If U.S. patents issue on the Company's various
applications, each patent may be expected to have a life of 17
years from the date of issue or, if filed after June 8, 1995, 20
years from the date the application was filed. The Company also
relies on trade secrets, proprietary know-how, and continuing
technical innovation to develop and maintain its competitive
position.
The Company's future success will depend, in part, upon its
ability to develop patentable products and technologies and obtain
patent protection for its products and technologies both in the
United States and Europe. There can be no assurance that patent
applications owned or licensed by the Company will issue as
patents, that patent protection will be secured for any particular
technology, or that, if issued, such patents will be valid, or
that they will provide the Company with meaningful protection
against competitors with a competitive advantage. There can be no
assurance that the patents will not be challenged or designed
around by others. Proceedings brought against the Company's
patents could expose it to significant expense and the risk of
adverse determinations.
The Company has engaged in negotiations to obtain licenses
from Ciba Geigy, S.A., Organon Teknika, N.V., and Hybritech, Inc.,
now owned by Beckman Instruments, each of whom has asserted that
its patent covers certain of the Company's diagnostic products,
including, in one instance, the Company's Western blot products.
While the Company believes it can resolve these matters on
reasonable terms, there can be no assurance that one or more of
these companies will not insist on terms unfavorable to the
Company, such as substantial retroactive royalties, or that the
Company will be able to reformulate the products.
Set forth below is a chart which lists U.S. patents owned or
exclusively licensed by the Company.
U.S. PATENTS OWNED OR EXCLUSIVELY LICENSED
YEAR OWNED/
PATENT NO. SUBJECT MATTER ISSUED LICENSED
4,459,361 Ligand Assay with 1 or 2 1984 Owned
particulate reagents
4,487,829 Production and use of Monoclonal 1984 Licensed
antibodies against adenovirus
4,596,695 Agglutinographic Reaction Chamber 1986 Licensed
4,597,944 Agglutinographic Reaction Chamber 1986 Licensed
4,775,515 Improved Agglutinographic Slide 1986 Licensed
4,689,204 Multiple step reagent delivery system 1987 Owned
4,725,669 HIV glyco proteins (gp 120) 1988 Licensed
4,728,608 Bacterial Screening System 1988 Owned
4,734,362 Method for Purifying Proteins 1988 Owned
4,738,177 Immunoassay strip cutter 1988 Owned
4,743,678 HTLV-I Virus Proteins 1988 Licensed
4,753,873 Polypeptides for the Diagnosis of HIV 1988 Owned
4,806,015 Agglutination Detection Apparatus 1989 Licensed
4,921,787 Detection of HIV Infection by 1990 Owned
Latex Agglutination
5,045,448 HTLV-I Antigens and diagnostic 1991 Owned
methods
5,057,540 Saponin Adjuvant 1991 Owned
5,145,784 Double Capture Assay 1992 Owned
5,273,965 Methods for Enhancing Drug Delivery 1993 Owned
with Modified Saponins
5,231,003 Monoclonal Antibodies Specific for 1993 Owned
Toxin B of Clostridium difficile
5,352,449 Vaccine Comprising Recombinant Feline 1994 Owned
Leukemia Antigen and Saponin Adjuvant
Des.55.493 Slide Immunoassay Detection System 1995 Owned
Biopharm Patents and Licenses
QS-21 and other Adjuvants. The Company received U.S. Patent
No. 5,057,540 in 1991, covering purified QS-21, QS-7 and the other
principal fractions of Q. saponaria and methods of their use in
vaccines. It believes that the standard of purity specified in
the patent for the saponin fractions is necessary to achieve a
safety profile acceptable for human use. CSL International ACN
("CSL") controls certain patents and patent applications covering
ISCOMS (immune stimulating complexes) prepared from crude saponin
fractions, lipids and various antigens. The Company believes that
its products do not infringe CSL's U.S. or European patents due to
process differences and formulation techniques which avoid ISCOM
formation, although the issue is less clear in Europe. In the
event patents do issue to CSL or other parties which dominate QS-
21, there can be no assurance that the Company will be able to
obtain licenses or obtain such licenses on favorable terms.
Human Granulocytic Ehrlichiosis. The Company believes that
it was the first to successfully cultivate the HGE organism in
tissue culture. The Company has filed patent applications on
infected cell lines, the methods of growing the organism, and
potential vaccine antigens and diagnostic reagents derived from
the cell lines. Other researchers in the field of HGE have filed
patent applications that might conflict with the Company's patent
applications. There can be no assurance that any of its patent
applications will issue.
Lyme Disease. The Company has filed a patent application on
its vaccine formulation of using both the A and the B outer
surface proteins and QS-21; animal data indicates this formulation
induces group-specific immune responses (important to protection
against multiple Borrelia strains) significantly better than
vaccines containing only one or two of these components. There
are several patents pending in the United States and in Europe
which, if issued in their current form, may dominate the Company's
Lyme vaccine. The Company believes that it is unlikely that any
dominant claims will issue because of the extensive prior art, but
there can be no assurance that the Company's position is correct
and, if dominating patents do issue, there can be no assurance
that it will be able to obtain the necessary licenses or obtain
such licenses on favorable terms.
Mastitis. The Company exclusively licensed from Alfa Laval
Agri AB certain base technology used in the mastitis program.
This technology includes patents and patent applications on
fibronectin binding proteins from S. Aureus, E. coli. and S.
agalactia. The Alfa Laval license calls for payment of an initial
license fee, royalties, and additional license fees as additional
patents issue and when the Company commercializes the vaccines.
As part of the joint development agreement with Virbac, the
Company arranged for Alfa Laval to grant a direct license to
Virbac in certain territories.
Other Biopharm Patents. The Company also holds U.S. patents
on its FeLV vaccine and drug delivery compounds and a protein
purification process, and has patent applications pending on
methods of expressing and purifying proteins made in a baculovirus
expression system.
Diagnostic Patents and Licenses
Harvard University License Agreement. In 1983, the Company
and Harvard University entered into an exclusive license agreement
governing certain inventions relating to HTLV-I made by Dr. Myron
Essex and others. In 1987, the license agreement was expanded to
include additional technology. The license agreement includes
Harvard's patents on gp120 and gp160, the envelopes and the
envelope precursor protein of HIV-1, and gp61, the envelope
protein of HTLV-I, and patent applications covering various other
HIV-1, HTLV-I, and simian immunodeficiency virus proteins. The
agreement is exclusive, subject to maintenance by the Company of
satisfactory progress towards commercialization of the licensed
technology and payment of minimum royalties and grants the Company
the right to sublicense the patent. The Company pays royalties
based upon net sales, subject to reduction in the event the
Company is required to pay other royalties on the same product to
third parties. The Company has granted sublicenses to several
companies in exchange for license fees and royalty payments and
expects to grant additional sublicenses. The license term is
equal to the term of the relevant patents which expire beginning
in 2005. The Company considers the Harvard license to be
important to its business both for the right to practice the
subject technology and for the opportunity to obtain royalties,
sublicense fees, and access to other technology in exchange for
sublicenses of the Harvard technology. During 1995, the Company
elected not to continue prosecution of a patent application
related to technology for the detection of antibodies to HTLV-II,
which it had licensed from Harvard in 1993.
Pasteur Licenses. The Company and Pasteur in 1989 entered
into a series of license agreements pursuant to which the Company
has licensed Pasteur to make diagnostic products under patents and
patent applications covering the gp120 and p27 proteins of HIV-1
and the gp61 protein of HTLV-I, and Pasteur has licensed the
Company to make diagnostic products for HIV-2 and for HIV-1 under
patent applications covering the gp110 and p27 proteins. The
parties must pay each other royalties on sales of certain products
covered by the agreements.
In March 1995, Institut Pasteur, which has an ownership
interest in Pasteur, and Genetic Systems Corporation, which is a
wholly-owned subsidiary of Pasteur, brought a patent infringement
action against the Company with respect to two HIV-2 patents
licensed to the Company under the license agreements, and a third
patent related to HIV-1 which was not licensed under the license
agreements. CBC filed an answer and counterclaim denying the
allegations and seeking a declaration of CBC's license rights to
the two patents under the license agreements. On September 1,
1995, the Bankruptcy Court issued summary judgment upholding CBC's
license under the license agreements to two HIV-2 patents to
commercialize diagnostic tests for the HIV-2 strain of the AIDS
virus.
With respect to the HIV-1 related patent, the Court ruled
that CBC's HIV-1 Western Blot confirmatory test for HIV-1
infringed the patent and enjoined CBC from the manufacture and
sale of the HIV-1 Western Blot test. On January 5, 1996, the
Bankruptcy Court ruled that CBC is only obligated to pay damages
for infringement on the HIV-1 patent in an amount equal to 1% of
net sales of HIV-1 Western Blot tests for the period July 7, 1994,
through December 31, 1995. The Bankruptcy Court also ruled that,
beginning on January 1, 1996, CBC has a license for the HIV-1
patent at a royalty rate of 1% of net sales, based on CBC's rights
pursuant to a 1987 Settlement Agreement between the United States
Government and Institut Pasteur. The Court lifted its injunction
with respect to the Company's production and sale of the HIV-1
Western Blot test. Institut Pasteur has appealed the Bankruptcy
Court's adverse rulings, and the Company has appealed the Court's
initial determination that it infringed the HIV-1 patent. See
Legal Proceedings.
Other Diagnostic License Agreements. The Company is a
licensee of technology used in various of its diagnostic products.
These agreements typically provide that the Company pay a license
fee upon execution and pay royalties based upon net sales, subject
to minimums in certain cases. These licenses are typically
exclusive and may become nonexclusive under certain conditions
based on the extent of commercialization by the Company of the
applicable inventions.
COMPETITION
The biotechnology and pharmaceutical industries are subject
to rapid and significant technological change. Competitors of the
Company in the United States and abroad will be numerous. They
include, among others, major pharmaceutical and chemical
companies, specialized biotechnology firms, universities and other
research institutions. There can be no assurance that the
Company's competitors will not succeed in developing technologies
and products that are more effective than any which have been
developed by the Company or may be developed by the Company in the
future or which would render the Company's technology and products
obsolete and noncompetitive. Many of these competitors have
substantially greater financial and technical resources and
production and marketing capabilities than the Company. In
addition, some of the Company's competitors have substantially
greater experience than the Company in preclinical testing and
human clinical trials of pharmaceutical products and in obtaining
FDA and other regulatory approvals of products for use in
healthcare. Accordingly, the Company's competitors may succeed in
obtaining FDA approval for products more rapidly than could the
Company. There can be no assurance that the Company's products
under development will be able to compete successfully with
existing products or products under development by other
companies, universities and other institutions or that they will
attain regulatory approval in the United States or elsewhere. If
the Company commences significant commercial sales of its
products, it will also be competing with respect to manufacturing
efficiency and marketing capabilities, areas in which it may have
less experience. A significant amount of research in the field is
also being carried out at academic and government institutions.
These institutions are becoming increasingly aware of the
commercial value of their findings and are becoming more
aggressive in pursuing patent protection and negotiating licensing
arrangements to collect royalties for use of technology that they
have developed. These institutions may also market competitive
commercial products on their own or in collaboration with
competitors and will compete with the Company in recruiting highly
qualified scientific personnel.
The Company is aware of certain programs and products under
development by others which may compete with its programs and
products. Several companies, including Ribi Immunochem ("Ribi")
and Chiron Corporation, are developing adjuvants.
At least two of the Company's adjuvant licensees are also
licensees of Ribi for certain diseases. Fort Dodge and one other
company already have canine Lyme disease vaccines on the market,
while Pasteur Merieux and SmithKline are in advanced human trials
with a human Lyme disease vaccine. Merck, Wyeth-Lederle and
possibly others are in human clinical trials with conjugate
pneumococcal vaccines for the pediatric market, although not for
the elderly market. Several companies market mastitis vaccines
for infections caused by E. coli, but these vaccines do not
protect against staphylococcal or streptococcal infections. Merck
has received regulatory approval for a treatment for osteoporosis.
At least six companies, including Abbott Laboratories, compete
with the Company in marketing HIV-1 screening tests, and two other
companies, Epitope, Inc., and Bio-Rad Laboratories, Inc., have
obtained FDA approval to market HIV-1 Western blot confirmatory
tests. The existence of products developed by these and other
competitors, or other products of which the Company is not aware
or which may be developed in the future, may adversely affect the
marketability of products developed by the Company.
GOVERNMENT REGULATION
The FDA, the USDA, the Environmental Protection Agency and
the Nuclear Regulatory Commission, comparable state agencies and
other agencies, including those in foreign countries, impose
requirements governing the development, manufacture and marketing
of certain of the Company's products and products under
development. The regulatory process can take several years,
involves lengthy and detailed laboratory and clinical testing, and
requires substantial expenditures. Human biologicals and
pharmaceuticals, including vaccines, typically require three
stages of clinical trials: Phase I to determine the initial safety
of the product; Phase II, during which the efficacy of the product
is preliminarily assessed and treatment regimens refined; and Phase
III (sometimes referred to as "pivotal trials") during which final
safety and efficacy data are generated. Regulatory approval is
required prior to commencement of initial clinical trials. The
clinical data, together with comprehensive manufacturing and
facility information, is filed with the FDA in a New Drug
Application (NDA) or Product License Application (PLA), and an
Establishment License Application (ELA), on which the regulatory
agencies base their approval decisions. In some instances,
particularly in cases of life-threatening diseases for which there
is no effective treatment, the clinical trial phases may be
combined, or approval may be sought after completion of an
expanded Phase II trial.
QS-21 is currently classified by the FDA as a constituent
material used in drug preparation. As a result, the FDA does not
require licensure of facilities used in its manufacture. The
Company believes that this allows it the flexibility to postpone
investment in commercial manufacturing facilities until after the
safety and effectiveness of QS-21 has been demonstrated in Phase
III clinical trials. The Company has filed with the FDA a
Biologics Master File for QS-21, which its licensees can reference
as part of their own PLAs and NDAs as they seek FDA approval.
There can be no assurance that, at the end of the regulatory
process, approval will be obtained or that product developments by
competitors in the interim will not have made the Company's
products obsolete or economically unfeasible. The extent of
regulation which may arise from future legislative or
administrative action cannot be predicted, nor can the potential
impact of such future regulation, or changes in existing
regulation, be predicted with any certainty.
PRODUCT LIABILITY
The Company has potential liability risks that are inherent
in the testing, manufacturing and marketing of medical products
and diagnostic products. The Company's manufacture and sale of
diagnostic products may expose it to product liability claims.
The Company has product liability insurance for its diagnostic
products at levels which it believes are customary in the
industry. The use of the Company's biopharm products in clinical
trials may expose it to product liability claims and possible
adverse publicity. These risks also exist with respect to the
Company's biopharm products, if any, that receive regulatory
approval for commercial sale. The Company currently has limited
product liability coverage for the clinical research use of its
products, which management believes is customary for companies
with products at this stage of clinical development. The Company
intends to obtain product liability insurance for other biopharm
products when commercialized. Product liability coverage is
becoming increasingly expensive and there can be no assurance that
the Company will be able to maintain its existing insurance
coverage or obtain additional insurance coverage at acceptable
costs, if at all, or that a product liability claim would not
materially adversely affect the business or financial condition.
If and when the Company manufactures vaccines that are
recommended for routine administration to children, it is possible
that it will be required to participate in the National Vaccine
Injury Compensation Program. This program compensates children
having adverse reactions to certain routine childhood
immunizations with funds collected through an excise tax from the
manufacturers of these vaccines.
HUMAN RESOURCES
As of March 1, 1996, the Company employed 182 full time
employees. The employees are not represented by any labor unions,
and the Company considers its relations with those employees to be
good. The Company's scientific staff has expertise in many
relevant areas and these internal resources are augmented by
consulting agreements with research scientists located at various
academic institutions and commercial organizations.
SCIENTIFIC ADVISORY BOARD
The Company's Scientific Advisory Board consists of six
individuals with recognized expertise in vaccines. The Scientific
Advisory Board meets from time to time to discuss matters relating
to the Company's current and long-term scientific planning and
research and development, and the individual members are available
for consultation on an informal basis. All members of the
Scientific Advisory Board are employed by academic institutions,
and may have commitments or consulting or advisory obligations to
other entities that may limit their availability to the Company.
These entities may be competitors of the Company. In certain
circumstances, the academic institutions which employ the
Scientific Advisory Board members may assert ownership rights to
inventions or other technology that may result from advice
provided to the Company by such members. In such circumstances,
the Company could seek to negotiate licenses to such inventions or
technology, but there can be no assurance that the Company would
be able to obtain such licenses on commercially reasonable terms.
No members of the Scientific Board are expected to devote more
than a small portion of their time to the Company.
The following persons are the current members of the
Scientific Advisory Board:
Mary Lou Clements, M.D., M.P.H.
Professor and Head, Division of Vaccine Sciences
Department of International Health
Johns Hopkins University
School of Hygiene and Public Health
John R. David, M.D.
Richard Pearson Strong Professor and Chairman
of the Department of Tropical Public Health
Professor of Medicine and Chief of the
Division of Tropical Medicine
Harvard Medical School
Michael J. Hawkins, M.D.
Associate Professor of Medicine
Division of Medical Oncology
Vincent T. Lombardi Cancer Research Center
Georgetown University College of Medicine
Arthur I. Hurvitz, D.V.M., Ph.D.
Chairman, Department of Pathology
The Animal Medical Center
New York
Takis S. Papas, Ph.D.
Director, Center for Molecular and Structural Biology
and Professor of Medicine
CMSB/Hollings Oncology Center
Medical University of South Carolina
Richard J. Whitley, M.D.
Professor of Pediatrics
University of Alabama at Birmingham
Children's Hospital
Item 2. Properties
The Company maintains most of its Worcester operations in a
76,475 square foot leased facility at the Biotechnology Research
Park in Worcester, Massachusetts. The facility contains research
and development laboratories, quality control laboratories,
manufacturing space and administrative offices. The building is
leased pursuant to a lease with a ten year initial term expiring
December 1996. The lease provides for an option to extend the
term for two additional five year periods and an option to cause
the landlord to build up to an additional 40,000 square feet.
Since the space exceeds the Company's expected needs for the
business after the reorganization of the Company, the Company may
relocate to new space at the end of 1996. The Company believes
that suitable replacement space is readily available at reasonable
rates. The Company also leases 15,000 sq. ft. of warehouse space
in Shrewsbury Massachusetts, pursuant to a lease for a five year
initial term commencing September 1, 1988, which expires in 1996.
The Company owns three buildings in Rockville, Maryland; its
main manufacturing building containing approximately 46,000 square
feet at 1500 East Gude Drive of which approximately 37,015 square
feet is used for manufacturing; and two laboratory buildings at 3
Taft Court containing approximately 20,852 square feet and
approximately 3,800 square feet. The Company leases the 20,852
square foot laboratory building to Biotech Research Labs, a
subsidiary of Boston Biomedica Inc., under a five year lease which
commenced July 1992.
Item 3. Legal Proceedings
On January 3, 1990, the Company instituted suit in the United
States District Court, District of Connecticut, against
MicroGeneSys, Inc., and three individual defendants alleging that
defendants were infringing United States Patent No. 4,725,669, to
which the Company holds an exclusive license. The Company sought
an injunction requiring that MicroGeneSys cease infringing the
patent by making diagnostic and research products, and requiring
MicroGeneSys to take a license to make vaccines and drugs. The
defendants counterclaimed asserting inter alia that the '669
patent was not infringed, being either invalid and/or not
enforceable and that the Company was interfering with business
advantage and committing unfair trade practices. The Company and
the defendants have entered into a settlement agreement in which
the defendants acknowledge that the manufacture, use, or sale of
certain of MicroGeneSys's current products infringe the '669
patent. Simultaneously with the execution of the settlement
agreement, the Company and MicroGeneSys entered into a license
agreement giving MicroGeneSys a non-exclusive, worldwide license
under the '669 patent in certain fields, for which the Company
will receive a license fee and royalties on the sale of licensed
products. The settlement agreement is subject to approval by the
District Court and the Bankruptcy Court.
In November 1993, five civil actions were commenced in the
U.S. District Court, District of Massachusetts, against CBC,
certain of its officers ("Individual Defendants"), and in three
cases, against the Company's former auditor. The claim against
the auditors was dismissed without prejudice. The actions were
instituted by persons alleging to be shareholders of CBC and to be
representative of a class of shareholders claiming damages
resulting from alleged violations of securities laws by the
Company and Individual Defendants in connection with the 1992
results of CBC and the restatement thereof. The five actions,
along with a sixth action filed in the U.S. District Court,
Southern District of New York in June 1994, were consolidated
under the caption In Re: Cambridge Biotech Corporation Securities
Litigation, Civil Action No. 93-12486-REK. The class comprises
purchasers of the Company's common stock during the period
February 28, 1992, through and including May 9, 1994. The Company
has successfully negotiated (i) a settlement agreement among the
class, National Union (the issuer of the Company's directors and
officers indemnity policy), the Individual Defendants, and the
directors and officers of the Company, and (ii) a second
settlement agreement among the class, the Individual Defendants
substantially all of the Company's directors and officers, and the
Company. Generally, pursuant to these settlements, the class will
receive approximately 25% of the shares to be issued in the
reorganized Company upon its emergence from Chapter 11, 90% of any
net recoveries by the class against the Company's former auditors
(with the Company to receive the other 10% thereof), and
$1,050,000 previously paid into escrow by National Union. These
agreements preliminarily have been approved by the United States
District Court and will be incorporated into the Company's plan of
reorganization. The settlement is subject to the confirmation of
a plan of reorganization by the U.S. Bankruptcy Court.
On March 19, 1996, the Company filed an action against
Deloitte & Touche, its former auditors (Cambridge Biotech Corp. v.
Deloitte & Touche, Superior Court, Suffolk County, Commonwealth of
Massachusetts, C.A. No. 96-1480-A 1996). The complaint arises out
of the defendant's audits of the Company's financial statements
for 1991 and 1992, and alleges that the defendant acted
negligently and in breach of contract in performing those audits.
As a result of defendant's failure to adequately conduct the audit
in accordance with GAAS and using GAAP, the complaint alleges that
the financial statements for 1991 and 1992 contained material
misstatements including overstatements of revenue, income, and
earnings per share. The Company is seeking compensation for the
full amount of its damages, pre-judgment interest, cost, and other
relief deemed appropriate by the Court. The Company is not liable
for the costs and expenses of the litigation. Any such costs and
expenses would be paid from any recoveries from the defendant.
Under its settlement agreement in the shareholder class action
litigation, the shareholder class will receive 90% and the Company
will receive 10% of any net recoveries from the defendant.
On July 7, 1994, the Company filed for protection under
Chapter 11 of the United States Bankruptcy Code and is a debtor in
possession pursuant to a voluntary petition filed in the United
States Bankruptcy Court for the District of Massachusetts, Western
Division, Case Number 94-43054-JFQ.
In July of 1994, the Securities and Exchange Commission
issued an Order Directing Private Investigation (In the matter of
Cambridge Biotech Corporation, United States of America Before the
Securities and Exchange Commission, File no. B-1238),
investigating matters pertaining to CBC's financial statements,
its public filings, and its offerings of its securities. CBC is
cooperating fully with the investigation, which is ongoing. The
Department of Justice is conducting its own independent
investigation, which the Company believes is focusing on matters
similar to the investigation of the SEC. CBC is cooperating in
the investigation and has been informed informally by the U.S.
Attorney's Office that no present officer or director is a target
of the investigation.
In March 1995, Institut Pasteur and Genetic Systems
Corporation brought a patent infringement action against the
Company with respect to two HIV-2 related patents licensed to the
Company, and a third patent related to HIV-1. CBC filed an answer
and counterclaim denying the plaintiff's allegations and seeking a
declaration of CBC's license rights to the two HIV-2 patents. On
September 1, 1995, the Bankruptcy Court issued summary judgment
upholding CBC's license under two license agreements with Pasteur
to the HIV-2 patents. The Court also ruled that CBC's HIV-1
Western Blot confirmatory test for HIV-1 infringed the patent and
enjoined CBC from the manufacture and sale of the HIV-1 Western
Blot test. On January 5, 1996, the Bankruptcy Court ruled that CBC
is only obligated to pay damages for infringement on the HIV-1
patent in an amount equal to 1% of net sales of HIV-1 Western Blot
tests for the period July 7, 1994 through December 31, 1995. The
Bankruptcy Court also ruled that, beginning on January 1, 1996,
CBC has a license for the HIV-1 patent at a royalty rate of 1% of
net sales, based on CBC's rights pursuant to a 1987 Settlement
Agreement between the United States Government and Institut
Pasteur, and lifted its injunction with respect to the Company's
production and sale of the HIV-1 Western Blot test. Institut
Pasteur has appealed the Bankruptcy Court's adverse rulings, and
the Company has appealed the Court's initial determination that it
infringed the HIV-1 patent.
On September 18, 1995, the Company filed a declaratory action
against Institut Pasteur (In re Cambridge Biotech Corporation v.
Institut Pasteur in the United States Bankruptcy Court for the
District of Massachusetts, Western Division, Adversary Proceeding
Number 95-04278), asking the Court to determine its right to
obtain a license to Institut Pasteur's patent covering HIV-1. The
action was dismissed as moot upon the Court's determination in the
patent infringement litigation filed by Institut Pasteur and
Genetic Systems that beginning on January 1, 1996, CBC has a
license for the HIV-1 patent based on CBC's rights pursuant to a
1987 Settlement Agreement between the United States Government and
Institut Pasteur.
In May 1995, a former employee of the Company filed a
complaint against the Company with the City of Rockville, Maryland
Human Rights Commission, claiming wrongful termination (Human
Rights Commission on the Complaint of Paul R. Shackleford against
Cambridge Biotech Corporation, Complaint No. 95-15-ER). The
Company disputes the allegations and will defend the complaint,
which has been stayed as a result of the bankruptcy proceeding.
On January 2, 1996, CBC received from the United States
Environmental Protection Agency ("EPA") a Notice of Potential
Responsibility and Request for Information under the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA")
relating to the EPA's investigation of the RAMP Industries, Inc.
site ("RAMP Site") in Denver, Colorado. The letter serves as
notice to CBC of its potential liability under Section 107(a) of
CERCLA, with respect to the RAMP Site. CBC responded by letter to
the EPA dated February 1, 1996 stating that it did not believe it
was a potentially responsible party and that it believed that all
Company waste shipped to the Site had been removed from the Site
prior to EPA incurring any CERCLA costs. While the Company
intends to fully cooperate with the investigation which is
ongoing, it also intends to defend any claim that may be asserted
by EPA.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to security holders during the
quarter ended December 31,
1995.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Price of Common Stock
1995 1994
Quarter High Low High Low
- ------------------------------------------------------------------------
First $0.750 $0.125 $3.687 $1.250
Second $1.250 $0.187 $1.750 $0.375
Third $1.625 $0.187 $1.250 $0.010
Fourth $1.500 $0.250 $1.328 $0.062
The above prices may not necessarily represent actual transactions. The
prices for the first and second quarters of 1994 are the closing prices
on the NASD National Market System. Effective June 9, 1994 the Company's
stock was delisted and therefore, the prices for subsequent quarters are
the last sales prices for transactions reported by brokers on the over the
counter market.
As of March 15, 1996, there were approximately 3,137 shareholders of record
of the Company's common stock.
Item 6. SELECTED FINANCIAL DATA
Year Ended December 31
1995 1994
---- ----
Revenue:
Product Sales $20,854,000 $16,684,000
Research & Development 5,137,000 4,334,000
Royalties 1,877,000 1,082,000
----------- -----------
Total Revenue $27,868,000 $22,100,000
Net Loss from continuing
operations ($4,942,000) ($12,533,000)
Net Loss ($4,942,000) ($22,276,000)
Per Share:
Net loss from continuing
operations ($0.19) ($0.48)
Net Loss ($0.19) ($0.86)
Weighted average shares
outstanding 26,057,000 25,859,000
========== ==========
Balance Sheet Data:
Total Assets $23,045,000 $28,503,000
Long-term obligations 12,168,000 12,413,000
Shareholder's Equity 3,946,000 8,668,000
The Company has not declared any dividends on common stock and does not
intend to declare any cash dividends in the foreseeable future.
Item 7. MANAGEMENT'S DISCUSSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
General
- -------
The Company filed for protection under Chapter 11 of the United States
Bankruptcy Code ("Chapter 11") on July 7, 1994 and is managing its assets
and operating its businesses as a debtor in possession pursuant to a
voluntary petition filed in the United States Bankruptcy Court for the
District of Massachusetts, Western Division (the "Bankruptcy Court"),
Case Number 94-43054-JFQ. Since the Chapter 11 filing, management has
spent considerable time reviewing the Company's strategic direction, as
well as specific products and programs. It has sold or disposed of certain
assets and operations of the Company, as described below, which did not
fit within the business plan for reorganizing the Company. The Company
is also considering a possible sale of the Company's diagnostics division
or portions thereof. Any potential sale must be approved by the Bankruptcy
Court.
On March 30, 1994, the Company's former independent accountants, who
resigned from their engagement to audit the Company's 1993 financial
statements, withdrew their opinion on the Company's 1992 financial
statements, and raised concerns over certain transactions that had come
to their attention. The Company's board of directors appointed a special
committee of two outside directors which was assisted by special
counsel to conduct an investigation into the matters raised by the former
accountants. The investigation confirmed the existence of several trans-
actions which did not appear to be bona fide or which were incorrectly
recognizing revenue. On May 9, 1994, the Company announced that it had
replaced its Chief Executive Officer and that two of its other officers had
resigned. In April 1995, the Company elected Alison Taunton-Rigby, Ph.D.
as its new President and Chief Executive Officer.
The Securities and Exchange Commission ("SEC") on July 22, 1994 issued an
Order Directing Private Investigation pertaining to the Company's financial
statements, its public filings and the offerings of its securities. On
September 21, 1995, the Company received a subpoena issued by the United
States District Court, District of Massachusetts for documents to be
presented to the Grand Jury. The Company believes the United States Attorney
is conducting an investigation similar to that of the SEC. The Company is
cooperating fully with both of the investigations.
Effective June 9, 1994, the Company's stock was de-listed by the National
Association of Securities Dealers (NASD) due to the Company's failure to
comply with NASD's listing requirements as a result of its inability to
provide audited financial statements.
Results of Operations
- ---------------------
Management has concluded that because of the events described above and in
light of the Company's financial condition and Chapter 11 filing, it would
not be feasible for its new accountants to perform an initial audit of the
Company's 1993 financial statements. Consequently, the accompanying
financial statements and footnotes do not show comparative data for 1993.
Revenues:
- --------
Total revenues were $27,868,000 and $22,100,000 in 1995 and 1994,
respectively. Product sales were $20,854,000 and $16,683,000 in 1995
and 1994, respectively. The increase in product sales was due primarily to
sales attributable to the operations of the Company's consolidated
subsidiary, Cambridge Affiliated Corporation ("CAC"), of which the Company
owns 51%. CAC, which was established in December of 1994, had product sales
of $2,788,000 and $231,000 in 1995 and 1994, respectively. Product sales
of the Diagnostics division represented $17,475,000 (84%) in 1995 and
$16,007,000 (96%) in 1994 of the product sales. Ortho Diagnostics Systems,
Inc. (Ortho) is the Company's principal distributor for diagnostics
products. All of the Company's products marketed by Ortho are under a joint
Cambridge Biotech/Ortho label. Sales to Ortho represented 30% and 32% of the
Company's total revenue in 1995 and 1994, respectively.
Research and Development ("R&D") revenues were $5,137,000 and $4,334,000
in 1995 and 1994, respectively. R&D revenue relates principally to the
biopharmaceutical division. The majority of these revenues were generated
from license agreements. In 1995 and 1994 the Company recognized $3,500,000
and $3,000,000, respectively, in license fees under an agreement with
SmithKline Beecham p.l.c. ("SKB") which allows SKB to use the Company's
proprietary Stimulon TM adjuvant ("QS-21") in numerous vaccines, including
hepatitis, lyme disease, human immunodeficiency virus (HIV), influenza
and melanoma. Income from this agreement represented 13% and 14% of the
Company's total revenue in 1995 and 1994, respectively. The Company also
recognized revenue from its collaboration with Virbac S.A. on the research
and development of vaccines for feline immune deficiency virus (FIV) and
bovine mastitis. In 1995 and 1994 the revenue recognized on these two
projects totaled $1,053,000. Additional deferred revenue totaling $2,072,000
will be recognized as research expense is incurred for these projects.
Royalty revenue in 1995 and 1994 was 7% ($1,877,000) and 5% ($1,082,000) of
the Company's total revenue, respectively. These royalties were received
as a result of licenses granted to use the Company's proprietary technology,
know-how and patents. The increase is primarily attributable to a partner
exercising an option to obtain a license for one of the Company's products.
Costs and Expenses:
Cost of sales as a percentage of product sales was 77% and 87% in 1995 and
1994, respectively. The diagnostics division, which accounts for the
majority of product sales, had more favorable cost of sales margins in 1995
compared to 1994. CAC, which has a cost of sales of 76% in 1995 and 1994,
accounted for 13% and 1% of cost of sales in 1995 and 1994, respectively.
Product mix changes are the primary reasons for the more favorable cost of
sales margin in 1995.
Research and development expenses represented 23% ($6,454,000) and 27%
($5,860,000) of total revenue in 1995 and 1994, respectively.
Biopharmaceutical research accounted for 91% ($5,844,000) and 87%
($5,100,000) of the total R&D expense in 1995 and 1994, respectively.
The increase is primarily attributable to a milestone obligation for an
additional patent allowed on technology licensed by the Company.
Sales, general and administrative expenses ("S,G&A") were $9,955,000 and
$10,274,000 in 1995 and 1994, respectively. Such expenses represented 36%
and 46% of total revenue of 1995 and 1994, respectively. The reduction in
S,G&A relates principally to a reduction in personnel.
As a result of the Company filing for reorganization under Chapter 11, the
Company re-evaluated its long-lived assets based upon undiscounted future
cash flows and stated them at net realizable value in accordance with
Financial Accounting Standard No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
Accordingly, during 1994 the Company recognized a loss on impairment of
long-lived assets in the amount of $2,879,000, representing $1,734,000 of
purchased technology and $1,145,000 on its property and plant in Rockville,
Maryland.
Other Income and Interest Expense:
The Company recognized net other income of $581,000 in 1995 compared to net
other expenses of $473,000 in 1994. Included in other income is $170,000 of
interest income earned prior to the Company filing for Chapter 11 protection
in 1994. The Company considered all interest income ($387,000) earned in
1995 on cash accumulated as a result of Chapter 11. In 1995 and 1994 the
Company recognized $13,000 and $302,000 of interest expense on its debt.
The accrual of interest expense on principally all debt incurred prior to
Chapter 11 was suspended since the Company's Chapter 11 proceedings. In 1994
the Company sold its interest in ImmuCell Corporation and recognized a loss
of $306,000. In 1995 the Company recognized income of $183,000 upon receipt
of stock resulting for the Company's ownership position in one of its
employee benefits providers.
Reorganization items:
The Company incurred expenses of $1,200,000 and $611,000 in 1995 and 1994,
respectively, for professional fees in relation to its filing for reorgan-
ization under Chapter 11. The Company also accrued a provision in 1994 for
rejected executory contracts totaling $358,000. Interest earned on
accumulated cash resulting from Chapter 11 proceedings was $387,000 and
$100,000 in 1995 and 1994, respectively.
Income taxes:
The Company recorded an income tax benefit of $207,000 in 1994 due to the
reversal of prior year tax accruals.
Discontinued Operations:
On July 21, 1994 the Company's wholly-owned subsidiary, Cambridge Biotech
Ltd. (CBL), filed for protection of the Irish High Court and an examiner
was appointed pursuant to the Irish Companies Act of 1990. As of that date,
the Company recorded a loss related to the discontinued operations. CBL's
1994 product sales of $1,952,000 were included in the process of calculating
the $2,129,000 loss from discontinued operations. Under the reorganization
plan for CBL, on November 30, 1994, the Company's interest as an equity
holder and its claim as a creditor were transferred to SelfCare Inc.
and the Company received $2,083,000 in cash for the transfer of certain
technology pertaining to products manufactured at the Irish facility. The
Company recorded a loss in 1994 of $6,963,000 on the sale of the discontinued
operations. Effective with the disposal of CBL, the Company also wrote off
registration rights and distribution contracts which were recorded by the
Company's subsidiary, Cambridge Biotech International Corporation (CBIC).
The loss on disposal of these assets was $519,000. Additionally the Company
included a discontinued operations loss for CBIC of $133,000. The combined
loss from discontinued operations and disposal on these two operations in
1994 was $2,262,000 and $7,482,000, respectively.
Net Income (Loss):
The Company had a loss of $4,942,000 or $0.19 per share and $12,533,000 or
$0.48 per share in 1995 and 1994, respectively, from continuing operations.
In 1994, the Company had a net loss of $22,276,000 or $0.86 per share
including the loss from discontinued operations.
Liquidity and Capital Resources
The Company's ability to fund its long term operations is dependent on
several factors, including the sale of the Company's diagnostics business,
the formulation and confirmation of a viable plan of reorganization and
the Company's ability to attract additional funding through public or
private financing or collaborative arrangements. There can be no assurance
that adequate operating funds will be generated through the sale of the
diagnostics business or that additional funding can be obtained on acceptable
terms.
Operating activities used $880,000 and $3,095,000 of cash in 1995 and 1994,
respectively. The 1995 net loss of $4,942,000 included non-cash depreciation
and amortization of $4,737,000. The 1994 net loss of $22,276,000 included
various non-cash items including the loss on discontinued operations
($7,482,000), depreciation and amortization ($4,282,000) and loss from asset
impairment ($2,880,000). In 1994 the Company reduced accounts receivable by
$975,000 and inventory levels by $1,524,000. The $3,500,000 SKB license
payment received in 1994 was earned in 1995 which was the primary reason for
the reduction in deferred revenue.
Accounts payable and other liabilities increased by $3,349,000 and $2,258,000
in 1995 and 1994, respectively. The 1995 increase was due primarily to the
patent related milestone obligation previously mentioned, employee retention
bonus plan and timing of payments. The 1994 increase was primarily due to
postponed payments due to a cash shortage prior to filing Chapter 11,
employee retention bonus plan and professional fees incurred due to the
Company's filing for Chapter 11.
The Company's 1995 investing activities used cash of $798,000. The Company's
1994 investing activities provided cash of $5,262,000. During 1994 the
Company sold marketable securities totaling $4,140,000, of which $1,026,000
was pledged as collateral under a sale/leaseback arrangement with Fleet
Credit Corporation for equipment. In 1995 the Company limited capital
expenditures due to its financial position. In 1994 the Company invested
$2,118,000 in property, plant, and equipment, $1,026,000 of which was used
to repurchase the equipment under the above mentioned sale/leaseback.
In 1994 the Company sold its interest in CBL's debt and equity to SelfCare,
Inc. for $2,082,000 and its interest in ImmuCell Corporation for $309,000.
The Company's 1994 financing activities provided $5,455,000 principally as a
result of raising $6,635,000 in the sale of its stock in the first quarter of
1994 and repaying $1,377,000 on long-term obligations. In the future, the
Company will seek additional funding through additional public or private
financing, and collaborative arrangements and dispositions of portions of
the business. The Company presently is seeking to sell the diagnostics
division or portions thereof as a source of funds.
At December 31, 1995 and 1994, the Company had cash and cash equivalents
totaling $6,856,000 and $8,538,000, respectively. At December 31, 1995, the
Company had total working capital of $7,977,000 and a current ratio of 2.15
to 1 compared to total working capital of $8,886,000 and a current ratio of
2.20 to 1 at December 31, 1994. However, the Company had approximately
$9,880,000 and $9,715,000 at December 31, 1995 and 1994, respectively in
liabilities subject to Chapter 11 proceedings, and if all of these liabilities
were considered current liabilities, the current ratio would have been 0.89
and 0.95 to 1, respectively.
In a Chapter 11 case, substantially all liabilities as of the date of filing
of the petition for reorganization are subject to settlement under a plan of
reorganization to be voted upon by the creditors and equity security holders
and approved by the Bankruptcy Court. The Company continues to manage its
affairs and operate its business as a debtor in possession, subject to the
supervision of the Bankruptcy Court while the case is pending. In the event
a plan of reorganization is approved by the Bankruptcy Court, continuation
of the business after reorganization is dependent upon the success of future
operations and the Company's ability to meet obligations as they become
due. The accompanying financial statements have been prepared on a going
concern basis, which contemplates continuity of operations, realization
of assets and liquidation of liabilities in the ordinary course of business.
As a result of the reorganization proceedings, the Company may have to sell
or otherwise dispose of assets and liquidate or settle liabilities for
amounts other than those reflected in the financial statements. The
financial statements do not give effect to adjustments to the carrying value
of assets, or amounts and reclassification of liabilities that might be
necessary as a consequence of these bankruptcy proceedings. The
appropriateness of using going concern basis accounting is dependent upon,
among other things, confirmation of a plan of reorganization, success of
future operations, and the ability of the Company to generate sufficient
cash from operations and financing sources to meet its obligations. There
can be no assurances that these events will occur.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.
The financial statements filed as part of this Annual Report on Form
10-K are listed under Item 14 below.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following is a list of Executive Officers and Directors of
Cambridge Biotech Corporation, their ages, positions, offices and
business experience, as of March 15, 1996:
Alison Taunton-Rigby, PhD., 51, has been president and Chief
Executive Officer and a member of the Board of Directors of the Company
since April 1995. From 1993 to 1994, she served as President and Chief
Executive Officer of Mitotix, Inc., a biopharmaceutical company. Prior
to joining Mitotix, Dr. Taunton-Rigby was Senior Vice President,
Biotherapeutics, of Genzyme Corporation, where she had overall
responsibility for Genzyme's biotherapeutics business. Dr.
Taunton-Rigby is a member of the Board of Directors of BIO, the
national trade organization, where she is also Vice Chair of the
Emerging Companies section. She is also a member of the Board of
Directors and a past President of the Massachusetts Biotech Council,
the trade organization representing Massachusetts biotechnology
companies. Dr. Taunton-Rigby received her doctorate in Chemistry
from the University of Bristol in England, and is a graduate of the
Advanced Management Program of the Harvard Business School. She is a
director of the CML Group, a specialty retailer, and of Synaptic
Pharmaceutical Corporation. She is also a member of the Bentley
College Ethics Board.
Gerald A. Beltz, Ph.D., 44, has been Vice President of Research
and Development of the Company since 1993. For ten years prior to
assuming this position, Dr. Beltz held various scientific positions
with the Company. Dr. Beltz was responsible for the initial
development of the Company's FeLV vaccine and HIV-1 diagnostic assays,
and is the lead inventor on the patents covering these products. Dr.
Beltz received his B.S. from Beloit College, his M.A. and Ph.D. from
Princeton University, and did his post-doctoral work at Harvard
University.
Stephen J. DiPalma, 37, has been Vice President, Chief Financial
Officer and Treasurer of the Company since March 1996. Before joining
CBC, Mr. DiPalma was Chief Financial Officer and Chief Operating
Officer of the Picker Institute, an affiliate of the Beth Israel
Hospital, specializing in quality assessment, improvement and
information services. From 1988 to 1995, Mr. DiPalma was Chief
Financial Officer of Athena Diagnostics Inc., (formerly Genica
Pharmaceuticals Corporation), a biotechnology company involved in
therapeutic development and diagnostic testing targeted at neurological
disorders. From 1985 to 1988, Mr. DiPalma was Director of Finance of
the Health Data Institute, a division of Baxter International
Corporation.
Deborah B. Grabbe, 44, has been Vice President of Manufacturing
Operations for the Company since 1995. She was Vice President of
Regulatory Affairs and Product Quality from 1993-1994. Prior to
joining CBC in 1993, Ms. Grabbe was Director of Regulatory and Clinical
Affairs and Director of Product Support for Behring Diagnostics, Inc.
From 1987 to 1988 she was Vice President of Operations at Biotechnica
Diagnostics, Inc. Ms. Grabbe holds a B.A. from Oberlin
College and an M.S. from John A. Burns School of Medicine, University
of Hawaii, Honolulu, HI.
Robert B. Kammer, 54, has been Vice President of Medical Affairs
for the Company since 1993. From 1988 to 1993, Dr. Kammer was employed
at Schering-Plough Corporation as Director, Anti-Infective Clinical
Research. Before joining Schering-Plough, Dr. Kammer worked at Lilly
Research Laboratories. Dr. Kammer received his B.A. and M.D. degrees
from the University of Iowa, and did his internship, residency and
fellowship at the Medical College of Virginia.
Gary E. Long, 56, has been Vice President of Diagnostic
Operations since January 1990. Previously, he was the Company's
Director of Operations. Prior to joining the Company in April
1989, Mr. Long was for three years General Manager, BCA Division of
Organon Teknika Corporation, and Vice President of Operations, Reagent
and Immunodiagnostic Products of Cooper BioMedical, Inc.
Jeffrey T. Beaver, 58, has served as Director of the Company
since January 1983, and Chairman of the Board of Directors since April
1995. From May 1994 to April 1995, Mr. Beaver served as President and
Chief Executive Officer of the Company, and from May 1994 to March
1996, Mr. Beaver served as the Company's Treasurer. From January 1991
to May 1994, Mr. Beaver was an independent consultant in the healthcare
sector. From September 1986 to December 1990, Mr. Beaver was Senior
Vice President and Head of the Corporate Finance Group of IBJ Schroder
Bank and Trust Company. Prior to September 1986, Mr. Beaver was a
Managing Director of J. Henry Schroder Corporation (a subsidiary of
Schroder Venture Managers, Inc.) where he was engaged in providing
corporate financial advisory services. Mr. Beaver is a member of the
Institute of Chartered Financial Analysts. He received his B.A.
degree from Princeton University and his M.B.A. degree from New York
University.
C. Arnold Kalman, 76, has served as a director since March 1989.
Mr. Kalman has worked for the consulting firm of Booz Allen & Hamilton
since 1950, becoming a partner in the firm in 1956 and retired as
Senior Vice President of the firm. Mr. Kalman's clients were primarily
in the industry with technology-based products. Mr. Kalman received
his B.S. from the Massachusetts Institute of Technology. Mr. Kalman
is a former director of several public companies including AXIA
Incorporated, and Electronic Memories & Magnetics Corp. Mr. Kalman is
chairman of the Company's nominating committee and a member of the
audit committee.
John H. Kellogg, 72, has served as a director since January 1983.
Mr. Kellogg retired from the practice of law and resigned from Kellogg
& George, P.C., on September 1, 1994, where he had been a partner since
1977. Mr. Kellogg specializes in small business development, finance
and acquisitions. He has been a founder in the following
technology-based manufacturing companies: Thermal Circuits, Inc.,
Kittiwake Corp., Tadco, Inc. and Astron, all based in New England.
Additionally, he is a partner in small partnerships which own and
operate industrial real estate. These include: Tor Co., Gimlet
Realty, Jefferson Realty, and KAK Associates. Mr. Kellogg received
his B.S. degree in Mechanical Engineering at the Massachusetts
Institute of Technology and a J.D. degree from Harvard Law School.
Mr. Kellogg is chairman of the Company's compensation committee.
John M. Nelson, 64, has served as a director since January 1987.
Since 1991, Mr. Nelson has been Chairman of the Board of Wyman-Gordon
Company, a manufacturer of technically advanced forgings, investment
castings and composites principally for aircraft structures and jet
engines. From 1991 to May 1994 he also served as Chief Executive
Officer. In 1995, Mr. Nelson was elected Chairman of the Board of The
TXJ Companies, Inc., a retailer of off-price fashion goods.
From 1988 until 1990, Mr. Nelson was Chairman, President and Chief
Executive Officer of Norton Company, a manufacturer of abrasives,
ceramics, plastics, and chemical process products. From 1979 to
September 1990, he was a director of Norton. Prior to becoming Chief
Executive Officer of Norton, Mr. Nelson was President and Chief
Operating Officer of Norton from 1986 to 1988, and, for
more than five years, was President and Chief Executive Officer of its
subsidiary, Norton Christianson, Inc. Mr. Nelson holds a B.A. degree
from Wesleyan University and a M.B.A. from Harvard Business School. He
is a director of Brown & Sharpe Manufacturing Company, Stocker &
Yale, Inc. and Commerce Holdings, Inc. Mr. Nelson serves on the
Company's compensation and nominating committees.
W. Samuel Nisbet, 59, has served as director since September
1990. From 1965 to 1994 when he retired, Mr. Nisbet was a Vice
President with SIGNET Bank/Maryland. Mr. Nisbet serves on the
Company's audit committee.
John S. Scott, 69, has served as a Director since May 1989.
Mr. Scott served as Chairman of the Board from December 1989 to March
1995, when he retired as Chairman and was named Chairman emeritus.
Mr. Scott is the retired Chairman (1987) of Richardson-Vicks, Inc.,
a diversified consumer products subsidiary of The Procter & Gamble
Company. He served as President and Chief Executive Officer of
Richardson-Vicks from 1975 until being named Chairman in 1986. He was
a director of Richardson-Vicks from 1975 until his retirement in 1987,
and of Procter & Gamble from 1986 until his retirement. Mr. Scott
holds a B.A. degree from Brown University. He is a director of
Fleet Financial Group, Inc., The Perkin-Elmer Corporation, The
Stanley Works, and Creative Products Resource, Inc. Mr. Scott serves
as a member on the Company's compensation committee and as a
member on the Company's nominating committee.
Thomas T. Taylor, 53, has served as a director since September
1990. Mr. Taylor has been President and a director of Chesapeake
Securities Research Corporation (formerly known as Offutt & Taylor,
Inc.), an investment banking firm located in Towson, Maryland, since
1983. From 1983 to November 1984, Mr. Taylor was Co-Director of the
Chesapeake Research Division of Baker, Watts & Co. and from 1979 to
1983, Mr. Taylor served as Co-Director of the Mid-Atlantic Research
Division of Legg Mason Wood Walker, Inc. Mr. Taylor holds a B.A.
degree from the University of Virginia and a M.B.A. degree from
Loyola College, Baltimore, Maryland. Mr. Taylor became a Chartered
Financial Analyst in 1976. Mr. Taylor serves on the Company's
compensation and audit committees.
Douglas Yee, 40, has served as a Director since September 1990.
He has been an Associate Professor of Medicine, Division of Medical
Oncology, at the University of Texas Health Science Center at San
Antonio since September 1993. From August 1988 to June 1989, he was
an Instructor in the Department of Medicine at the Georgetown
University Medical Center. Dr. Yee received a B.S. degree from the
University of Michigan and an M.D. degree from the University of
Chicago. Dr. Yee serves on the Company's nominating committee.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Act")
requires the Company's directors and executive officers and persons who
own more than ten percent of a registered class of the Company's equity
securities to file with the Securities and Exchange Commission ("SEC")
initial reports of ownership and reports of changes in ownership of
common stock of the Company. These persons are required by SEC
regulation to furnish the Company with copies of all Section 16(a)
forms they file. To the Company's knowledge, based solely on a
review of the copies of such reports furnished to the Company and
written representations that no other reports are required during the
fiscal year ended December 31, 1995, one report covering a transaction
was filed late on behalf of Dr. Alison Taunton-Rigby.
Item 11. EXECUTIVE COMPENSATION.
The following table sets forth certain information as to the
annual and long-term compensation for services to the Company for the
Company's last three completed fiscal years of the Company's Chief
Executive Officer and four other most highly compensated executive
officers of the Company as of December 31, 1995 (collectively the
"Named Executive Officers").
Annual Compensation
Other
Annual
Name and Principal Compen-
Position Year Salary Bonus sation
Alison Taunton-Rigby2 1995 $161,827 $56,639 ---
President/CEO and 1994
Director 1993
Jeffrey T. Beaver3 1995 108,077 0 ---
1994 97,231
1993
Gerald A. Beltz 1995 118,885 9,692 ---
Vice President, 1994
Research & 1993
Development
Deborah B. Grabbe 1995 118,500 9,000 ---
Vice President 1994
of Manufacturing 1994
Operations
Robert B. Kammer, M.D. 1995 178,614 10,385 $55,1104
Vice President - 1994
Medical Affairs 1993
Gary E. Long 1995 125,000 0 ---
Vice President - 1994 125,000 0 ---
Operations 1993 125,029 0 ---
Long-Term
Compensation
Awards
Restricted
Name and Principal Stock Options All Other
Position Year Award(s) /SARs Compensation1
Alison Taunton-Rigby2 1995 --- 787,500 3,076
President/CEO and 1994 ---
Director 1993 ---
Jeffrey T. Beaver3 1995 --- 262,500 ---
1994
1993
Gerald A. Beltz 1995 --- --- 514
Vice President, 1994
Research & 1993
Development
Deborah B. Grabbe 1995 --- --- 512
Vice President 1994
of Manufacturing 1993
Robert B. Kammer, M.D. 1995 --- --- 772
Vice President - 1994
Medical Affairs 1993
Gary E. Long 1995 --- --- 540
Vice President - 1994 --- 15,000 540
Operations 1993 --- --- 540
1 The amounts shown for each of the Named Executive Officers represent
payments by the Company of term life insurance.
2 Dr. Taunton-Rigby was appointed President, Chief Executive Officer
and Director effective April 6, 1995.
3 Mr. Beaver became President and Chief Executive Officer on May 9,
1994 and resigned effective April 6, 1995.
4 $19,510.00 for Tax Reimbursements and $35,600.00 for relocation
allowance.
OPTION/SAR GRANTS - LONG TERM INCENTIVE PLAN AWARDS
Individual Grants
Name Number of Percent Exercise Expira-
(a) Securities of Total of Base tion Date
underlying Options/ Price (e)
option/SARs SARs ($/Sh.)
Granted Granted to (d)
(#) Employees
(b) in Fiscal
Year
(c)
Alison 787,500 .37 12/05
Taunton-
Rigby
Jeffrey T. 262,500 .37 12/05
Beaver
Gerald A. 0 ___ ___ ___
Beltz
Deborah B. 0 ___ ___ ___
Grabbe
Robert B. 0 ___ ___ ___
Kammer
Gary E. 0 ___ ___ ___
Long
Name Potential
(a) Realizable Value
at Assumed
Annual Rates
of Stock Price
Appreciation
for Option Term
5%($) 10%($)
(f) (g)
Alison 179,306.67 460,439.21
Taunton-
Rigby
Jeffrey T. 59,768.89 153,479.74
Beaver
Gerald A. ---
Beltz
Deborah B. ---
Grabbe
Robert B. ---
Kammer
Gary E. ---
Long
Fiscal Year End Option/SAR Value Table
The following chart shows the number and value of unexercised
options held by each of the Named Executive Officers at the end of the
Company's last fiscal year. The value shown for each option is equal
to the difference between the exercise price of the option and the fair
market value of the underlying stock at fiscal year end. The Company
has never awarded any stock appreciation rights to any of its
employees, and thus none are outstanding. None of the Named Executive
Officers exercised any options during the Company's last fiscal year.
Number of Value of
Unexercised Unexercised
Options/SARs at In-the-Money
Name Fiscal Year-End Options/SARs at
Fiscal Year-End
Exercisable/ Exercisable/
Unexercisable Unexercisable
Jeffrey T. Beaver 394,250/3,250 $17,719/$0.00
Gerald A. Beltz 88,250/29,250 $0.00
Deborah B. Grabbe 7,875/14,625 $0.00
Robert B. Kammer 45,500/84,500 $0.00
Gary E. Long 85,976/99,750 $0.00
Alison Taunton-Rigby 787,500/0 $53,156/$0.00
The Directors' fees, which include retainer fees that are paid
quarterly and fees for attendance at the regular meetings of the Board
of Directors, for fiscal year end December 31, 1995 were as follows:
John S. Scott - $33,000 (deferred payment of $5,000 retainer, paid
$28,000); Jeffrey T. Beaver - $0; C. Arnold Kalman - $19,500 (deferred
payment of $6,000 retainer, paid $13,500; John H. Kellogg - $17,500
(deferred payment of $6,000 retainer, paid $11,500); John M.
Nelson - $20,500 (deferred payment of $5,000 retainer, paid $15,500);
W. Samuel Nisbett - $16,500 (deferred payment of $5,000 retainer, paid
$11,500); Thomas T. Taylor - $20,500 (deferred payment of $6,000
retainer, paid $14,500); and Douglas E. Yee - $10,500 (deferred payment
of $5,000 retainer, paid $5,500). The directors have agreed to accept
payment of their retainers for 1995 and fees deferred from 1994 in
shares of common stock in the reorganized company. The Board has set
the price at $.50 per share.
The Company entered into employment contracts with several of its
officers as described below.
Dr. Taunton-Rigby has been employed as CBC's President and Chief
Executive Officer since April 1995. Dr. Taunton-Rigby entered into an
employment agreement with CBC dated April 6, 1995, which provides for
an initial term of two years, and an annual salary of $225,000, subject
to review on an annual basis. Dr. Taunton-Rigby is eligible for a
bonus at the discretion of the Board of Directors. After the first
year of the employment term, Dr. Taunton-Rigby may terminate the
agreement without liability upon ninety days' written notice.
Dr. Beltz entered into an employment agreement with CBC on August
21, 1995, with an initial term of two years and an annual salary of
$140,000, subject to review on an annual basis. Dr. Beltz is eligible
for a bonus in the discretion of the Board of Directors. Dr. Beltz's
employment under the agreement may be terminated at any time by either
party after August 21, 1997, without liability upon 180 days' prior
written notice.
Ms. Grabbe entered into an employment agreement with CBC on
August 21, 1995, with an initial term of two years and an annual salary
of $130,000, subject to review on an annual basis. Ms. Grabbe is
eligible for a bonus in the discretion of the Board of Directors. Ms.
Grabbe's employment under the agreement may be terminated at any time
by either party after August 21, 1997 without liability upon 180 days'
prior written notice.
Dr. Kammer entered into an employment agreement with CBC as of
August 21, 1995, with an initial term of two years and an annual salary
of $150,000, subject to review on an annual basis. Dr. Kammer is
eligible for a bonus in the discretion of the Board of Directors. Dr.
Kammer's employment under the agreement may be terminated at any time
by either party after August 21, 1997, without liability upon 180
day's prior written notice.
Board Compensation Committee Report on Executive Compensation
During 1995, the Company continued to operate as a
Debtor-in-Possession under the protection of Chapter 11 of the United
States Bankruptcy Code. Thus the Company's compensation committee
(the "Committee") was not working in a normal operating environment and
in many respects was unable to play its traditional role of
establishing consistent long-term performance-based compensation
goals.
Traditionally, the Company's compensation for its executive
officers, including its chief executive officer, has consisted of
three key elements: base salary, discretionary annual bonus, and
periodic grants of stock options or other long-term compensation. The
Committee has historically made judgements as to the components of
compensation based upon its review of the Company's results and each
individual's performance. The Committee's goal has been to provide an
appropriate balance between base salary and incentive compensation
awarded upon achievement of long-term goals.
During 1995, the Company had two chief executive officers. Mr.
Beaver, a director (now Chairman of the Board) served as interim chief
executive officer beginning in May 1994. During the early months of
1995, the Company conducted a search for a new CEO, which resulted in
the election of Dr. Taunton-Rigby as chief executive officer ("CEO") of
the Company effective April 6, 1995. Mr. Beaver submitted his
resignation as chief executive officer of the Company effective April
6, 1996.
In determining the terms of Dr. Taunton-Rigby's employment
contract, including base salary of $225,000, participation in the
Management Bonus Plan, stock options, and other benefits, the
Committee reviewed levels of salary and other benefits available to
other CEOs in the industry. The Committee believed that the Company
must offer competitive compensation in order to attract a
person with substantial experience capable of developing the Company's
technology and bringing the Company out of bankruptcy. In addition
the Committee felt it necessary to provide significant incentives to
induce the CEO to undertake the task of guiding the Company through
its emergence from bankruptcy. The Committee awarded Dr.
Taunton-Rigby a bonus for 1995 of 35% of her salary, one-third in cash
and two-thirds in stock of the Company's successor upon emergence of
the Company from bankruptcy.
The Committee also reviewed the salaries of other executive
officers, all of whom are under employment contracts. The salaries of
Dr. Kammer, Dr. Beltz and Ms. Grabbe were all adapted to the level
indicated in their employment contracts. The Committee adopted a
management bonus program in March of 1995. The Committee awarded Dr.
Kammer, Mr. Beltz and Ms. Grabbe a bonus for 1995 of 20% of their
respective salaries, one-third in cash, two-thirds in stock of the
reorganized company, prorated to the start date of their employment
contracts.
John H. Kellogg
John M. Nelson
John S. Scott
Thomas T. Taylor
Performance Graph
The following graph shows a comparison over a five-year period
ending at the end of the Company's last fiscal year of the cumulative
total return to the Company's shareholders with the cumulative total
return of the Standard & Poor's 500 Composite Index and the NASDAQ
Pharmaceutical Index and assumes an investment of $100 on December 31,
1989.
1990 1991 1992 1993 1994 1995
S&P500 Composite Index 100.00 120.70 140.70 154.40 156.50 215.40
NASDAQ Pharmaceuticals
Index 100.00 265.70 221.10 197.10 148.30 271.90
Cambridge Biotech 100.00 390.00 285.00 100.00 5.00 17.50
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth certain information as to the
Company's common stock owned by management of the Company as of March
1, 1995 based upon information supplied by the Company's directors and
executive officers. All directors and executive officers have sole
voting and sole investment power in shares reported as beneficially
owned by them except as may be noted. The State of Wisconsin
Investment Board owns more than five percent (5%) of the outstanding
shares of the Company's common stock.
Name and Address of Number Percent
Beneficial Owner of Shares (1) of Class
Alison Taunton-Rigby (2) 787,500 3%
Cambridge Biotech Corporation
365 Plantation Street
Worcester, MA 01605
Gerald A. Beltz (3) 88,250 *
Cambridge Biotech Corporation
365 Plantation Street
Worcester, MA 01605
Deborah B. Grabbe (4) 7,875 *
Cambridge Biotech Corporation
365 Plantation Street
Worcester, MA 01605
Robert B. Kammer (5) 50,700 *
Cambridge Biotech Corporation
365 Plantation Street
Worcester, MA 01605
John S. Scott (6) 431,900 1.6%
Cambridge Biotech Corporation
365 Plantation Street
Worcester, MA 01605
Jeffrey T. Beaver (7) 397,083 1.5%
Cambridge Biotech Corporation
365 Plantation Street
Worcester, MA 01605
C. Arnold Kalman (8) 54,200 *
Cambridge Biotech Corporation
365 Plantation Street
Worcester, MA 01605
John H. Kellogg (9) 73,500 *
Cambridge Biotech Corporation
365 Plantation Street
Worcester, MA 01605
John M. Nelson (10) 68,000 *
Cambridge Biotech Corporation
365 Plantation Street
Worcester, MA 01605
W. Samuel Nisbet (11) 42,115 *
Cambridge Biotech Corporation
365 Plantation Street
Worcester, MA 01605
Thomas T. Taylor (12) 45,000 *
Cambridge Biotech Corporation
365 Plantation Street
Worcester, MA 01605
Douglas Yee (13) 181,950 *
Cambridge Biotech Corporation
365 Plantation Street
Worcester, MA 01605
Gary E. Long (14) 90,668 *
Cambridge Biotech Corporation
365 Plantation Street
Worcester, MA 01605
Directors and Executive (15) 1,392,041 5.3%
Officers as a Group
State of Wisconsin 2,505,000 9.45%
Investment Board
State of Wisconsin
121 East Wilson Street
Madison, WI 53707
____________
* Less than 1%
(1) Share ownership includes shares of Common Stock issuable on
exercise of certain outstanding options as described in the
footnotes below.
(2) Includes 787,500 shares which Ms. Taunton-Rigby may acquire
upon the exercise of options.
(3) Includes 84,723 shares which Mr. Beltz may acquire upon the
exercise of options.
(4) Includes 7,875 shares which Ms. Grabbe may acquire upon the
exercise of options.
(5) Includes 45,500 shares which Mr. Kammer may acquire upon the
exercise of options.
(6) Includes 419,900 shares which Mr. Scott may acquire upon the
exercise of options.
(7) Includes 1,000 shares held as custodian for one daughter and
1,000 shares held as custodian for another daughter.
Mr. Beaver disclaims beneficial ownership of the shares held as
custodian for his daughters. Includes 394,250 shares which Mr.
Beaver may acquire upon the exercise of options.
(8) Includes 49,200 shares which Mr. Kalman may acquire upon the
exercise of options.
(9) Includes 60,000 shares which Mr. Kellogg may acquire upon the
exercise of options.
(10) Includes 60,000 shares which Mr. Nelson may acquire upon the
exercise of options.
(11) Includes 40,000 shares which Mr. Nisbet may acquire upon the
exercise of options.
(12) Includes 40,000 shares which Mr. Taylor may acquire upon the
exercise of options.
(13) Includes 138,475 shares held by him alone and 3,475 shares held
by his wife alone. Includes 40,000 shares which Mr. Yee may
acquire upon the exercise of options.
(14) Includes 85,876 shares which Mr. Long may acquire upon the
exercise of options.
(15) See footnotes #1-14.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a)1. Financial Statements
The following documents are filed as a part of this
report:
1. Report of Independent Accountants
2. Consolidated Balance Sheet at December 31, 1995
and 1994
3. Consolidated Statement of Operations for the
Years ended December 31, 1995 and 1994
4. Consolidated Statement of Cash Flows
for the Years Ended December 31, 1995 and 1994
5. Consolidated Statement of Shareholders'Equity
for the Years Ended December 31, 1995 and 1994
6. Notes to Consolidated Financial Statements for
the Years Ended December 31, 1995 and 1994
(a)2. Financial Statement Schedules
Schedule II Valuation and Qualifying Accounts for the
Years Ended December 31, 1995 and 1994
All other schedules are omitted because they are
inapplicable, not required under the instructions, or
because the information is reflected in the financial
statements or notes thereto
(a)3. Exhibits
3.1 Restated Certificate of Incorporation, effective June 15,
1987 (incorporated by reference to Exhibit 4 of Form S-8
Registration Statement, File No. 33-190641).
3.1.1 Amendment to Certificate of Incorporation dated June 27,
1989, (incorporated by reference to Exhibit 3.1.1 to Form
10-K for fiscal year ended December 31, 1989,
File No. 0-12081).
3.1.2 Amendment to Certificate of Incorporation dated
September 7, 1990 together with complete copy of
certificate, as amended (incorporated by reference to
Exhibit 3.1.2 to Form 10-K for fiscal year ended
December 31, 1990, File No. 0-12081).
3.2 By-Laws of the Company (incorporated by reference to
Exhibit 3.2 to Annual Report on Form 10-K for fiscal year
ended December 31, 1989, File No. 0-12081).
4.1 Specimen Certificate representing Common Stock of the
Company (incorporated by reference to Exhibit 4.1 to Form
10-K for fiscal year ended December 31, 1990,
File No. 0-12081).
4.2 Shareholder Rights Agreement dated March 17, 1989
(incorporated by reference to Exhibit 1 to Current Report
on Form 8-K dated March 20, 1989, File No. 0-12081).
04.3 Long Term Debt.
*10.1 License Agreement with Harvard University dated May 1,
1987 (incorporated by reference to Exhibit 10.9 to Annual
Report on Form 10-K for fiscal year ended December 31,
1987, No. 0-12081).
*10.1.1 Amendment to License Agreement with Harvard University
(incorporated by reference to Exhibit 10.8.1 to Annual
Report on Form 10-K for fiscal year ended December 31,
1988, No. 0-12081).
*10.2 License Agreement with National Technical Information
Service, a primary operating unit of the United States
Department of Commerce, dated February 1, 1989
(incorporated by reference to Exhibit 10.9 to Annual
Report on Form 10-K for fiscal year ended December 31,
1988, No. 0-12081).
*10.3 Contract Research and License Agreement with Virbac
Laboratories dated July 6, 1983 (incorporated by
reference to Exhibit 10.31 to Annual Report on Form 10-K
for fiscal year ended December 31, 1983, No. 0-12081).
*10.3.1 Amendment to Agreement with Virbac Laboratories
(incorporated by reference to Exhibit 10.10.1 to Annual
Report on Form 10-K for fiscal year ended December
31, 1988, No. 0-12081).
*10.4 Lease for Worcester, Massachusetts facility (incorporated
by reference to Exhibit 10.13 to Annual Report on Form
10-K for fiscal year ended December 31, 1986, No. 0-
12081).
10.5 Lease for Shrewsbury, Massachusetts facility
(incorporated by reference to Exhibit 10.12 to Annual
Report on Form 10-K for fiscal year ended December 31,
1988, No. 0-12081).
10.5.1 Extension and Amendment of Lease for Shrewsbury,
Massachusetts facility (incorporated by reference to
Exhibit 10.5.1 to Annual Report on Form 10-K for fiscal
year ended December 31, 1993, No. 0-12081).
*10.6 Agreement with Massachusetts Institute of Technology
dated as of November 1, 1985, and amendment thereto
(incorporated by reference to Exhibit 10.9 to Annual
Report on Form 10-K for fiscal year ended December 31,
1988, No. 0-12081).
*10.7 Agreement with University of Massachusetts dated
November 1, 1984 (incorporated by reference to Exhibit
10.19 to Amendment No 2 to Annual Report on Form 10-K for
fiscal year ended December 31, 1986, No. 0-12081).
10.9 Master Agreement with SelfCare, Inc. and Cambridge
Biotech Limited dated November 23, 1994 (incorporated by
reference to Current Report on Form 8-K dated November
30, 1994, File No. 0-12081).
TM10.10 1989 Stock Award and Option Plan, adopted May 23, 1989,
as amended (incorporated by reference to Exhibit 10.12 to
Annual Report on Form 10-K for fiscal year ended December
31, 1991, File No. 0-12081).
10.11 Master Equipment Lease and Pledge Agreement with Fleet
Credit Corporation dated September 5, 1989, as amended
(incorporated by reference to Exhibit 10.23 to Annual
Report on Form 10-K for fiscal year ended December 31,
1989, File No. 0-12081), as amended.
10.11.1 Amendment and Restated Pledge Agreement to Master
Equipment Lease and Pledge Agreement with Fleet Credit
Corporation dated September 6, 1989 (incorporated by
reference to Exhibit 10.14.1. to Annual Report on Form
10-K for fiscal year ended December 31, 1993, No. 0-
12081).
10.12 Lease Agreement for premises located at 1 Taft Court,
Rockville, Maryland, dated March 11, 1985, between
William M. Rickman and Biotech Research Laboratories,
Inc. (incorporated by reference to Exhibit 10.21 to Form
10-K for fiscal year ended December 31, 1990, No. 0-
12081).
10.13 Lease Agreement for premises located at 1 Taft Court,
Rockville, Maryland 20852, dated August 25, 1987, between
William M. Rickman and Biotech Research Laboratories,
Inc. (incorporated by reference to Exhibit 10.22 to Form
10-K for fiscal year ended December 31, 1990, No. 0-
12081).
*10.14 License, Development and Supply Agreement with SmithKline
Beecham p.l.c. dated as of September 11, 1992, as amended
by agreement dated as of March 31, 1993, (incorporated by
reference to Exhibit 10.17 to Annual Report on Form 10-K
for fiscal year ended December 31, 1992, No. 0-12081).
10.15 Amendment to Lease Agreement for Worcester, Massachusetts
facility, (incorporated by reference to Exhibit 10.18 to
Annual Report on Form 10-K for fiscal year ended December
31, 1992, No. 0-12081).
o10.16 Sublease Agreement between CBC and Dyn Corporated dated
April 6, 1995, for 1,044 square feet of office and
laboratory space in a building located at 1 Taft Court
Rockville, MD.
TMo10.17 Employment Agreement between CBC and Alison Taunton-
Rigby, dated April 6, 1995.
TMo10.18 Employment Agreement between CBC and Gerald A. Beltz,
dated August 21, 1995.
TMo10.19 Employment Agreement between CBC and Deborah Blackburn
Grabbe, dated August 21, 1995.
TMo10.20 Employment Agreement between CBC and Robert B. Kammer,
dated August 21, 1995.
TMo10.21 Management Bonus Program.
o22. Subsidiaries of the registrant.
o23.1 Consent of Coopers & Lybrand, L.L.P.
o27. Financial Data Schedule
____________________
* Confidential treatment previously granted.
o Filed herewith as part of this Annual Report on Form 10-K
TM Management contract or compensatory plan.
(b) Reports on Form 8-K filed in 1995
1. Current report on Form 8K dated 1/23/95
2. Current report on Form 8K dated 2/2/95
3. Current report on Form 8K dated 2/21/95
4. Current report on Form 8K dated 3/20/95
5. Current report on Form 8K dated 4/24/95
6. Current report on Form 8K dated 5/22/95
7. Current report on Form 8K dated 6/22/95
8. Current report on Form 8K dated 7/28/95
9. Current report on Form 8K dated 8/24/95
10. Current report on Form 8K dated 10/11/95
11. Current report on Form 8K dated 11/10/95
REPORT OF INDEPENDENT ACCOUNTANTS
We have audited the consolidated financial statements and the
financial statement schedule of Cambridge Biotech Corporation
(debtor in possession, effective July 7, 1994) listed in Item
14(a)1. of this Form 10-K. These consolidated financial
statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements
and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Cambridge Biotech Corporation as of December 31, 1995
and 1994 and the consolidated results of its operations and its
cash flows for the years then ended, in conformity with generally
accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in
relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required
to be included therein.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Notes 1 and 13 to the consolidated financial
statements, Cambridge Biotech Corporation filed a voluntary
petition for relief under Chapter 11 of the United States
Bankruptcy Code on July 7, 1994, civil actions have been filed
against the Company by certain shareholders, and the Company is
subject to a Securities and Exchange Commission order directing
private investigation. The civil actions against the Company have
been temporarily stayed as a result of the Company's bankruptcy.
Although the Company is currently operating its business as a
debtor in possession under the jurisdiction of the Bankruptcy
Court, the continuation of the Company's business as a going
concern is contingent upon, among other things, the ability to
formulate a plan of reorganization which will gain approval of the
creditors and confirmation by the Bankruptcy Court, and the final
settlement of the shareholder litigation and the Securities and
Exchange Commission order directing private investigation. These
matters raise substantial doubt about the Company's ability to
continue as a going concern. The consolidated financial
statements do not include any adjustments that may be required in
connection with restructuring the Company as it reorganizes under
Chapter 11 of the United States Bankruptcy Code, and the final
settlement of the shareholder litigation and the Securities and
Exchange Commission order directing private investigation.
Boston, Massachusetts /s/ Coopers & Lybrand L.L.P.
March 20, 1996
Cambridge Biotech Corporation
(Debtor-In-Possession)
Consolidated Balance Sheet
As of December 31, 1995 and 1994
Assets 1995 1994
- ------ ---- ----
Current Assets:
Cash and cash equivalents $6,855,751 $8,537,791
Marketable securities
(Notes 2 and 12) 216,162 ---
Accounts receivable - trade
(less allowance for doubt-
ful accounts of $160,000 and
$150,000, respectively) 2,638,024 2,875,612
Other receivables 125,831 92,624
Inventories (Note 4) 4,367,831 3,965,668
Prepaid expenses and other
current assets 695,455 836,285
--------- ----------
Total Current Assets 14,899,054 16,307,980
Investments (Note 5) --- 110,586
Property, Plant, and Equipment,
Net (Note 6) 6,985,523 9,883,820
Patents and Purchased Technology,
Net (Note 7) 1,054,579 2,094,493
Other Assets 105,423 105,791
--------- ---------
Total Assets $23,044,579 $28,502,670
========== ==========
Liabilities & Shareholders' Equity
- ----------------------------------
Current Liabilities:
Accounts payable $ 850,480 $ 524,426
Accrued royalties 1,192,169 372,550
Accrued professional fees 753,244 522,548
Accrued incentive
compensation (Note 14) 1,457,622 627,407
Accrued expenses (Note 8) 2,258,196 1,284,912
Deferred revenue (Note 16) 410,739 4,089,670
--------- ---------
Total Current Liabilities 6,922,450 7,421,513
Deferred Revenue (Note 16) 2,287,315 2,698,904
Liabilities Subject To Chapter 11
Proceedings (Notes 9 and 10) 9,880,309 9,714,572
Commitments and Contingencies
(Note 13) --------- ---------
Total Liabilities 19,090,074 19,834,989
Minority Interest 8,989 ---
Shareholders' Equity (Note 14):
Preferred stock, par values: $.01
per share, authorized: 5,000,000
shares, none issued --- ---
Common stock, par value: $.01 per
share, authorized: 40,000,000
shares, issued: 26,057,006
shares in 1995 and 1994 260,570 260,570
Additional Paid in Capital 120,382,104 120,211,479
Unearned Compensation (138,088) (186,844)
Deficit (116,559,070) (111,617,524)
------------- -------------
Total Shareholders' Equity 3,945,516 8,667,681
------------- -------------
Total Liabilities and Shareholders'
Equity $23,044,579 $28,502,670
============= =============
The accompanying notes are an integral part of the consolidated financial
statements
- -----------------------------------------------------------------------------
Cambridge Biotech Corporation
(Debtor-In-Possession)
Consolidated Statement of Operations
For the Years Ended December 31, 1995 and 1994
1995 1994
---- ----
Revenue:
Product sales $20,854,268 $16,683,287
Research and development 5,136,857 4,334,197
Royalties 1,877,283 1,082,375
---------- ----------
27,868,408 22,099,859
Cost and expenses:
Cost of sales 16,155,619 14,485,330
Research and development 6,453,816 5,859,652
Sales, general and administrative 9,955,384 10,273,822
Loss on impairment of assets
(Notes 6 and 7) --- 2,879,707
--------- ----------
32,564,819 33,498,511
Other:
Other income and interest expense
net of interest income
(Notes 9 and 12) 580,612 (472,582)
Loss from continuing operations
before reorganization items and --------- ---------
income tax benefit (4,115,799) (11,871,234)
Reorganization items (Note 1):
Professional fees (1,200,188) (610,832)
Provision for rejected
executory contracts --- (357,501)
Interest earned on accumulated
cash resulting from Chapter 11
proceedings 387,407 99,579
--------- ---------
Total reorganization items ( 812,781) (868,754)
Loss from continuing operations --------- ----------
before income tax benefit (4,928,580) (12,739,988)
Income tax (expense)/benefit (3,977) 207,396
---------- ----------
Loss before minority interest (4,932,557) (12,532,592)
Minority Interest (8,989) ---
---------- ----------
Loss from continuing operations (4,941,546) (12,532,592)
Discontinued operations (Note 3):
Loss from operations --- (2,261,964)
Loss on disposal --- (7,481,710)
---------- -----------
Net Loss ($4,941,546) ($22,276,266)
========== ===========
Net loss per weighted average
number of common shares:
Continuing operations ($0.19) ($0.48)
Discontinued operations $0.00 ($0.38)
--------- ----------
Net Loss per share ($0.19) ($0.86)
========= ==========
Weighted average number of
common shares outstanding 26,057,006 25,858,608
The accompanying notes are an integral part of the consolidated financial
statements
-----------------------------------------------------------------------------
Cambridge Biotech Corporation
(Debtor-In-Possession)
Consolidated Statement of Cash Flows
For the years ended December 31, 1995 and 1994
Cash Flows From Operating Activities: 1995 1994
---- ----
Net Loss ($4,941,546) ($22,276,266)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 4,736,689 4,282,125
Provision for doubtful accounts 61,065 46,697
Non-cash compensation expense 219,381 160,253
Loss on sale of property,
plant, and equipment --- 60,343
Loss from impairment of assets --- 2,879,707
Receipt of marketable securities (216,162) ---
Minority interest 8,989 ---
Loss on disposal of discontinued
operations --- 7,481,710
Loss on disposition and write
down of investments 110,586 531,155
Changes in assets and liabilities,
net of effects of disposed
businesses:
Accounts and other receivables 143,316 974,979
Inventories (402,163) 1,524,269
Deferred revenue (4,090,520) (468,819)
Prepaid and other current assets 140,830 (275,089)
Accounts payable and other
liabilities 3,349,347 2,257,680
Income taxes payable --- (183,708)
Other assets 368 44,261
Discontinued operations -
non cash and working capital
changes --- (134,235)
-------- --------
Net cash used by
operating activities (879,820) (3,094,938)
Cash Flows From Investing Activities:
Proceeds from sale of marketable
securities --- 4,139,562
Proceeds on sale of discontinued
operations --- 2,391,256
Purchases of property, plant, and
equipment (593,551) (2,118,359)
Proceeds from sale of property,
plant, and equipment --- 84,750
Proceeds from collection of note
receivable --- 1,000,366
Patents (204,927) (266,332)
Financing activities of discon-
tinued operations --- 31,152
-------- ---------
Net cash (used)/provided by
investing activities (798,478) 5,262,395
Cash Flows From Financing Activities:
Issuance of common stock --- 6,832,513
Payment on long-term obligations (3,742) (1,377,449)
-------- ---------
Net cash (used)/provided by
financing activities (3,742) 5,455,064
Effect of exchange rate changes on
cash and cash equivalents --- 31,107
-------- ---------
Net (decrease)/increase in cash and
cash equivalents (1,682,040) 7,653,628
Cash and cash equivalents at the
beginning of the year 8,537,791 884,163
---------- ---------
Cash and cash equivalents at the
end of the year $6,855,751 $8,537,791
========= =========
Supplemental disclosures:
- ------------------------
Income taxes refunded $ --- ($141,814)
========= =========
Interest paid ($ --- ) $254,026
========= =========
The accompanying notes are an integral part of the consolidated financial
statements
- ----------------------------------------------------------------------------
Cambridge Biotech Corporation
(Debtor-In-Possession)
Consolidated Statement of Shareholders' Equity
For the years ended December 31, 1995 and 1994
Common Stock Additional
------------ Paid-In Unearned
Shares Amount Capital Compensation
------ ------ ---------- ------------
BALANCE,
DECEMBER 31, 1993 23,403,445 $234,034 $113,854,636 ($796,231)
Private placement of
common stock 2,589,100 25,891 6,609,357 ---
Stock issued for the
employee stock purchase
plan 50,761 508 154,313 ---
Exercises of warrants,
options, and other
shares issued 13,700 137 42,307 ---
Forfeiture of discounted
stock options --- --- (449,134) 449,134
Compensation expense
recognized --- --- --- 160,253
Net loss --- --- --- ---
Translation adjustment --- --- --- ---
--------- -------- ---------- --------
BALANCE,
DECEMBER 31, 1994 26,057,006 260,570 120,211,479 (186,844)
Compensation expense
recognized --- --- 170,625 48,756
Net loss --- --- --- ---
----------------------------------------------------
BALANCE,
DECEMBER 31, 1995 26,057,006 $260,570 $120,382,104 ($138,088)
====================================================
The accompanying notes are an integral part of the financial statements
- ------------------------------------------------------------------------------
Cambridge Biotech Corporation
(Debtor-In-Possession)
Consolidated Statement of Shareholders' Equity
For the years ended December 31, 1995 and 1994
Cumulative
Translation
Deficit Adjustment Total
------- --------- ----------
BALANCE,
DECEMBER 31, 1993 ($89,341,258) ($1,934,051) $22,017,130
Private placement of
common stock --- --- 6,635,248
Stock issued for the
employee stock
purchase plan --- --- 154,821
Exercises of warrants,
options, and other
shares issued --- --- 42,444
Forfeiture of discounted
stock options --- --- ---
Compensation expense
recognized --- --- 160,253
Net loss (22,276,266) --- (22,276,266)
Translation adjustment --- 1,934,051 1,934,051
--------- -------- -----------
BALANCE,
DECEMBER 31, 1994 (111,617,524) --- 8,667,681
Compensation expense
recognized --- --- 219,381
Net loss (4,941,546) --- (4,941,546)
-----------------------------------------
BALANCE,
DECEMBER 31, 1995 ($116,559,070) --- $3,945,516
===========================================
The accompanying notes are an integral part of the financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. CHAPTER 11 REORGANIZATION
Cambridge Biotech Corporation (the "Company" or "CBC") filed a
petition for reorganization under Chapter 11 of the United States
Bankruptcy Code ("Chapter 11") on July 7, 1994 with the United
States Bankruptcy Court for the District of Massachusetts Western
Division (the "Bankruptcy Court"). In a Chapter 11 case,
substantially all liabilities as of the date of filing of the
petition for reorganization are subject to settlement under a plan
of reorganization to be voted upon by the creditors and equity
security holders and approved by the Bankruptcy Court. The
Company continues to manage its affairs and operate its business
as a debtor-in-possession, subject to the supervision of the
Bankruptcy Court while the case is pending.
In the event a plan of reorganization is approved by the
Bankruptcy Court, continuation of the business after
reorganization is dependent upon the success of future operations
and the Company's ability to meet obligations as they become due.
The accompanying financial statements have been prepared on a
going concern basis, which contemplates continuity of operations,
realization of assets and liquidation of liabilities in the
ordinary course of business. As a result of the reorganization
proceedings, the Company may have to sell or otherwise dispose of
assets and liquidate or settle liabilities for amounts other than
those reflected in the financial statements. The financial
statements do not give effect to all adjustments to the carrying
value of assets, or amounts and reclassification of liabilities
that might be necessary as a consequence of these bankruptcy
proceedings. The appropriateness of using the going concern basis
is dependent upon, among other things, confirmation of a plan of
reorganization, success of future operations, and the ability of
the Company to generate sufficient cash from operations and
financing sources to meet its obligations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The financial statements include
Cambridge Biotech Corporation and its subsidiaries, Biotech
Research Laboratories, Inc., FSC (FSC), and Cambridge Affiliated
Corporation (CAC), of which CBC owns 51%. Cambridge Biotech Ltd.
(CBL), a subsidiary, was sold during 1994 (see Note 3) and is no
longer included in the Company's Consolidated Balance Sheet.
CBL's revenue and expenses from January 1, 1994 to July 21, 1994
are reflected on the Statement of Operations as a loss from
discontinued operations. Cambridge Biotech International
Corporation ("CBIC") ceased operations in 1994 (see Note 3). FSC
is a foreign sales corporation which was dissolved by the Company
on January 27, 1995. All significant intercompany transactions
and accounts have been eliminated.
Nature of Operations - The Company is in the business of
developing, manufacturing and marketing products for the
prevention, detection, and treatment of diseases in humans and
animals. Its Diagnostic Division has developed an extensive line
of diagnostic products for the detection of infectious diseases.
Its Biopharmaceutical Division has and is developing vaccines and
other products that stimulate the immune system to control or
prevent infectious diseases and cancer. The principal market for
the Company's products are in the U.S. The Diagnostic Division is
responsible for a significant portion of the Company's total
revenues.
The Company is subject to risks common to companies in the
biotechnology industry including, but not limited to, development
by the Company or its competitors of new technological
innovations, dependence on key personnel, protection of
proprietary technology, and compliance with FDA government
regulations.
Basis of Presentation - Certain prior year amounts have been
reclassified to conform with current year presentation.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make certain estimates and assumptions that effect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
Cash and Cash Equivalents - The Company considers all highly-
liquid debt instruments purchased with a maturity of three months
or less to be cash equivalents. Cash equivalents include money
market accounts, certificates of deposit, commercial paper and
short-term investments.
Concentrations of Credit Risk - At December 31, 1995, the Company
has 83% of its cash and cash equivalents invested in commercial
paper of three financial institutions in the following
percentages: 55%, 27% and 18%. The remaining cash and cash
equivalents are primarily in government-backed securities. All of
the above mentioned securities had maturities of less than 45 days
as of December 31, 1995.
Marketable Securities - The Company has classified its marketable
securities as "available for sale". All marketable securities
represent shares of common stock of one insurance company and are
valued at fair value which approximates cost. There are no
realized or unrealized gains in 1995.
Inventories - Inventories are stated at the lower of cost (first-
in, first-out method) or market.
Property, Plant and Equipment - Property, plant and equipment are
recorded at cost. However, the Company evaluates its property,
plant and equipment based upon undiscounted cash flows and states
their net realizable value in accordance with the Financial
Accounting Standard No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("FAS 121"). Depreciation for financial accounting purposes is
computed substantially by the straight-line method to amortize the
cost of various classes of assets over their estimated useful
lives. The estimated useful lives of the assets are as follows:
Useful Life
Buildings 30
Furniture, fixtures and equipment 3 - 10
Leasehold and building improvements Lesser of Useful Life
for the Term of the Lease
Maintenance and repairs are charged to operations as incurred,
whereas additions and improvements are capitalized. Gains and
losses on the disposition of properties, if reflected in earnings
and the related asset costs and accumulated depreciation, are
removed from the respective accounts.
Purchased Technology and Patents - Purchased technology related to
the acquisition of assets is recorded at fair market value at
acquisition date. The Company evaluates its purchased technology
and patents based upon undiscounted cash flows and states their
net realizable value in accordance with FAS 121. Capitalized
patent costs include product registrations and costs incurred for
the support and protection of existing patents. Purchased
technology and patents are amortized on a straight-line basis over
periods ranging from three to seven years.
Revenue Recognition - Revenue from product and service sales is
recognized at the time of the product shipment or performance of
the service. Revenue from research and development contracts is
deferred and recognized over the contractual periods as services
are performed. In addition, research agreements which have
established payments for distinct achievements or phases are
recorded as income as earned. The initial fee in alliance
agreements is recognized when a definitive agreement is reached
and no contingent factors are present.
Research and Development Costs - Research and development costs
are charged to operations as incurred.
Income Taxes - The Company uses the asset and liability method of
accounting for income taxes. Under this method, deferred tax
assets and liabilities are recognized for the expected future tax
consequences of temporary differences between the carrying amounts
and the tax bases of assets and liabilities using the current
statutory tax rates.
Net Loss Per Share - The net loss per share is computed based on
the weighted average number of shares of common stock outstanding
during each period. Common equivalent shares are not included in
the per share calculation because the effect of their inclusion
would be anti-dilutive.
3. DISCONTINUED OPERATIONS
On July 21, 1994 the Company's wholly-owned Irish subsidiary, CBL,
filed for protection of the Irish High Court and an Examiner was
appointed pursuant to the Irish Companies Act of 1990. At July
21, 1994 CBL's debt to the Company represented approximately 92%
of CBL's total liabilities.
The appointment of the Examiner and the doubtful recovery of the
Company's investment in CBL have led the Company to conclude the
measurement date, under the Accounting Principles Board Statement
No. 30 "Reporting the Results of Operations - Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions" ("APB
30"), to be July 21, 1994. Consequently the accompanying
financial statements for 1994 include a loss of $2,129,000 from
the discontinued operations for the period January 1, 1994 through
July 21, 1994. Net revenues from discontinued operations were
$1,952,000 for the period prior to disposal.
On November 30, 1994 the Company sold its interest in CBL's debt
and equity to SelfCare, Inc. (a U.S. Corporation). Total
consideration for the transaction was approximately $2.1 million.
CBL was classified as a discontinued operation as of the July 21,
1994 measurement date and a $6,963,000 charge was recorded for the
loss in 1994.
The Company, through the acquisition of certain assets of
Codiapharm, S.A. in November, 1991 obtained product registration
rights and distribution contracts for the sale of products
manufactured by CBL, the Company's Irish subsidiary. These assets
were recorded by the Company's subsidiary CBIC. Effective with
the disposal of CBL, the Company has written off the value of
CBIC's assets, and included this loss of $519,000 in the loss on
disposal in 1994.
On March 11, 1994 the Company sold its 54% ownership of ADI
Diagnostics, Inc. to the minority shareholder, Biomira Inc., and
received net proceeds of $910,000 in 1994. The Company had
accounted for ADI as a discontinued operation in 1993, and
accordingly, consistent with APB 30, the results of ADI and loss
on disposal are not included in the accompanying financial
statements.
4. INVENTORIES
Inventories consist of the following at December 31:
1995 1994
------ ------
Finished Goods $ 680,712 $ 559,321
Work in process 2,887,150 2,735,664
Raw Materials and supplies 799,969 670,683
---------- ----------
$ 4,367,831 $3,965,668
======= =======
5. INVESTMENTS
The Company owns a 19% interest in GRF Corporation (GRF) as part
of a joint venture formed to develop and market human growth
hormone releasing factor (GHRF) thought to be beneficial in the
treatment of osteoporosis and other diseases. The remainder of
this company is beneficially owned by BioNebraska, Inc. and R&C
Enterprises, Inc. The Company provided the initial funding of $2
million. GRF is conducting a pilot study testing the use of GHRF
to treat osteoporosis. Depending on the results of the pilot
study, the Company has the right to fund additional studies and
potentially increase its equity interest in the joint venture.
While growth hormone levels have increased in the majority of
patients in response to treatment, the data are incomplete. The
Company has recorded valuation adjustments of $111,000 and
$226,000 in the Company's 1995 and 1994 Statement of Operations,
respectively for its investment in GRF. Due to the uncertainty
that the joint venture will be able to raise additional funding to
support its activities, this investment has been fully written
off.
The Company had an investment in ImmuCell Corporation, which was
accounted for on the cost method. In December, 1994 the Company
sold its interest in ImmuCell for $309,000, recognizing a $306,000
loss in 1994.
6. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consists of the following at
December 31:
1995 1994
------ ------
Land $ 647,031 $ 647,031
Buildings 3,356,525 3,356,525
Furniture, fixtures, and 13,328,707 13,080,062
equipment
Leasehold and building 6,779,949 6,684,335
improvements
Property leased to others 987,889 987,889
Leased equipment 20,588 20,588
------------- ---------
Sub-total 25,120,689 24,776,430
Less accumulated depreciation
and amortization (18,135,166) (14,892,610)
------------- -----------
$ 6,985,523 $ 9,883,820
========= ========
Total depreciation expense during 1995 and 1994 was $3,492,000 and
$3,174,000, respectively. Accumulated depreciation on property
leased to others was $603,000 and $588,000 at December 31, 1995
and 1994, respectively.
As a result of the Company filing for reorganization under Chapter
11, the Company evaluated its facilities in Rockville, Maryland
based upon undiscounted future cash flows and stated them at net
realizable value in accordance with FAS 121. Accordingly, the
Company recognized an impairment loss of $1,145,000 on its
property and plant in Rockville during 1994.
7. PURCHASED TECHNOLOGY AND INTANGIBLES
Purchased technology and intangibles consist of the following at
December 31:
1995 1994
---- ----
Purchased technology $ 3,451,366 $ 3,451,366
Patents and patent support 948,965 744,038
--------- ----------
Sub-total 4,400,331 4,195,404
Less accumulated amortization (3,345,752) (2,100,911)
---------- -----------
$ 1,054,579 $ 2,094,493
========= =========
Total amortization expense was $1,245,000 and $1,107,000 in 1995
and 1994, respectively.
As a result of the Company filing for reorganization under Chapter
11, the Company evaluated its intangible assets based upon
undiscounted future cash flows and stated them at net realizable
value in accordance with FAS 121. Accordingly, the Company
recognized an impairment loss in 1994 of $1,734,000 on certain
purchased technology.
8. ACCRUED EXPENSES
Accrued expenses consist of the following at December 31:
1995 1994
----- -----
Contract obligations $ 975,000 $ - - -
Compensation 321,023 301,642
Rockville restructuring charge 257,000 378,000
Other 705,173 605,270
--------- --------
$ 2,258,196 $ 1,284,912
========= =========
During 1992 the Company recorded a restructuring charge for the
consolidation of the Rockville manufacturing facilities and
processes into the Worcester, Massachusetts and Galway, Ireland
locations. The Company made $121,000 and $351,000 in 1995 and
1994, respectively, in payments against this reserve. The
remaining balance of $257,000 at December 31, 1995 consists of
estimated severance costs and related expenses.
9. DEBT
The Company was in default of its debt agreements as of December
31, 1995 and 1994, with the exception of the capital lease
agreement, and the balance is included in liabilities subject to
Chapter 11 proceedings (Note 10). The debt consists of the
following at December 31:
1995 1994
----- -----
Building loan; interest at prime
plus 1/2%: $ 3,719,500 $ 3,719,500
Building loan; interest at 8%; 292,659 292,659
Equipment capital lease; interest at
9.5%; due December 1997; payments of
$433 per month including interest;
collateralized by the leased
equipment 10,390 15,580
---------- ---------
4,022,549 4,027,739
Less: amount representing interest
included in the capital lease (1,329) (2,777)
--------- --------
Debt $ 4,021,220 $ 4,024,962
========= =========
The two building loans are collateralized by land, buildings and
improvements with a carrying value of approximately $3,950,000.
These loans are in default because of the Company's Chapter 11
filing; however, payment has been stayed by the Bankruptcy Court,
pending resolution of the Chapter 11 proceedings. The prime rate
was 8.5% at December 31, 1995 and 1994, respectively.
10. LIABILITIES SUBJECT TO CHAPTER 11 PROCEEDINGS
As described in Note 1, since July 7, 1994 the Company has been
operating as debtor-in-possession under Chapter 11 and is subject
to the jurisdiction and supervision of the Bankruptcy Court. In
Chapter 11 cases, substantially all liabilities of the debtor as
of the date of the filing of the petition for reorganization will
be subject to settlement under the plan or plans of
reorganization. These amounts may be subject to future
adjustments depending on Bankruptcy Court actions and further
developments with respect to disputed claims. Accordingly, the
ultimate amount of, and settlement terms for, such liabilities is
not presently determinable.
Schedules were filed with the Bankruptcy Court setting forth the
assets and liabilities of the Company as of the filing date as
recorded in the Company's accounting records. Claimants could
file claims until various bar dates set by the Court. Differences
between amounts shown by the Company and claims filed by the
creditors are currently being investigated. After completion of
the reconciliation, any remaining differences may be resolved by
negotiated agreement between the Company and the claimant or by
the Bankruptcy Court as part of the Chapter 11 proceedings or
otherwise.
Under the Bankruptcy Code, debtors may elect to assume or reject
real estate leases, employment contracts, personal property
leases, service contracts and other unexpired executory
prepetition contracts, subject to Bankruptcy Court approval.
The principal categories of claims included in Liabilities Subject
to Chapter 11 Proceedings in the Consolidated Balance Sheet are
set forth below:
1995 1994
---- ----
Priority liabilities $ 14,870 $ 41,405
Collateralized Debt (see Note 9) 4,021,220 4,024,962
Prepetition unsecured liabilities 5,844,219 5,648,205
--------- ---------
Total $ 9,880,309 $ 9,714,572
========= =========
These amounts represent management's best estimate of all valid
claims. Such claims remain subject to future adjustments
depending on negotiations and actions of the Bankruptcy Court,
further developments with respect to the disputed claims, whether
or not such claims are secured, the value of any security
interests securing any of such claims, and other events.
11. INCOME TAXES
A reconciliation between the amount of reported income tax
expense/(benefit) and the amount computed using the U.S. federal
statutory rate of 34% is as follows for the years ended December
31:
1995 1994
---- ----
Tax benefit at federal statutory rates (34.0%) (34.0)%
Losses without tax benefit 34.0% 34.0 %
Other 0.1% (1.6) %
------- ------
Reported provision/(benefit) for
income taxes 0.1% (1.6)%
===== =====
The components of the deferred tax assets and liabilities are as
follows (in millions):
December 31,
-----------
1995 1994
Current: ---- ----
Inventory $ 0.5 $ 1.1
Other 0.3 0.2
------ -----
Total current 0.8 1.3
Noncurrent:
Federal & state net operating losses 27.4 21.1
Capital loss carryover 7.2 -
Federal tax credits 1.2 1.1
Depreciation and amortization 2.2 4.0
Restructuring and other costs 2.0 1.5
----- ----
Total noncurrent 40.0 27.7
------ ------
Sub-total 40.8 29.0
Less: valuation allowance (40.8) (29.0)
------ ------
Net deferred tax asset $ --- $ ---
======== =========
Deferred tax accounting requires that a valuation reserve be
established if it is more likely than not that all or a portion of
the deferred tax asset will not be realized. Accordingly, a
valuation reserve has been established for the full amount of the
deferred tax asset.
As of December 31, 1995, the Company had approximately $58,000,000
of federal net operating loss (NOL) carryforwards. These loss
carryforwards expire through the year 2010. Utilization of these
NOL's may be limited pursuant to the provisions of Section 382 of
the Internal Revenue Code of 1986. The Company's NOL's are
subject to review by the Internal Revenue Service and various
state tax authorities. In addition, these NOL's and other tax
attributes may be adversely impacted by the bankruptcy proceedings
(see Note 1).
12. RENTAL AND OTHER INCOME
The Company receives rental income on certain property and
equipment from various tenants and sub-tenants under noncancelable
leases which extend to 1997. The Company received $286,000 and
$458,000 in rental income in 1995 and 1994, respectively. The
Company records the expenses associated with the rental income by
aggregating the expenses with the rental income in Other Income/
Expense on its Statement of Operations. The Company incurred
approximately $75,000 and $420,000 in expenses during 1995 and
1994, respectively, in regard to these leases. Future minimum
rentals on noncancelable operating leases for the year ended
December 31, 1995 are as follows:
1996 $ 268,840
1997 144,760
Thereafter -0-
----------
Total future minimum rentals $ 413,600
=========
In 1995, the Company received stock valued at $216,000 as a result
of the demutualization of the Company's ownership position in one
of its employee benefit providers. The stock was valued at fair
market value at the date of receipt.
13. COMMITMENTS AND CONTINGENCIES
Leases - The Company has entered into operating lease agreements
for its executive offices, warehouse, research laboratories,
manufacturing facilities, and office equipment. The base lease
periods range from two to ten years. Two leases contain renewal
options, the first for one five-year period and the second for two
five-year periods. Several leases contain escalation clauses for
increases in real estate taxes from the base year, as well as
minimum rental increases for the change in the Price Index, not to
exceed 3% of the previous year's rent. Costs incurred under the
operating leases are recorded as rent expense and totaled
$1,161,000 and $1,406,000 for real estate and $9,400 and $632,000
for equipment in 1995 and 1994, respectively.
As of December 31, 1995, the future minimum lease payments
required under operating leases that have initial or remaining
noncancelable lease terms in excess of one year are as follows:
Year Ending Real
December 31 Equipment Estate
1996 $ 2,738 $ 1,068,408
1997 456 - - -
----- ---------
Total minimum lease payments $ 3,194 $ 1,068,408
===== ==========
Employment and Consulting Agreements - The Company has agreements
with various consultants and key employees, with terms ranging,
generally, from one to three years. These agreements provide for
future aggregate annual payments of approximately $916,000. Costs
incurred and charged to operations under these contracts
aggregated $1,422,000 and $2,724,000 in 1995 and 1994,
respectively.
Other Agreements - The Company has entered into various license
agreements which require the Company to pay royalties based upon a
set percentage of product sales subject, in some cases, to certain
minimum annual amounts; these minimums total approximately
$250,000. Total royalty expense was $1,707,000 and $1,109,000 in
1995 and 1994, respectively.
Contingencies - During 1992, the Company paid $2,300,000 to Alfa-
Laval, a Swedish company, to acquire its fibronectin binding
technology for use in mastitis vaccines and certain other
products. In 1995 the Company recorded $700,000 in expenses for
the granting of certain patents on this technology. The agreement
provides for additional payments to Alfa-Laval conditioned upon
the first commercial sale of future vaccines at $1,333,000 per
vaccine, and up to $1,300,000 conditioned upon the granting of
additional patents in the United States and Europe on the
technology acquired.
In November 1993, five civil actions were commenced in the United
States District Court, District of Massachusetts, against the
Company, certain of its officers, and in three of the actions, the
Company's former auditors. The actions were instituted by persons
alleging to be shareholders of the Company and to be
representative of a class of shareholders claiming damages
resulting from alleged violations of securities laws by defendants
in connection with the 1992 results of the Company and the
restatement thereof. The actions have been consolidated under the
caption In Re: Cambridge Biotech Corporation Securities
Litigation, Civil Action No. 93-12486-REK. In February, 1996 the
plaintiffs agreed to settle all claims against the Company and the
individual defendants and pleadings were filed with the United
States District Court for the District of Massachusetts for the
purpose of approving the settlement. Under the terms of the
Settlement, the class members will be entitled to receive their
pro rata share of: 25% of the shares of a new company which will
be formed under "the Company's" Chapter 11 reorganization plan,
and 90% of any recoveries from prosecution of claims, if any,
against the Company's former accountants. The Company shall be
entitled to receive 10% of any recoveries from prosecution of such
claims. These agreements preliminarily have been approved by the
United States District Court and will be incorporated into the
Company's plan of reorganization. The settlement is subject to
the confirmation of a plan of reorganization by the U.S.
Bankruptcy Court.
In March 1995, an Adversary Proceeding No. 95-4074 was commenced
in the Bankruptcy court, by Institut Pasteur and Genetic Systems
Corporation alleging patent infringement and asking for damages
and injunctive relief. The Company filed an answer and
counterclaim denying the plaintiff's allegations and alleging a
breach by Institute Pasteur of its license agreement with the
Company. On September 1, 1995, the Bankruptcy Court issued a
summary judgment upholding the Company's license under two patents
issued to Institut Pasteur to commercialize diagnostics tests for
the HIV-2 strain of the AIDS virus. The Bankruptcy Court also
ruled that the Company's HIV-1 Western blot confirmatory test
infringes a third patent issued to Institut Pasteur, and enjoined
the Company from the manufacture and sale of the HIV-1 Western
blot test. On January 5, 1996, the Bankruptcy Court lifted its
injunction with respect to the Company's production and sale of
the HIV-1 Western blot kits. The Court ruled that the Company has
a license for the HIV-1 patent and must pay a royalty on related
sales. Institut Pasteur has appealed the Bankruptcy's Court's
ruling. While the final outcome of these patent issues cannot be
determined with certainty, if the Bankruptcy Court rulings are
sustained, management believes that the outcome will not have a
material adverse effect on the Company's results of operations or
its financial position.
In July of 1994, the Securities and Exchange Commission issued an
Order Directing Private Investigation in the matter of Cambridge
Biotech Corporation, investigating matters pertaining to the
Company's financial statements, its public filings and the
offerings of its securities. The Company is cooperating fully
with the investigation which is ongoing.
GRF Corporation (see Note 5) is conducting a pilot clinical study
testing the use of growth hormone releasing factor to treat
osteoporosis. Depending on the results of the pilot study, the
Company has the right to fund additional studies and potentially
increase its equity interest in the joint venture. While growth
hormone levels have increased in the majority of the patients in
response to treatment, the data are incomplete.
The Company has and is engaged in negotiations of various
contracts, license agreements and other claims with other parties
regarding issues generally incidental to the normal course of
business. While the outcome of these negotiations and the
ultimate liability from these discussions is difficult to
determine, in the opinion of management any additional liability
will not have a material effect on the Company's financial
position, liquidity, or results of operations.
14. CAPITALIZATION OF COMPANY
Effective upon the Company's reorganization under Chapter 11, all
outstanding stock options, except for options on 1,313,000 shares
granted in December 1995, will be cancelled.
Capital Stock - In the first quarter of 1994 the Company issued
2,589,000 shares in connection with a shelf offering. The
offering raised net proceeds of $6,635,000 after deducting legal
costs and other expenses associated with the offering.
Stock Option and Purchase Plans - The Company has three stock
option plans. A plan adopted in 1985 and amended in 1987 provides
for non-qualified stock options and stock appreciation rights
available only to non-employee consultants. A stock option plan
adopted in 1989 and amended in 1991 provides the granting of
incentive stock options to employees and non-qualified stock
options, discounted stock options, restricted stock, deferred
stock and stock appreciation rights to employees, officers,
consultants and advisors. A stock award and option plan for
directors was adopted November 19, 1991 and subsequently approved
at the shareholders' annual meeting on May 19, 1992. The plan
provides for the granting of incentive stock options, restricted
stock, deferred stock and stock appreciation rights to directors.
No stock appreciation rights or deferred stock had been granted
through December 31, 1995.
On November 19, 1991, the Company's Board of Directors approved a
program, which was ratified by the Company's shareholders in 1992,
to reserve an additional 3,000,000 shares of common stock for the
1989 stock option plan. Under this plan, some of the past and
current executives of the Company were granted options by the
Board of Directors in 1992 to purchase 180,000 shares of common
stock at 75% of the fair market value at the date of the grant.
The options vest over a five-year period, but vesting may be
accelerated upon the attainment of certain goals. During 1994
stock options with a deferred compensation balance totaling
$449,000, were forfeited by employees who left the Company. In
1995 and 1994, $49,000 and $160,000 respectively, of deferred
compensation related to this program was amortized to expense. On
December 15, 1995, certain executives and members of the Board of
Directors were granted options on 1,313,000 shares of common stock
at $0.37 which vested immediately. The Company recognized
$171,000 of compensation expense in connection with the issuance
of discounted options.
The above plans provide for the granting of options for an
aggregate maximum of 5,814,000 shares of common stock and
2,100,000 stock appreciation rights. There were 1,853,000 options
available for granting at December 31, 1995. The price of the
shares that may be purchased under the plans shall be determined
by the Board of Directors, subject to certain limitations.
Options granted during 1994 generally vest over two to three
years. The right to grant options under each plan expires ten
years after adoption. A summary of option activity is as follows:
Shares Prices
Balance, January 1, 1994 2,907,818 $1.00 to $16.44
Options granted 619,000 $1.17 to $3.31
Options rescinded
or lapsed (960,789) $2.00 to $14.06
Options exercised (3,000) $2.00
_________
Balance, December 31, 1994 2,563,029 $1.00 to $16.44
Options granted 1,312,500 $0.37
Options rescinded
or lapsed (778,489) $2.00 to $14.06
________
Balance, December 31, 1995 3,097,040 $0.37 to $16.44
=======
There were 3,097,000 options outstanding at December 31, 1995 of
which 2,696,000 were exercisable.
On October 27, 1994, the Company's plan to institute a retention
bonus plan for some of its employees was approved by the United
States Bankruptcy Court for the District of Massachusetts. The
plan called for bonuses to be paid in stock of the reorganized
Company upon emergence from Chapter 11 reorganization. The
Company recorded compensation expense of $830,000 and $627,000 in
1995 and 1994, respectively.
In 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 ("FAS 123"), "Accounting
for Stock-Based Compensation". FAS No., 123 encourages but does
not require the recognition of compensation expense for grants of
stock, stock options, and other equity instruments based upon new
fair value accounting rules (the "recognition method"). Companies
that choose not to adopt the recognition method must disclose pro-
forma net income and earnings per share amounts under that method
and make detailed disclosures about plan terms, exercise prices,
and assumptions used in measuring the fair value of stock based
grants (the "disclosure method"). The Company plans to adopt the
disclosure method in 1996.
15. EMPLOYEE BENEFITS PLAN
The Company has a savings plan for its employees pursuant to
Section 401(k) of the Internal Revenue Code. Substantially all
employees can participate, and the plan allows for a minimum
deferral of 1% to a maximum deferral of 15% percent of plan
compensation, as permitted by law or as limited by the plan
administrator. Prior to the Chapter 11 filing, the Company
matched 50% of the first 6% of an employee's compensation, if
contributed to the plan. Any contributions made by the Company
vest over a three-year period. The amount charged to operations
for the plan was $93,000 in 1994. The Company suspended its
matching contribution on the date of the Chapter 11 filing.
16. AGREEMENTS
The Company has a comprehensive agreement with SmithKline Beecham
p.l.c. ("SmithKline") which allows SmithKline to use the Company's
proprietary Stimulon adjuvant ("QS-21") in numerous vaccines
including hepatitis, lyme disease, human immunodeficiency virus
(HIV), influenza and malaria. The agreement grants certain
exclusive worldwide rights in some fields of use, and co-exclusive
or non-exclusive rights in others. The Company recognized
$3,500,000 and $3,000,000 in license fees under this agreement
during 1995 and 1994, respectively. Deferred revenue at December
31, 1994 was $3,500,000. The agreement calls for royalties to be
paid by SmithKline on its future sales of licensed vaccines which
include CBC's adjuvant. The terms of the collaborative agreement
with SmithKline include funding through 1998.
The Company has product development and supply agreements with
Virbac S.A. ("Virbac") which covers the ongoing collaboration
between Virbac and the Company relating to the following products:
vaccines for the feline leukemia virus ("FeLV"), the feline immune
deficiency virus ("FIV") and bovine mastitis. The Company
recognized $1,464,000 and $1,061,000 in revenues under these
agreements during 1995 and 1994, respectively. In addition,
$2,072,000 and $2,543,000 were included in deferred revenue at
December 31, 1995 and 1994, respectively.
As part of its program to develop, manufacture and market products
for detection, prevention and treatment of human and animal
infectious diseases, the Company has entered into various
agreements with the National Institute of Health (NIH). Such
agreements provide the Company with research and development
funding through 1995, assuming, in certain cases, achievement of
mutually defined milestones. Revenue recognized under these
contracts amounted to $596,000 and $787,000 in 1995 and 1994,
respectively.
17. MAJOR CUSTOMERS
Ortho Diagnostics Systems, Inc. (Ortho) is the Company's principal
distributor for retroviral products, which include both screening
and confirmatory tests. All of the Company's products marketed by
Ortho are under a joint Cambridge Biotech / Ortho label. Sales to
Ortho represented 30% and 32% of the Company's total revenue in
1995 and 1994, respectively.
SmithKline<PAGE>
is the Company's principle source of research and development
revenue. Revenues from SmithKline represented 13% and 14% of the
Company's total revenue in 1995 and 1994, respectively.
18. SEGMENT INFORMATION
The Company operates in one industry segment consisting of the
development, manufacturing and marketing of products for the
detection, prevention, and treatment of infectious diseases in
humans and animals. Export sales were approximately $4 million
and $3.7 million in 1995 and 1994, respectively. The Company's
subsidiary, CAC, operates in Europe and reported sales of
$2,788,000 and $231,000 in 1995 and 1994, respectively.
CAMBRIDGE BIOTECH CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
--------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
Additions
---------------------------
Balance at Charged to Charged to Balance
beginning costs and other (1) at end
Description of period expenses accounts Deductions of period
----------- ------------ ---------- ------------ --------- ---------
Year ended
December 31, 1995
Allowance for
Doubtful
Accounts ($150,000) ($61,065) 0 $51,065 ($160,000)
Year ended
December 31, 1994
Allowance for
Doubtful
Accounts ($1,031,931) ($46,697) 0 $928,628 ($150,000)
(1) Uncollectible accounts, net of recoverable amounts
SIGNATURES
Pursuant to the requirements of Section13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly
authorized.
CAMBRIDGE BIOTECH CORPORATION
March 29, 1996 By: /s/ Alison Taunton-Rigby
Alison Taunton-Rigby
President and Chief Executive
Officer
(Principal Executive Officer)
March 29, 1996 By: /s/ Stephen J. DiPalma
Stephen J. DiPalma
Vice President -Finance,
Chief Financial Officer and
Treasurer (Principal
Financial Officer)
March 29, 1996 By: /s/ Paul Foulkrod
Paul Foulkrod
(Principal Accounting
Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ Jeffrey T. Beaver Director March 26, 1996
Jeffrey T. Beaver
/s/ C. Arnold Kalman Director March 23, 1996
C. Arnold Kalman
/s/ John H. Kellogg Director March 24, 1996
John H. Kellogg
/s/ John M. Nelson Director March 25, 1996
John M. Nelson
/s/ W. Samuel Nisbet Director March 29, 1996
W. Samuel Nisbet
/s/ John S. Scott Director March 28, 1996
John S. Scott
/s/ Thomas T. Taylor Director March 26, 1996
Thomas T. Taylor
/s/ Douglas Yee Director March 24, 1996
Douglas Yee
EXHIBIT 4.3
LONG TERM DEBT
CAMBRIDGE BIOTECH CORPORATION
LONG TERM DEBT
The Company agrees to file copies of any instruments defining the rights of
holders of the Company's long term debt with the Commission upon request.
SUBLEASE AGREEMENT
This sublease agreement was entered into on April 6, 1995
between DynCorp, of 2000 Edmund Halley Drive, City of Reston,
County of Fairfax, State of Virginia 22091, referred to as
lessee, and Cambridge Biotech Corporation of 365 Plantation
Street, City of Worcester, State of Massachusetts 01605, referred
to as Sublessee.
RECITALS
The parties recite and declare:
A. Lessee has leased space in a commercial office and
laboratory building.
B. Sublessee desires to obtain laboratory space in the
geographical area in which the building is located.
C. The parties desire to enter a sublease agreement
defining ail rights, duties, and liabilities of the parties.
In consideration of the mutual covenants contained in this
sublease agreement, the parties agree as follows:
SECTION ONE
DESCRIPTION OF PREMISES
A. Lessee has leased space in a building consisting of
approximately 11,743 square feet of office and laboratory space
in a building located at 1 Taft Court, Rockville, MD 20850, from
W.M. Rickman Construction Company, lessor, of 15215 Shady Grove
Road, City of Rockville, County of Montgomery, State of Maryland
20850.
B. Lessee shall demise to Sublessee the 1044 square feet
of the building, all located on the 2nd floor, as more fully
described in Exhibit A which is attached to and made a part of
this sublease agreement.
SECTION TWO
PURPOSE OF SUBLEASE
A. The premises demised under this sublease agreement are
to be used by Sublessee in the conduct of the business of
laboratory work, and all tasks related to such business.
B. Sublessee shall not use the demised premises for any
illegal, immoral, or ultrahazardous activity, whether within or
outside the scope of the business of Sublessee.
SECTION THREE
TERM OF SUBLEASE
A. The term of this sublease agreement shall be for an
initial period of 5 (five) years, commencing on April 1, 1995,
and terminating on March 31, 2000, unless earlier terminated by
breach of the terms and conditions of this sublease agreement or
as provided in Sections Seven or Sixteen, or Three (C) below.
B. Lessor concurs that Sublessee may remain in possession
of the demised premises for the full term of this sublease
agreement, despite any change that may occur in the status of
lessee or the lease agreement between lessee and lessor.
C. Sublease may terminate this lease upon at least ninety
(90) days prior written notice to be effective no earlier than
October 1, 1995.
SECTION FOUR
RENT
Sublessee shall pay to lessee as basic rent two thousand and
one Dollars ($2001.00) per month, on the 1st day of each month,
commencing on 1 April, 1995, and continuing each month thereafter
during the term of this sublease agreement. Sublessee shall pay
all other sums due as additional rental under the provisions of
this sublease agreement on the basic rental payment due date
first occurring after the additional rental payment arises.
The minimum rent shall be adjusted at the end of each year
during the term hereof by a 3% increase over the rent then being
paid. There also shall be no additional pass-throughs of
increases in operating expenses except as specifically referenced
herein.
SECTION FIVE
SERVICES AND UTILITIES
Lessee shall furnish all water and sewer and electrical
services to Sublessee at the expense of lessee. All other
utilities required by Sublessee on the demised premises including
telephone services shall be obtained by and at the expense of
Sublessee. Sublessee shall also obtain and pay the expense of
all janitorial services required on the demised premises.
SECTION SIX
ACCIDENTAL DAMAGE OR INJURY
Lessor and lessee shall not be liable for any damage to
property or any injury to persons, sustained by Sublessee or
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others, caused by conditions or activities on the demised
premises. Sublessee shall indemnify lessor and lessee against
any and all claims arising therefrom and shall carry liability
insurance insuring lessee, Sublessee, and lessor against any
claims in amounts to be approved by lessor.
SECTION SEVEN
CASUALTY DAMAGE OR INJURY
If the demised premises shall be destroyed or damaged by any
acts of war, the elements, including earthquake, or fire, to such
an extent as to render the demised premises untenantable in whole
or in substantial part, lessor has the option of rebuilding or
repairing the demised premises by giving notice to that effect to
lessee within 90 (ninety) days after the occurrence of any damage
of the intent of lessor to rebuild or repair the demised premises
or the part so damaged. If lessor elects to rebuild or repair
the demised premises and does so without unnecessary delay,
Sublessee shall be bound by this sublease agreement, except that
during the period of repair the rent of the demised premises
shall be abated in the same proportion that the part of the
demised premises rendered unfit for occupancy by Sublessee shall
bear to the whole of the subleased premises. If lessor fails to
give notice of the intent to repair, Sublessee shall have the
right to declare this sublease agreement terminated.
SECTION EIGHT
COMPLIANCE WITH ORIGINAL LEASE AND LAWS
A. Sublessee shall not cause or allow any undue waste on
the demised premises and shall comply with all applicable laws
and ordinances respecting the use and occupancy of the demised
premises relating to matters not covered elsewhere in this
sublease agreement, provided that Sublessee shall not be required
to make any alterations, additions, or improvements to the
demised premises in order to conform with this sublease
agreement.
SECTION NINE
REPAIRS
Subject to the obligations of lessor under Section 9 of the
original lease agreement, lessee, unless specified to the
contrary in this sublease agreement, shall maintain the demised
premises in good repair and tenantable condition during the
continuance of this sublease agreement, except in case of damage
arising from acts or negligence of Sublessee or the agents of
Sublessee.
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SECTION TEN
ALTERATIONS, ADDITIONS, OR IMPROVEMENTS
A. Sublessee shall not make any alterations, additions, or
improvements on or to the demised premises without first
obtaining the written consent of lessee. All alterations,
additions, and improvements that shall be made shall be at the
sole expense of Sublessee and shall become the property of lessee
and shall remain on and be surrendered with the demised premises
as a part thereof at the termination of this sublease agreement
without disturbance, molestation, or injury.
B. Nothing contained in this section shall prevent
Sublessee from removing all office machines, equipment, and trade
fixtures customarily used in the business of Sublessee.
SECTION ELEVEN
LIENS
Sublessee shall keep the demised premises free and clear of
all liens arising out of any work performed, materials finished,
or obligations incurred by Sublessee.
SECTION TWELVE
ACCESS TO PREMISES
Sublessee shall allow lessor or lessee or the agents or
employees of either the free access to the demised premises at
all reasonable times for the purpose of inspecting or of making
repairs, additions, or alterations to the demised premises or any
property owned by or under the control of either party.
SECTION THIRTEEN
ADVERTISEMENTS
All signs or symbols placed in the windows or doors of the
demised premises, or on any exterior part of the building by
Sublessee, shall be subject to the approval of lessee. If
Sublessee shall place signs or symbols on the exterior of the
building or in the windows or doors where they are visible from
the street that are not satisfactory to lessee, lessee may
immediately demand the removal of the signs or symbols. The
refusal by Sublessee to comply with any demand within a period of
72 (seventy-two) hours will constitute a breach of this sublease
agreement and entitle lessee immediately to recover possession of
the demised premises in the manner provided by law. Any signs so
placed on the demised premises shall be so placed on the
understanding and agreement that Sublessee shall remove these
signs or symbols at the termination of the tenancy created in and
by this sublease agreement and repair any damage or injury to the
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demised premises caused thereby. If not so removed by Sublessee,
then lessee may have the signs or symbols removed at the expense
of Sublessee.
SECTION FOURTEEN
SALES, ASSIGNMENTS, AND SUBLEASES
A. Sublessee shall not assign this sublease agreement, or
sell or sublet the premises subleased, or any part thereof or
interest therein, without the prior, express, and written consent
of lessee.
B. This sublease shall not be assigned by operation of
law.
C. If consent is once given by lessee to the assignment of
this sublease agreement or sublease of the demised premises or
any interest in this sublease agreement, lessee shall not be
barred from subsequently refusing to consent to any further
assignment or sublease.
D. Any attempt to sell, assign, or sublet without the
consent of lessee, shall be deemed a default by Sublessee,
entitling lessee to reenter pursuant to Section Nineteen if
lessee so elects.
SECTION FIFTEEN
QUIET ENJOYMENT
If Sublessee performs the terms of this sublease agreement,
lessee will warrant and defend Sublessee in the enjoyment and
peaceful possession of the demised premises during the term of
this sublease agreement without any interruption by lessee or
lessor or either of them or any person rightfully claiming under
either of them.
SECTION SIXTEEN
CONDEMNATION
A. If the demised premises or any part of the demised
premises are appropriated or taken for any public use by virtue
of eminent domain or condemnation proceedings, or if by reason of
law, ordinance, or by court decree, whether by consent or
otherwise, the use of the demised premises by Sublessee for any
of the specific purposes referred to in this sublease agreement
shall be prohibited, Sublessee shall have the right to terminate
this sublease on written notice to lessee, and rental shall be
paid only to the time when Sublessee surrenders possession of the
demised premises.
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B. In the event of partial appropriation, Sublessee may
elect to continue in possession of that part of the demised
premises not so appropriated under the same terms and conditions
of this sublease agreement, except that in those cases Sublessee
shall be entitled to an equitable reduction of the rental payment
under this sublease agreement.
C. Any rental paid in advance beyond the time that the
property has been taken from Sublessee shall be returned by
lessee to Sublessee on demand.
D. Sublessee does not waive any right to recover from the
condemnation authority for any damage that may be suffered by
Sublessee by reason of any condemnation.
SECTION SEVENTEEN
OPTION TO RENEW
Subject to the receipt by lessee of an extension of the
original lease agreement for a sufficient duration to include
this renewal, at any time before the commencement of the last
calendar month of the first term of this sublease agreement,
Sublessee is granted the option and privilege of extending and
renewing the term of this sublease agreement for an additional
five-year period at an annual rental to be agreed on or
arbitrated as provided in this sublease agreement.
SECTION EIGHTEEN
DEFAULT BY LESSOR OR LESSEE
If lessor or lessee fails or neglects to perform under the
provisions of this sublease agreement or of the original lease
between them, then Sublessee may, after reasonable notice in
writing of not less than 90 (ninety) days, terminate this
sublease agreement.
SECTION NINETEEN
DEFAULT OF SUBLESSEE
A. If any rents reserved, or any part thereof, shall be
and remain unpaid when they shall become due, or if Sublessee
violates or defaults in any of the provisions of this sublease
agreement, then lessee may cancel this sublease agreement by
giving the required notice, and reenter the demised premises.
B. In spite of any reentry, the liability of Sublessee for
the rent shall not be extinguished for the balance of the term of
this sublease agreement, and Sublessee shall make good to lessee
any deficiency arising from a reentry and reletting of the
demised premises at a reduced rental.
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C. Sublessee shall pay any deficiency on the first day of
each month immediately following the month in which the amount of
deficiency is ascertained by lessee.
SECTION TWENTY
INSOLVENCY OR BANKRUPTCY
If Sublessee becomes insolvent, voluntarily or involuntarily
bankrupt, or if a receiver, assignee, or other liquidating
officer is appointed for the business of Sublessee, then lessee
may terminate this sublease agreement at the option of lessee.
SECTION TWENTY-ONE
WAIVER OF BREACH
The waiving of any of the provisions of this sublease
agreement by any parry shall be limited to the particular
instance involved and shall not be deemed to waive any other
rights of the same or any other terms of this sublease agreement.
SECTION TWENTY-TWO
TERMINATION AND SURRENDER
A. Sublessee shall surrender the demised premises within
90 (ninety) days from receipt of notice of termination of this
sublease agreement, or on the last day of the term of this
sublease agreement.
B. Lessee shall have the right to place and maintain on
the demised premises For Rent or For Sale signs during the last
90 (ninety) days of the term of this sublease agreement.
C. Sublessee shall, at the expiration of this sublease
agreement, surrender the keys to the demised premises to lessee.
D. If Sublessee shall surrender the demised premises at
the election of Sublessee, the liability for all duties and
obligations required of Sublessee shall continue until the
surrender has been accepted by lessee in writing.
SECTION TWENTY-THREE
REMOVAL OF PERSONAL PROPERTY
A. Sublessee shall have the right to remove all personal
property, trade fixtures, and office equipment, whether attached
to the demised premises or not, provided that these items can be
removed without serious damage to the building or the demised
premises.
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B. All holes or damages to the building or the demised
premises caused by removal of any items shall be restored or
repaired by Sublessee promptly.
C. Sublessee shall be entitled to remove any electrical
service connections installed by Sublessee that were designed
specifically for Sublessee.
D. If lessee or lessor reenters or retakes possession of
the demised premises prior to the normal expiration of this
sublease agreement, lessee or lessor shall have the right, but
not the obligation, to remove from the demised premises all
personal property located therein belonging to Sublessee, and
either party may place the property in storage in a public
warehouse at the expense and risk of Sublessee.
SECTION TWENTY-FOUR
HOLDING OVER
A. Any holding over at the expiration of this sublease
agreement with the consent of lessee shall be on a month-to-month
basis, which tenancy may thereafter be terminated as provided by
the laws of the State of Maryland.
B. During any holdover tenancy, Sublessee shall pay 125%
of rental on a monthly basis as is in effect at the time of the
termination of this sublease agreement and shall be bound by all
the terms and conditions of this sublease agreement.
SECTION TWENTY-FIVE
INTEREST OF SUCCESSORS
The covenants and agreements of this sublease agreement
shall be binding on the successors and assigns of lessee and on
the successors and assigns of Sublessee but only to the extent
specified in this sublease agreement.
SECTION TWENTY-SIX
NOTICES
Except where otherwise required by statute, all notices
given pursuant to the provisions of this sublease agreement may
be sent by certified mail, postage prepaid, to the last known
mailing address of the party for whom the notice is intended.
SECTION TWENTY-SEVEN
ARBITRATION
If any controversy develops that is to be submitted to
arbitration according to the terms of this sublease agreement, it
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shall be arbitrated in accordance with the arbitration laws of
the State of Maryland, as supplemented by the rules then
obtaining of the American Arbitration Association. Judgment on
any award rendered may be entered in any court having
jurisdiction over the parties and the property.
SECTION TWENTY-EIGHT
COSTS OF LITIGATION
If any legal action is instituted to enforce this sublease
agreement, or any part of this sublease agreement, the prevailing
party shall be entitled to recover reasonable attorney fees and
court costs from the other party.
SECTION TWENTY-NINE
VENUE
At the option of either party, venue of any action may be
established in the County of Montgomery, State of Maryland.
Personal service either within or without the State of Maryland
shall be sufficient to give that court jurisdiction.
SECTION THIRTY
ACKNOWLEDGMENT BY LESSOR
This sublease agreement is made with the full knowledge and
agreement of lessor of the demised premises, and lessor accepts
this sublease agreement but retains all rights to disapprove any
future sublease between lessee and Sublessee or between lessee
and any other party.
SECTION THIRTY-ONE
GOVERNING LAW
It is agreed that this sublease agreement shall be governed
by, construed, and enforced in accordance with the laws of the
State of Maryland.
SECTION THIRTY-TWO
PARAGRAPH HEADINGS
The titles to the paragraphs of this sublease agreement are
solely for the convenience of the parties and shall not be used
to explain, modify, simplify, or aid in the interpretation of the
provisions of this sublease agreement.
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SECTION THIRTY-THREE
COUNTERPARTS
This sublease agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute but one and the same
instrument.
In witness whereof, each party to this sublease agreement
has caused it to be executed on the year and date first written
below.
Witness DynCorp
_________________ ____________________________ ________
DATE
Witness Cambridge Biotech Corp
_________________ ____________________________ ________
DATE
Witness W.M. Rickman Construction Company
_________________ ____________________________ ________
DATE
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Execution Copy
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective as of April 6, 1995 (the
"Commencement Date") by and between Cambridge Biotech Corporation,
debtor and debtor in possession United States Bankruptcy Court for
the District of Massachusetts, Western Division, Case Number 94-
43054-JFQ, a Delaware corporation, having a principal place of
business at 365 Plantation Street, Worcester, Massachusetts
("CBC") and Alison Taunton-Rigby of 8 Farrar Road, Lincoln,
Massachusetts 01773 ("Executive").
WHEREAS, CBC desires to employ Executive for the period and
upon the terms and conditions provided in this agreement;
WHEREAS, Executive desires to serve in the employ of CBC on a
full-time basis upon the terms and conditions hereinafter
provided;
WHEREAS, CBC has filed for protection under the provisions of
Chapter 11 of the United States Bankruptcy Code, and CBC wishes to
obtain the approval of the United States Bankruptcy Court for the
District of Massachusetts, Western Division (the "Court") to the
consummation of the matters contemplated herein.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
1. Employment. CBC hereby employs Executive, and Executive
hereby accepts employment by CBC, for the period stated in
Paragraph 3 hereof and upon the terms and conditions herein
provided.
2. Position and Responsibilities; Principal Location.
(a) During the term of this agreement, Executive will
serve as President and Chief Executive Officer of CBC reporting to
its board of directors ("the Board"). Executive shall devote her
primary energies, attention and abilities to the business of CBC
and shall perform such duties as shall be assigned to her by the
Board consistent with her status of President and Chief Executive
Officer. Executive's duties shall include such duties as are
customarily associated with the positions of President and Chief
Executive Officer, including, without limitation, general
supervision and control over, and responsibility for, the general
management and operation of CBC and any subsidiaries. CBC shall
take all actions necessary to appoint Executive to the Board and
during the term of Executive's employment, at any time as
Executive's term as a director of CBC shall be expiring, shall
nominate and recommend to CBC's stockholders the election of
Executive as a director of CBC. CBC acknowledges that Executive
serves as the President of the Massachusetts Biotechnology Council
and as a director of the companies listed on Schedule A and
agrees she may continue to serve in such positions. With the
prior approval of the Board, Executive may serve as a director of
other companies. Executive understands and agrees that in
carrying out her responsibilities and performing her duties under
this agreement she may be required to perform duties and serve in
administrative or executive capacities for CBC's affiliates.
(b) The principal location at which Executive will
perform her duties will be at CBC's principal offices in
Worcester, Massachusetts or in a location not more than fifty (50)
miles distant from Boston, Massachusetts.
3. Term of Employment. The term of Executive's employment
hereunder shall be for two years from the Commencement Date;
provided, however, that thereafter the term shall be extended
automatically on each anniversary of the Commencement Date, for
one (1) year unless either CBC or Executive shall have given
written notice to the other of a desire that such automatic
extension not occur, which notice is given no later than ninety
(90) days prior to the relevant anniversary of the Commencement
Date. The last day of such term as may be extended from time to
time is herein sometimes referred to as the "Expiration Date."
4. Compensation and Benefits. For all services rendered by
Executive during her employment hereunder, CBC shall compensate
Executive as follows:
(a) Salary. CBC shall pay Executive a base salary of
$225,000 per year, subject to increase from time to time in
accordance with the usual practice of CBC with respect to review
of compensation of its senior executives. Executive's salary
shall be reviewed at least annually. Executive's salary shall be
payable in periodic installments in accordance with CBC's usual
practice for its senior executives.
(b) Regular Benefits. Executive shall be entitled to
participate in any and all employee benefit plans, medical
insurance plans, disability income plans, life insurance plans,
retirement plans, and other benefit plans from time to time in
effect for senior executives of CBC, including the Management
Bonus Plan subject to the conditions described in Section 4(c)
below. Such participation shall be subject to: (i) the terms of
the applicable plan documents; (ii) generally applicable policies
of CBC; and (iii) the discretion of the Board or any
administrative or other committee provided for in or contemplated
by such plan. Notwithstanding any other provision of this
Section 4, Executive shall be entitled to those benefits set forth
on Schedule B.
(c) Management Bonus Plan. After having been employed
for one year hereunder, Executive shall be eligible annually,
commencing in 1996, to participate in CBC's Management Bonus Plan
for its executive officers, a copy of which is attached hereto and
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made a part hereof as Schedule C. Executive's target annual bonus
shall be 35% of her then annual salary. The award of any bonus
shall be in the sole discretion of the Board based upon
Executive's performance. Executive may elect to receive in cash
up to forty percent (40%) of any such bonus which is granted based
upon Executive's performance in the first year of this contract.
The shares issuable upon grant of any such bonus are referred to
herein as the "Bonus Shares."
(d) Business Expenses. CBC shall reimburse Executive
for all reasonable travel and other business expenses incurred by
her in the performance of her duties and responsibilities, subject
to such reasonable requirements with respect to substantiation and
documentation as may be specified by CBC.
(e) Vacation. Executive shall be entitled to paid
vacation in accordance with the policies of CBC (but in no event
less than four weeks per year), to be taken at such times and
intervals as shall be determined by Executive with the approval of
CBC, which approval shall not be unreasonably withheld.
(f) Life Insurance. CBC will provide Executive term
life insurance having death benefits totalling Two Million Dollars
($2,000,000), including any benefit to which Executive may be
eligible under any CBC life insurance plan. CBC agrees that it
will "gross-up" Executive's compensation as a result of the
payment of the premiums for such life insurance by making an
additional payment to her in an amount which, after reduction for
any income taxes payable as a result of receiving such additional
payment, is equal to the income tax payable by Executive as a
result of the payment by CBC of such premiums.
5. Bonus Option.
(a) Executive shall be granted an option (the "Bonus
Option") to purchase that number of shares of common stock
("Reorganization Stock") of CBC or its successor issued pursuant
to CBC's Plan of Reorganization confirmed by the Court (the
"Plan") having an aggregate value equal to one and one-half
percent (1.5%) of the value (the "RS Value") of all of CBC's
Reorganization Stock outstanding on the effective date ("Effective
Date") of the Plan. For the purposes of this agreement, RS Value
shall be an amount equal to: (i) the value assigned by the Court
to all of the Reorganization Stock outstanding on the Effective
Date as contained in the Court's order confirming the Plan; or
(ii) if the Court does not assign a value to all of the
Reorganization Stock, the product of the value assigned by the
Court to each share of the Reorganization Stock outstanding on the
Effective Date as contained in its order confirming the Plan
multiplied by the number of shares of Reorganization Stock
outstanding on the Effective Date; or (iii) if no value is
assigned by the Court as set forth in (i) or (ii), the value
assigned by CBC to each share of Reorganization Stock as part of
the process of confirming the Plan which value is accepted by the
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Court, whichever is applicable. The value of a share of
Reorganization Stock determined by or extrapolated from the above
process is sometimes referred to herein as the "RS Share Value."
The Bonus Option shall be granted on the Effective Date, shall
have a term of ten years, shall be a nonqualified stock option,
and shall be exercisable as to two-thirds of the shares subject to
the Bonus Option at any time and from time to time commencing on
the Effective Date. The Bonus Option as to the remaining one-
third of the shares (the "Unvested Shares") shall be exercisable
at any time and from time to time commencing on the earlier of
(the "Vesting Date"): (i) the second anniversary date of this
agreement, (ii) immediately preceding the date on which a Change
of Control (as hereinafter defined or as defined under CBC's 1989
Stock Award and Option Plan (the "Option Plan")) is deemed to
occur, but subject to such Change of Control, provided in the
event of a Change of Control as a result of a tender offer, such
Bonus Option shall become fully exercisable in a timely manner
such that Executive may participate in such tender offer at any
stage, (iii) the date on which Executive's employment hereunder
terminates pursuant to the provisions of Section 6(c) or Section
6(d), or (iv) as provided in the Stock Option Agreement attached
hereto as Schedule D, upon Executive's death or disability.
Notwithstanding the foregoing, if prior to the Vesting Date: (i)
Executive voluntarily ceases to be an employee of CBC (other than
pursuant to the provisions of Section 6(c)), or (ii) her
employment is terminated pursuant to the provisions of Section
6(b) hereunder, the Bonus Option shall not be exercisable as to
the Unvested Shares. Upon exercise of the Bonus Option, Executive
shall make a payment for each share of the Reorganization Stock in
an amount equal to the RS Share Value. It is anticipated that CBC
will grant the Bonus Option under the Option Plan, and the parties
will execute a Stock Option Agreement on substantially the terms
set forth in Schedule D attached hereto and made a part hereof,
and the terms of such agreement shall govern the terms of the
Bonus Option.
(b) Commencing in 1996, Executive shall be eligible for
consideration for option grants made by CBC's Compensation
Committee as made annually by such committee in such amount and on
such terms as the Compensation Committee may determine.
(c) CBC and Executive acknowledge that CBC is
currently unable to comply with the provisions of the Securities
Exchange Act of 1934, as amended, with respect to periodic filings
nor with the provisions of the Securities Act of 1933, as amended
and the regulations thereunder, (the '33 Act) pertaining to the
registration of securities for public sale due, in both instances,
to its inability to provide audited financial statements for
fiscal years 1992, 1993 and 1994. Although CBC's current
intention is to engage an auditing firm to conduct an audit of the
Company's financial statements for fiscal year 1994, CBC has not,
as of the date hereof, obtained approval from the Court to retain
an audit firm to conduct such audit, and CBC is continuing to
evaluate the feasibility and advisability of having an audit
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conducted of its financial statements for fiscal years 1992 and
1993. CBC agrees to use all reasonable efforts to insure as soon
as is reasonably practicable taking into account its current
inability to provide audited financial statements, that any Bonus
Shares issued hereunder and any shares issued upon the exercise of
the Bonus Option will be freely tradeable by Executive under the
provisions of the '33 Act without restriction, except such
restrictions as are imposed upon affiliates as a result of their
status as such.
(d) CBC agrees to use its reasonable efforts to
establish and maintain a cashless exercise program which will
apply to options granted by CBC to Executive.
(e) CBC agrees that with respect to all options and
Bonus Shares, upon grant and during the term of such options and
the issuance of the Bonus Shares, CBC shall use reasonable efforts
to comply with the requirements of Rule 16b-3, promulgated
pursuant to the Securities Exchange Act of 1934, as amended, as
such rule shall be in effect from time to time, or with any
successor provisions ("Rule 16b-3") such that such options and
Bonus Shares shall be afforded the benefits of Rule 16b-3.
6. Termination and Termination Benefits. Notwithstanding
the provisions of Section 3, Executive's employment hereunder
shall terminate under the following circumstances:
(a) Death. In the event of Executive's death during
Executive's employment hereunder, CBC shall continue to pay an
amount equal to Executive's base salary to Executive's beneficiary
designated in writing to CBC prior to her death (or to her estate,
if she fails to make such designation) for a period of six (6)
months after the date of Executive's death, at the salary rate in
effect on the date of her death, said payments to be made on the
same periodic dates as base salary payments would have been made
to Executive had she not died.
(b) Termination by CBC for Cause. Executive's
employment hereunder may be terminated by CBC for cause, without
further liability on the part of CBC, effective immediately by
notice to Executive stating the nature of such cause. The
following shall constitute "cause" for such termination:
(i) Deliberate dishonesty of Executive with
respect to CBC or any subsidiary or affiliate thereof; or
(ii) Conviction of Executive of a crime involving
moral turpitude; or
(iii) The material failure by Executive to perform
Executive's duties hereunder (other than any such failure
resulting from the incapacity of Executive due to physical or
mental illness) which failure continues for thirty (30) days after
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notice to Executive setting forth in reasonable detail the manner
in which Executive has not performed Executive's duties; or
(iv) Unlawful conduct pertaining to CBC or any of
its affiliates or shareholders or involving a criminal act;
material and conscious falsification or unauthorized disclosure of
important records or reports; embezzlement or unauthorized
conversion of property; violation of conflict of interest or
vendor relations policies; or willful disclosure of significant
trade secrets or other information likely to be used to the
detriment of CBC.
(c) Termination by Executive for Cause. Executive's
employment hereunder may be terminated without liability effective
after thirty (30) days notice by Executive to CBC in the event of
the following:
(i) Material breach by CBC of this agreement if
such breach shall continue for more than thirty (30) days after
notice to CBC setting forth in reasonable detail the nature of
such breach; or
(ii) Executive should fail to be elected to the
Board or to the office of President or Chief Executive Officer or
at any time fail to remain on the Board or in either of such
offices, except such failure which is caused by Executive's
voluntary resignation from such offices; or
(iii) A significant decrease in the nature and
scope of Executive's authority, powers, functions or duties from
the authority, powers, functions and duties exercised by Executive
(collectively a "Terminating Event") as of the date of Court
approval of this agreement or, if such decrease occurs after the
Effective Date, as of the day after the Effective Date.
Notwithstanding the foregoing, no notice to terminate may be given
pursuant to this clause (iii) after the passage of six months from
the occurrence of a Terminating Event; or
(iv) The Plan is confirmed by the Court over the
objection of CBC, provided that no notice to terminate may be
given pursuant to this clause (iv) after the passage of sixty (60)
days from the Effective Date.
(d) Termination by CBC Without Cause. Executive's
employment may be terminated without cause by CBC by thirty (30)
days notice to Executive.
(e) Termination of Executive Without Cause. Executive
may terminate her employment under this Section 6(e) without
liability by notice given no earlier than the first anniversary of
the Commencement Date to be effective no earlier than ninety (90)
days after such notice.
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(f) Certain Termination Benefits.
(i) In the event of termination pursuant to
Section 6(c)(i), (ii), (iii) or (iv) or Section 6(d), CBC shall
continue to pay Executive base salary at the rate in effect on the
date of termination for the period subsequent to the date of
termination until the later to occur of the Expiration Date or the
first anniversary date of the termination.
(ii) Notwithstanding the provisions of clause
6(f)(i) or 6(f)(iv)(B), if a termination under either
Section 6(c)(i), (ii) or (iii) or 6(d) above shall occur within
six (6) months after a Change of Control, CBC shall pay Executive
within fifteen (15) days of such termination, in lieu of the
payments set forth in clause 6(f)(i) and 6(f)(iv)(B), an amount
equal to two (2) times Executive's base salary at the annual rate
as in effect immediately prior to such Change of Control, but in
no event less than two (2) times the annual rate set forth in
Section 4(a). "Change of Control" shall mean: (i) the
acquisition by any individual, firm, corporation, partnership or
other entity (excluding CBC, any of CBC's employee benefit plans
or the plaintiffs, as a class, under the action pending in the
United States District Court for the District of Massachusetts
captioned In re Cambridge Biotech Corporation Securities
Litigation) of thirty percent (30%) or more of the shares of
Reorganization Stock then outstanding; (ii) a change in the
majority of the Board (excluding any persons approved by a vote of
at least a majority of the current Board); or (iii) the approval
by the stockholders of a merger, consolidation (other than a
merger or consolidation in which stockholders of the Company
receive fifty percent (50%) or more of the stock of the surviving
company), or a liquidation, dissolution or the sale of all or
substantially all of the assets of CBC.
(iii) In the event of a termination pursuant to
Section 6(c)(i), (ii), (iii) or (iv) or 6(d), then Executive shall
continue to receive the benefits to which she is entitled under
Section 4(b) and Section 4(c) as of immediately preceding such
termination at CBC's expense for the period of time during which
Executive remains entitled to receive continuing payments as
provided in Section (f)(i) above or Section (f)(iv)(B) below, as
the case may be, , or two years, in the case of a termination to
which Section (f)(ii) applies (notwithstanding the provisions of
Section 6(f)(iv)(B) below); provided that Executive shall only be
eligible for an award under the plan described in Section 4(c) for
the period prior to her termination and awards thereunder shall be
prorated through the date of termination; and provided further,
CBC's obligation to continue such benefits shall cease on a
benefit by benefit basis on that date, if any, on which Executive
is employed on a full-time basis and Executive receives in
connection with such employment benefits which are substantially
equivalent to CBC's benefits. For purposes of the application of
CBC's benefits, Executive shall be treated, to the extent that
applicable law pertaining to the particular CBC benefit plan
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permits CBC to do so, as if she had remained in the employ of CBC,
with a total annual salary at the rate in effect on the date of
termination and service or similar credits, if any, will continue
to accrue during such period as if the Executive had remained in
the employ of CBC. If in spite of the provisions of this clause
(iii), benefits or service credits under any benefit plan shall
not be payable or provided under any such plan to the Executive,
or to Executive's dependents, beneficiaries or estate, because
Executive is no longer deemed to be an employee of CBC, CBC itself
shall pay or provide payment of such benefits and service credits
for such benefits to the Executive, or to the Executive's
dependents, beneficiaries or estate. To the extent that
applicable law does not permit any CBC benefit referred to above
to be provided, paid or funded through the applicable CBC benefit
plan, then CBC shall not be required to provide such benefit
through such plan and shall only be required to provide in the
case of a benefit the tax treatment of which is enhanced by such
plan an amount equal to what would have been the Company's initial
contribution to such plan and not the equivalent benefit.
(iv) (A) If CBC shall give notice under Section 3
that it does not desire to extend the term of Executive's
employment hereunder, then, except as hereinafter set forth in
clause (B), for all purposes such a termination shall be treated
as a termination by CBC without cause under Section 6(d); (B)
notwithstanding the foregoing provisions of clause (A), in lieu of
the termination benefits that otherwise would be provided under
Section 6(f)(i) and Section 6(f)(iii), CBC shall continue to pay
Executive base salary at the rate in effect on the date of
termination and Executive shall continue to receive the benefits
to which she is entitled under Section 6(f)(iii) as of immediately
preceding such termination at CBC's expense for a period of six
months from the date of expiration of the term of Executive's
employment hereunder.
(v) Notwithstanding anything contained herein to
the contrary, the termination by Executive pursuant to Section
6(e) shall not be deemed to entitle Executive to any termination
benefits under this Section 6.
7. Disability. If, due to physical or mental illness,
Executive shall be disabled so as to be unable to perform
substantially all of her duties and responsibilities hereunder,
CBC may designate another executive to act in her place during the
period of such disability. Notwithstanding any such designation,
Executive shall continue to receive her full salary and benefits
under Section 4 of this agreement, unless her employment is
terminated as provided in this Section 7. If Executive shall
become totally and permanently disabled, then CBC may terminate
Executive's employment hereunder and shall continue to pay to
Executive her full salary and provide her with the benefits she
was receiving immediately prior to such termination for one (1)
year, provided that such salary amounts shall be reduced by the
amount of any disability insurance proceeds actually paid to
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Executive or for her benefit with respect to such period of time
under any disability policy provided by CBC for Executive. The
determination that by virtue of total and permanent disability,
Executive is unable to perform her duties hereunder, shall be made
by a physician chosen by CBC and reasonably satisfactory to
Executive (or Executive's legal representative) and such
determination shall be conclusive. The cost of such examination
shall be borne by CBC. Executive shall be conclusively presumed
to be totally and permanently disabled if for reasons involving
physical or mental illness or injury Executive fails to perform
her duties hereunder for a period of one hundred twenty (120)
consecutive calendar days or for any periods aggregating one
hundred twenty (120) days or more in any six (6) consecutive month
period. The date of termination of Executive's employment
hereunder in the event of total and permanent disability shall be
the earlier of such physician's examination pursuant to which such
determination is made or the first business day after which either
such 120-day or such six-month period has expired.
8. Non-Competition and Confidential Information.
(a) Non-competition. Executive agrees that she will
not at any time during her employment with CBC, and for a period
of six months following the termination of such employment for any
reason, directly or indirectly, as a partner, officer, director,
consultant, employee, stockholder or otherwise, engage in any
employment, pursuit or association in which she shall have
substantial responsibility with respect to products and/or
services which are in direct competition with products and/or
services of CBC in the area of diagnostics or adjuvants, or in any
other specific area constituting more than 40% of CBC's
consolidated operating revenue at the time of such termination,
unless CBC was not engaged in the business of diagnostics or
adjuvants at the time of such termination; provided, however, in
any event that the holding by Executive of any investment in any
security shall not be deemed to be a violation of this Section 8
if such investment does not constitute more than 5% of the
outstanding issue of such security.
(b) Confidential Information; Inventions; Non-
Disclosure. Contemporaneously with the execution of this
agreement and in consideration thereof, Executive will sign CBC's
Invention and Non-Disclosure Agreement attached hereto as
Schedule E.
(c) Relief; Interpretation. Executive agrees that CBC
shall be entitled to injunctive relief for any breach by her of
the covenants contained in Section 8(a) or in the Invention and
Non-Disclosure Agreement referred to in Section 8(b). In the
event that any provision of this Section 8 shall be determined by
any court of competent jurisdiction to be unenforceable by reason
of its being extended over too great a period of time, too large a
geographic area, or too great a range of activities, it shall be
interpreted to extend only over the maximum period of time,
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geographic areas, or range of activities as to which it may be
enforceable. For purposes of this Section 8, the term "CBC" shall
mean CBC and any of its subsidiaries.
9. Conflicting Agreements. Executive hereby represents and
warrants that the execution of this agreement and the performance
of her obligations hereunder will not breach or be in conflict
with any other agreements to which she is a party or is bound, and
that she is not now subject to any covenants against competition
or similar covenants which would affect the performance of her
obligations hereunder.
10. Withholding. All payments made by CBC under this
agreement shall be net of any tax or other amounts required to be
withheld by CBC under applicable law.
11. Arbitration of Disputes. Any controversy or claim
arising out of or relating to this agreement or the breach thereof
shall be settled by final and binding arbitration in accordance
with the laws of The Commonwealth of Massachusetts by three
arbitrators. The party initiating arbitration shall nominate one
arbitrator in the request for arbitration and the other party
shall nominate a second in the answer thereto within thirty (30)
days of receipt of the request. The two arbitrators so named will
then jointly appoint the third arbitrator. If the answering party
fails to nominate its arbitrator within the thirty (30) day
period, or if the arbitrators named by the parties fail to agree
on the third arbitrator within sixty (60) days, then such
arbitrator shall be appointed by the American Arbitration
Association in the City of Boston. Such arbitration shall be
conducted in the City of Worcester, Massachusetts in accordance
with the rules of the American Arbitration Association, except
with respect to the selection of arbitrators which shall be
provided in this Section 11. Judgment upon the award rendered by
the arbitrators may be entered in any court having jurisdiction
thereof.
12. Directors and Officers Indemnification. CBC confirms
that it will indemnify Executive and advance expenses in
connection therewith, subject to the requirement that Executive
repay CBC for such advance if it should be determined that
Executive is not entitled to indemnification, as provided in the
Indemnification Agreement attached as Schedule F and to the full
extent permitted by Delaware General Corporation Law. CBC will
provide Executive with directors and officers liability insurance
protection if and to the extent such coverage is reasonably
available to CBC.
13. Assignment; Successors and Assigns, etc. Neither CBC
nor Executive may make any assignment of this agreement or any
interest herein, by operation of law or otherwise, without the
prior written consent of the other party; provided, however, that
CBC may assign its rights under this agreement without the consent
of Executive in the event CBC shall hereafter, consolidate with or
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merge into any other person, or transfer all or substantially all
of its properties or assets to any other person. In the event of
Executive's death prior to the completion by CBC of all payments
due her under this agreement, CBC shall continue such payments to
the Executive's beneficiary or beneficiaries designated in writing
to CBC prior to her death (or to her estate, if no designation is
made). This agreement shall inure to the benefit of and be
binding upon CBC and Executive, their respective successors,
executors, administrators, heirs and permitted assigns.
14. Legal Fees. CBC shall pay Executive's legal fees and
expenses incurred in connection with entering into this Agreement
and the related agreements, not to exceed $4,000.
15. Publicity. Neither party shall issue any press releases
or otherwise make any public statement with respect to Executive's
employment by CBC without the prior written consent of the other
party, except as may be required by law, including without
limitation, the Securities Exchange Act of 1934 and in connection
with the proceedings before the Court.
16. Enforceability. If any portion or provision of this
agreement shall to any extent be declared illegal or unenforceable
by a court of competent jurisdiction, then the remainder of this
agreement, or the application of such portion or provision in
circumstances other than those as to which it is so declared
illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this agreement shall be valid and
enforceable to the fullest extent permitted by law.
17. Waiver. No waiver of any provisions hereof shall be
effective unless made in writing and signed by the waiving party.
The failure of any party to require the performance of any term or
obligation of this agreement, or the waiver by any party of any
breach of this agreement, shall not prevent any subsequent
enforcement of such or any other term or obligation or be deemed a
waiver of any subsequent breach.
18. Notices. All notices and other communications required
or permitted hereunder shall be in writing and shall be delivered,
mailed by first-class mail, postage prepaid, or sent by telex or
facsimile with a mailed confirmation copy, addressed:
(a) if to CBC: Cambridge Biotech Corporation
Biotechnology Research Park
365 Plantation Street
Worcester, Massachusetts 01605
Attention: Secretary
Facsimile No. (508) 797-4014
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with a copy to: Bowditch & Dewey
311 Main Street
Worcester, Massachusetts 01608
Attention: Attorney Jane V. Hawkes
Facsimile No. (508) 756-7636
(b) if to Executive: Alison Taunton-Rigby
8 Farrar Road
Lincoln, Massachusetts 01773
with a copy to: Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
Attn: Attorney Elizabeth P. Knauss
Facsimile No. (617) 542-2241
or such other addresses or facsimile numbers as shall be
furnished in writing by either party and any such notice or
communication shall be deemed to have been given in the case of
notices or communications which have been delivered or sent by
facsimile or telex on the date of delivery or sending provided
such day is a business day and in the case of notices or
communications which have been mailed on the second business day
after the date mailed.
19. Amendment. This agreement may be amended or modified
only by a written instrument signed by Executive and by a duly
authorized representative of CBC.
20. Governing Law. This is a Massachusetts contract and
shall be construed under and be governed in all respects by the
laws of The Commonwealth of Massachusetts without reference to its
conflict of laws provisions, except as provided in Section 12.
21. Court Approval. The parties' obligations hereunder
shall be subject to the approval of this agreement by the Court.
IN WITNESS WHEREOF, this agreement has been executed as a
sealed instrument by CBC, by its duly authorized officer, and by
Executive, as of the date first above written.
CAMBRIDGE BIOTECH CORPORATION
By:____________________________ __________________________
Alison Taunton-Rigby
Executive
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SCHEDULE A
Synaptic Pharmaceuticals Corporation
CML Group, Inc.
SCHEDULE B
Comprehensive Family Health Coverage. Recognizes reasonable and
customary charges for all medical-necessary standard treatments,
services and supplies, covering many items in full and others at
a nominal charge.
Family Dental Coverage. Provides full dental coverage per Fortis
schedule.
Short Term Disability Benefit. Short term disability benefit for
the first year is two weeks at 100% pay, then 24 weeks at 75%
pay. Benefit increases in value based on length of service.
Long Term Disability Benefit. Long term disability benefit
commence six months after disability at rate of 70% of monthly
gross pay to a maximum of $10,000 per month.
401(k) Plan. Benefit commences on the first enrollment period
after six months of employment.
Tuition Reimbursement. Employees are eligible to receive up to
$2,000 each year for their own tuition reimbursement.
SCHEDULE C
CAMBRIDGE BIOTECH CORPORATION
Management Bonus Program. The Company's management bonus
program is a discretionary incentive program established by the
Company to reward its executive officers. Under the program
adopted and in effect in 1995, each executive officer is eligible
to receive a bonus of up to 35% of his or her base salary based
upon overall company performance and outstanding individual
achievement.
Bonus payments may be made in cash and/or in stock at the
discretion of the Company's compensation committee which manages
the program.
SCHEDULE D
STOCK OPTION AGREEMENT
under the
1989 Stock Award and Option Plan
THIS AGREEMENT is entered into as of this _______ day of
____________, 19___ by and between CAMBRIDGE BIOTECH CORPORATION,
a Delaware corporation with its principal office at 365
Plantation Street, Worcester, Massachusetts 01605 (hereinafter
the "Company") and Alison Taunton-Rigby, an individual and
executive officer of the Company (hereinafter the "Optionee").
WHEREAS, the Optionee renders important services to the
Company, and the Company desires to retain the services of the
Optionee and grant a stock option to the Optionee on the terms
and subject to the conditions set forth herein and in the
Company's 1989 Stock Award and Option Plan (the "Plan"); and
WHEREAS, the Optionee and the Company have entered into an
Employment Agreement (the "Employment Agreement") effective
April 6, 1995, under which this agreement is contemplated.
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements herein contained, the parties hereto hereby
agree as follows:
1. Grant of Option. The Company hereby grants to the
Optionee the right, privilege and option (the "Option") to
purchase from the Company, upon the terms and conditions
hereinafter set forth, the number of shares of the Company's
common stock, $.O1 par value, as presently constituted, as are
set forth on Schedule I attached hereto (the "Option Stock").
Subject to the restrictions on exercise set forth on Schedule 1,
the Option may be exercised by the Optionee (which term may
include his personal representative), in whole or in partial
increments of shares, at such time or times during the term of
the Option, by the delivery to the Company of written notice of
the Optionee's election to exercise the Option, specifying the
date and number of shares to be purchased, together with the
Exercise Price which is specified on Schedule I for each share of
Option Stock to be purchased, payable by (a) cash, (b) check, (c)
delivery and assignment to the Company of securities of the
Company having a value equal to the Exercise Price or (d) by a
combination of (a), (b) and (c). The Company shall within a
reasonable time after receipt of the Exercise Price deliver to
the Optionee a certificate representing the shares of Option
Stock so purchased; provided, however, that if any securities law
or regulation then in effect requires the Company to take any
action with respect to the Option Stock before the issuance or
sale thereof by the Company to the Optionee, the date of delivery
of the certificate shall be extended for the period of time
necessary to take such action, and the Company shall use its best
efforts to accomplish such action as promptly as possible.
2. Term of Option. To the extent vested, as set forth on
Schedule I attached hereto, the Option shall be immediately
exercisable in full or in part and shall remain exercisable until
it expires 10 years from the date hereof, unless the Option is
sooner terminated as hereinafter provided.
3. Other Conditions and Limitations.
(a) During the Optionee's lifetime, the Option is
exercisable only by the Optionee. The Option may not be
transferred or assigned, except by will or the laws of
descent and distribution. If the Optionee voluntarily
ceases to be an employee of the Company (other than pursuant
to Section 6(c) of the Employment Agreement) or if such
employment is terminated for cause, the Optionee may
exercise, within three months after the termination date,
the unexercised portion of the Option in full or in part,
but only to the extent that the Option was exercisable,
pursuant to Schedule I, at the date of such termination. No
further portion of the option shall become exercisable after
such employment termination. If the Optionee's employment
is terminated involuntarily and without cause; if a Change
of Control shall occur, as defined in the Plan or as defined
in the Employment Agreement; or if Optionee shall terminate
her employment pursuant to Section 6(c) of the Employment
Agreement, then the Option shall become fully exercisable
without regard to the limitations of Schedule I and the
Optionee may exercise the unexercised portion of the Option
in full or in part within twelve months after the
termination date, provided that in the case of a Change of
Control, this option shall become exercisable immediately
prior to, but subject to, such Change of Control and in the
event of a Change of Control as a result of a tender offer,
this option shall become fully exercisable in a timely
manner such that Executive may participate in such tender
offer at any stage. If the Optionee's employment is
terminated due to disability or death, the Option shall
become fully exercisable without regard to the limitations
of Schedule I and the Optionee may exercise the unexercised
portion of the Option in full or in part within 12 months
after the termination date. For the purposes of the
provisions of this subparagraph, employment with the Company
shall be considered to continue during the period of time
the Optionee continues to be associated with the Company in
the capacity of a consultant or advisor, or the Optionee
otherwise provides services or assistance to the Company,
unless and until the Board shall determine, in its
discretion, that such activity shall no longer be considered
employment, in which event the Optionee may exercise the
non-exercised portion of the Option in full or in part but
only to the extent the Option was exercisable pursuant to
- 2 -
Schedule I on the date of such determination, within three
months after receipt by Optionee of notice of such
determination by the Board.
(b) The Company will furnish upon request of the
Optionee copies of the certificate of incorporation of the
Company, as amended, and by-laws of the Company, as amended,
and such publicly available financial and other information
concerning the Company and its business and prospects as may
be reasonably requested by the Optionee in connection with
the exercise of this Option.
4. Securities Law Representation. The Optionee represents
and warrants to the Company that (a) the Optionee is acquiring
the Option for the Optionee's own account for investment, and not
with a view to, or for resale in connection with, any
distribution of shares of the Option Stock; and (b) any exercise
of the Option will constitute the Optionee's representation at
that time that the Optionee is acquiring the Option Stock for the
Optionee's own account for investment, and not with a view to the
distribution thereof. At the time of the exercise of the Option
or any installment thereof, the Optionee shall execute such
further agreement as the Company may require to affirm the
foregoing representation and to acknowledge the Optionee's
familiarity with restrictions on the resale of the Option Stock
under applicable securities laws.
5. Stock Dividends; Stock Splits; Stock Combinations;
Recapitalization. Adjustment shall be made in accordance with
the Plan in the maximum number of shares of Option Stock subject
to this Option and in the number, kind, and option price for
shares covered by this Option to the extent it is outstanding to
give effect to any stock dividends, stock splits, stock
combinations, recapitalizations and other similar changes in the
capital structure of the Company after the grant of this Option.
6. Merger; Sale of Assets; Dissolution. In the event of a
change of the Company's capital stock resulting from a merger or
similar reorganization as to which the Company is the surviving
corporation, the number and kind of shares then subject to this
Option and the price per share thereof shall be appropriately
adjusted in such manner as the Board of Directors of the Company
may deem equitable to prevent substantial dilution or enlargement
of the rights available or granted hereunder. If the Company is
merged into or consolidated with another corporation under
circumstances where the Company is not the surviving corporation,
or if the Company is liquidated, or sells or otherwise disposes
of substantially all its assets to another corporation, unless
the unexercised portion of the Option is canceled by action of
the Board of Directors as of the effective date of such merger
after notice of at least thirty (30) days prior to the effective
date of such merger, consolidation, liquidation or sale, the
Optionee shall be entitled, upon exercise of such Option after
the effective date of such merger, consolidation, liquidation or
- 3 -
sale, to receive, in lieu of shares of Option Stock, shares of
such stock or other securities as the holders of shares of the
Company's common stock, $.O1 par value, received pursuant to the
terms of the merger, consolidation, liquidation or sale; and the
Board of Directors may waive any limitations set forth in
Schedule I so that the Option, from and after a date prior to the
effective date of such merger, consolidation, liquidation or
sale, as the case may be, specified by the Board of Directors,
shall be exercisable in full. The Board of Directors as of the
effective date of any such merger, consolidation, liquidation or
sale may cancel this Option to the extent then unexercised
provided that notice of such cancellation shall be given to the
Optionee and the Optionee shall have the right to exercise such
Option in full without regard to any limitations set forth in
Schedule I during a 30-day period preceding the effective date of
such merger, consolidation, liquidation, or sale.
7. Notices. All notices hereunder shall be in writing and
effective when delivered or mailed (certified, return receipt
requested), if to the Company, to:
Cambridge Biotech Corporation
365 Plantation Street
Worcester, MA 01605
Attention: Secretary
and if to the Optionee, to the address set forth on Schedule I.
A party may change its aforesaid address by giving notice to
the other party pursuant to the foregoing procedure at least ten
(10) days prior to the effective date thereof.
8. Miscellaneous.
A. This Agreement is issued under and pursuant to the
terms of the Plan, a copy of which may be examined at the
principal office of the Company. In the event of any
inconsistency between the terms of the Plan and the terms of
this Agreement, the terms of the Plan shall prevail. All
the terms and provisions of the Plan are incorporated herein
by reference and are assented to by the Company by its
issuance of this Option, and are assented to by the Optionee
by his acceptance of this Option.
B. This Agreement shall be binding upon the legal
representatives, heirs, administrators and executors of the
Optionee and the successors and assigns of the Company.
C. The Optionee shall have no rights as a stockholder
with respect to the shares subject to the Option until the
exercise of the Option and the issuance of a stock
certificate for the shares with respect to which the Option
shall have been exercised.
- 4 -
D. Nothing herein contained shall impose any
obligation on the Company or any of its subsidiaries or the
Optionee with respect to the Optionee's continued employment
with the Company or any of its subsidiaries. Nothing herein
contained shall impose any obligation upon the Optionee to
exercise the Option.
E. The Option granted hereunder is not an incentive
stock option under Section 422 of the Internal Revenue Code
of 1986, as amended, and the Company makes no representation
as to the tax treatment to the Optionee upon receipt or
exercise of the Option or sale or other disposition of the
Option Stock covered thereby.
9. Entire Agreement. This Agreement constitutes the
entire agreement of the parties as to the subject matter hereof,
and supersedes all other prior agreements (both oral and written)
related thereto.
10. Headings. The paragraph headings used in this
Agreement are for convenience only and shall not control or
affect the meaning or construction of any of the provisions
hereof.
11. Governing Law. This Agreement shall be subject to and
construed in accordance with the laws of the Commonwealth of
Massachusetts.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by As duly authorized officer and the Optionee has
executed this Agreement, both as of the date first above written.
CAMBRIDGE BIOTECH CORPORATION
By_____________________________
_______________________________
Alison Taunton-Rigby
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SCHEDULE I
Option Agreement dated:
Name and Address
of Optionee
TIPN:
Number of Shares of Option Stock:
Exercise Price per share:
The Option Stock may be purchased upon Exercise as follows:
Not more than __________ shares on or after __________
An additional __________ shares on or after __________
_______________________________
Initials
_______________________________
Initials
SCHEDULE E
CAMBRIDGE BIOTECH CORPORATION
Invention and Non-Disclosure Agreement
In consideration of my engagement or continued engagement as
an employee, consultant or otherwise by Cambridge Biotech
Corporation, a Delaware corporation, (the "Company") and the
compensation to be paid me by the Company during my engagement, I
hereby agree as follows:
1. Inventions and Patents:
Any and all inventions, processes, procedures, systems,
discoveries, designs, configurations, technology, works of
authorship, trade secrets, and improvements (whether or not
patentable and whether or not they are made, conceived or reduced
to practice during working hours or using the Company's data or
facilities) (hereinafter called "Inventions") which I make,
conceive, reduce to practice, or acquire during my employment by
or consultancy with the Company (either solely or jointly with
others), and which are related to the Company's present or
planned business, shall be the sole property of the Company and
shall at all times and for all purposes be regarded as acquired
and held by me in a fiduciary capacity for the sole benefit of
the Company. I hereby assign to the Company, without further
compensation, all such Inventions and any and all patents,
copyrights, trademarks, trade names or applications therefore, in
the United States and elsewhere, relating thereto.
I shall maintain adequate and current written records of all
such Inventions (in the form of notes, sketches, drawings and as
may be specified by the Company), which records shall be
available to and remain the sole property of the Company at all
times.
I will promptly disclose to the Company all such Inventions
and will assist the Company in obtaining and enforcing for its
own benefit patents on such Inventions in any country. Upon
request, I will execute all applications, assignments,
instruments and papers and perform all acts, such as the giving
of testimony in interference proceedings and infringement suits
or other litigation, necessary or desired by the Company to
enable the Company, it successors, assigns and nominees to secure
and enjoy the full benefits and advantages of such Inventions.
I understand that my obligations under this section will
continue after the termination of my engagement by the Company
and that I will perform such obligations without further
consideration, except for reimbursement or expenses incurred at
the request of the Company. I further understand that if I am
not engaged by the Company as an employee or consultant at the
time I am requested to perform any obligations under this
section, I shall receive for such performance reasonable per diem
fee, as well as reimbursement of any expenses incurred at the
request of the Company. In addition, I understand that the
absence of a request by the Company for information, or for the
making of an oath, or for the execution of any document shall in
no way be construed to constitute a waiver of the Company's
rights under this Agreement.
I understand that I shall have patent rights in such
Inventions as set forth in this paragraph. Beginning one year
after I have made a disclosure adequate for the filing of proper
United States patent application for any of such Inventions, or
(if earlier) six months after the subject matter of the
disclosure has been published anywhere or placed in public use or
on sale in the United States, the Company shall advise me on my
request; whether it intends to file a United States patent
application for such subject matter. If on such a request the
Company advises me that it does not intend to file such an
application, then, subject to the following provisions, I may
file such a application (and any corresponding foreign
application) at my own expense. The Company, having stated its
intention to file such an application, fails to do so (through no
fault of my own or any co-inventor) within the greater of (a) the
first half of the time interval between its first knowledge of
such publication, public use or sale and the first anniversary of
such publication, public use or sale, or (b) a period of thirty
days after its first knowledge of such publication, public use or
sale, then, subject to the following provision, I may file such
an application (and any corresponding foreign patent
applications) at my own expense during the second half of such
time interval. I shall not, however, file any patent application
under the terms of this paragraph if the filing thereof conflicts
with any obligations of the Company to any customer.
Notwithstanding any contrary provision elsewhere in this section,
but subject to the provisions of Section 4 below, any patent
application filed by me under the terms of this paragraph and any
patent issuing on such an application shall be for my own
benefit, subject to a royalty-free, non-exclusive, License for
the life of the patent reserved and granted to the Company. The
License includes the Company's right to incorporate such subject
matter in any design submitted by the Company to any customer or
prospective customer and in any product made by or on behalf of
the Company or any affiliate of the Company. Nothing in this
paragraph shall limit in any way the Company's right to cause to
be published or be put into public use or on sale the subject
matter of any disclosure made under this agreement. I release
the Company from any claims and liability for any publication,
public use or sale of such subject matter by any third party
including the Company's customers or prospective customers.
- 2 -
2. Proprietary Information
I recognize that my relationship with the Company is one of
high trust and confidence by reason of my access to and contract
with the trade secrets and confidential and proprietary
information of the Company. I will use my best efforts to
protect the Inventions and any and all confidential, proprietary
or secret information relating to the Company's products,
services, clients, customers or business operations or activities
(collectively called "Proprietary Information").
I will not during my engagement with the Company or at any
time thereafter disclose to others or use for my own benefit or
for the benefit of another any Proprietary Information (whether
or not learned, obtained or developed solely by me or jointly
with others).
My undertakings and obligations under this Section 2 will
not apply, however, to any such information which: (a) is or
becomes in the public domain through no action or failure on my
part, (b) is generally disclosed to third parties by the Company
without restriction on such third parties, or (c) is approved for
release by written authorization of the Board of Directors of the
Company.
Upon termination of my engagement or at any other time upon
request, I will promptly deliver to the Company all notes,
memoranda, notebooks, drawings, records, reports, files and other
documents (and all copies or reproductions of such materials) in
my possession or under my control, whether prepared by me or
others, which are secret, confidential or proprietary to the
Company. I acknowledge that this material is the sole property
of the Company.
3. Absence of Restrictions Upon Disclosure and Competition
I hereby represent that, except as disclosed in writing to
the Company, I am not bound by the terms of any agreement with
any previous employer or other party to refrain from using or
disclosing any trade secret or confidential or proprietary
information in the course of my engagement by the Company or to
refrain from competing, directly or indirectly, with the business
of such previous employer or any other party, which would affect
the performance of my obligations hereunder. I further represent
that I have given the Company true and correct copies of any and
all such agreements described above which remain in force and
affect notwithstanding whether such agreements would affect the
performance of my obligations hereunder.
I further represent that my performance of all the terms of
this Agreement and of my duties as an employee or a consultant to
the Company does not and will not breach any agreement to keep in
confidence proprietary information, knowledge or data acquired by
me in confidence or in trust prior to my employment with the
- 3 -
Company, and I will not disclose to the Company or induce the
Company to use any confidential or proprietary information or
material belonging to any previous employer or others.
4. Other Obligations
I acknowledge that the Company from time to time may have
agreements with other persons or entities or with the U.S.
Government, or agencies thereof, which impose obligations or
restrictions on the Company regarding the confidential nature of
such work. I agree to be bound by all such obligations and
restrictions and to take all action necessary to discharge the
obligations of the Company.
5. Miscellaneous
The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
This agreement supersedes all prior agreements, written or
oral, between me and the Company relating to the subject matter
of this Agreement. This Agreement may not be modified, changed
or discharged in whole or in part, except by an agreement in
writing signed by me and the Company. I agree that any
subsequent change or changes in my duties, salary or compensation
shall not affect the validity or scope of this Agreement.
This Agreement will be binding upon my heirs, and personal
representatives in their capacity as such and will inure to the
benefit of the Company and its successors and assigns, provided
that Section 2 shall be binding upon such heirs, and personal
representatives only to the extent that they obtain from me
Proprietary Information of the Company.
No delay or omission by the Company in exercising any right
under this Agreement will operate as a waiver of that or any
other right, except as expressly provided herein. A waiver or
consent given by the Company on any one occasion is effective
only in that instance and will not be construed as a bar to or
waiver of that or any other right. A waiver or consent given by
the Company on any one occasion is effective only in that
instance and will not be construed as a bar to or waiver of any
right on any other occasion.
I expressly consent to be bound by the provisions of this
Agreement for the benefit of the Company or any subsidiary or
affiliate thereof to whose employ I may be transferred without
the necessity for any re-execution of this Agreement at the time
of such transfer.
- 4 -
This agreement is governed by Massachusetts law and shall be
given the effect of a sealed instrument.
Date signed by
Employee or
Consultant:_______________ ___________________________________
Signature of Employee or Consultant
___________________________________
Printed name of Employee or
Consultant
Agreed to and accepted by
Cambridge Biotech Corporation
on:__________________________
By:__________________________
- 5 -
SCHEDULE F
INDEMNIFICATION AGREEMENT
This Indemnification Agreement, made and entered into as of
the _____ day of ____________, 1995 ("Agreement"), by and between
Cambridge Biotech Corporation, a Delaware corporation (the
"Corporation"), and Alison Taunton-Rigby, residing at 8 Farrar
Road, Lincoln, Massachusetts 01773 ("Indemnitee"):
WHEREAS, the Corporation and the Indemnitee have entered
into an Employment Agreement dated of even date herewith which
provides for the execution of this Agreement; and
WHEREAS, the Board of Directors of the Corporation (the
"Board") has determined that the difficulty of attracting and
retaining highly competent persons as directors and officers is
detrimental to the best interest of the Corporation's
stockholders and that the Corporation should act to provide such
persons with adequate indemnification against claims and actions
against them arising out of their service to and activities on
behalf of the Corporation; and
WHEREAS, it is reasonable, prudent and necessary for the
Corporation contractually to obligate itself to indemnify such
persons to the fullest extent permitted by applicable law so that
they will serve the Corporation free from undue concern that they
will not be so indemnified; and
WHEREAS, Indemnitee is willing to serve the Corporation on
the condition that she be so indemnified;
NOW, THEREFORE, in consideration of the premises and the
covenants contained herein, the Corporation and Indemnitee do
hereby covenant and agree as follows:
Section 1. Services by Indemnitee. Indemnitee agrees to
serve as President, Chief Executive Officer and a Director of the
Corporation. Indemnitee may at any time and for any reason
resign from such positions or from any such position (subject to
any other contractual obligation or any obligation imposed by
operation of law), in which event the Corporation shall have no
obligation under this Agreement to continue Indemnitee in any
such position.
Section 2. General. The Corporation shall indemnify, and
advance Expenses (as hereinafter defined) to, Indemnitee as
provided in this Agreement and to the fullest extent permitted by
applicable law, as the same exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that
such amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to
provide prior to such amendment unless and to the extent such
amendment prohibits the Corporation from providing the
indemnification rights provided hereunder).
Section 3. Proceedings Other Than Proceedings by or in the
Right of the Corporation. Indemnitee shall be entitled to the
rights of indemnification provided in this Section 3 if, by
reason of her Corporate Status (as hereinafter defined), she is,
or is threatened to be made, a party to any threatened, pending,
or completed Proceeding (as hereinafter defined), other than a
Proceeding by or in the right of the Corporation. Pursuant to
this Section 3, Indemnitee shall be indemnified against Expenses,
judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred by her or on her behalf in
connection with such Proceeding or any claim, issue or matter
therein, if she acted in good faith and in a manner she
reasonably believed to be in or not opposed to the best interests
of the Corporation, and, with respect to any criminal Proceeding,
had no reasonable cause to believe her conduct was unlawful.
Section 4. Proceedings by or in the Right of the
Corporation. Indemnitee shall be entitled to the rights of
indemnification provided in this Section 4 if, by reason of her
Corporate Status, she is, or is threatened to be made, a party to
any threatened, pending or completed Proceeding brought by or in
the right of the Corporation to procure a judgment in its favor.
Pursuant to this Section, Indemnitee shall be indemnified against
Expenses actually and reasonably incurred by her or on her behalf
in connection with the defense or settlement of such Proceeding
if she acted in good faith and in a manner she reasonably
believed to be in or not opposed to the best interests of the
Corporation. Notwithstanding the foregoing, no indemnification
against such Expenses shall be made in respect of any claim,
issue or matter in such Proceeding as to which Indemnitee shall
have been adjudged to be liable to the Corporation unless and
only to the extent that the Court of Chancery of the State of
Delaware, or the court in which such Proceeding shall have been
brought or is pending, shall determine upon application that
despite the adjudication of liability, but in view of ail the
circumstances of the case, the Indemnitee is fairly and
reasonably entitled to indemnity for such Expenses which the
Court of Chancery or such other court shall deem proper.
Section 5. Indemnification for Expenses of a Party Who is
Wholly or Partly Successful; Other Indemnification.
(a) Notwithstanding any other provision of this Agreement,
to the extent that Indemnitee is, by reason of her Corporate
Status, a party to and is successful, on the merits or otherwise
in defense of, any Proceedings, she shall be indemnified against
all Expenses actually and reasonably incurred by her or on her
behalf in connection therewith. If Indemnitee is not wholly
successful in such Proceeding but is successful, on the merits or
- 2 -
otherwise, as to one or more but less than all claims, issues or
matters in such Proceeding, the Corporation shall to the extent
allowed by law indemnify Indemnitee against all Expenses actually
and reasonably incurred by her or on her behalf in connection
with each successfully resolved claim, issue or matter.
(b) To the maximum extent permitted by applicable law, the
Indemnitee shall be entitled to indemnification against Expenses
reasonably incurred by her if, by reason of her Corporate Status,
she is involved, as a witness or otherwise, in any threatened,
pending or completed Proceeding to which she neither is, nor is
threatened to be made, a party.
Section 6. Advancement of Expenses. The Corporation shall
advance all reasonable Expenses incurred by or on behalf of
Indemnitee in connection with any Proceeding within 20 days after
the receipt by the Corporation of a statement or statements from
Indemnitee requesting such advance or advances from time to time,
whether prior to or after final disposition of such Proceeding.
Such statement or statements shall reasonably evidence the
Expenses incurred by Indemnitee and shall include or be preceded
or accompanied by an undertaking by or on behalf of Indemnitee to
repay any Expenses advanced if it shall ultimately be determined
that Indemnitee is not entitled to be indemnified against such
Expenses.
Section 7. Procedure for Determination of Entitlement to
Indemnification.
(a) Subject to Section 9, to obtain indemnification under
this Agreement, Indemnitee shall submit to the Corporation a
written request, including therein or therewith such
documentation and information as is reasonably available to
Indemnitee and is reasonably necessary to determine whether and
to what extent Indemnitee is entitled to indemnification. The
Secretary of the Corporation shall, promptly upon receipt of such
a request for indemnification, advise the Board of Directors in
writing that Indemnitee has requested Indemnification.
(b) Subject to Section 9, Indemnitee's entitlement to
indemnification under any of Sections 3, 4 or 5 hereof shall be
determined in the specific case: (i) if a Change of Control (as
defined in the Employment Agreement dated ___________, 1995, as
amended from time to time, between the Company and Indemnitee) a
"Change of Control" shall have occurred, by Independent Counsel
(as hereinafter defined) (unless Indemnitee shall request that
such determination be made by the Board of Directors, in which
case the determination shall be made in the manner provided below
in clause (ii) (A) as so requested by the Indemnitee, if
applicable) in a written opinion, a copy of which shall be
delivered to the Indemnitee; (ii) if a Change of Control shall
not have occurred, (A) by the Board of Directors by a majority
vote of a quorum of the Board consisting of Disinterested
Directors (as hereinafter defined); or (B) if a quorum of the
- 3 -
Board of Directors consisting of Disinterested Directors is not
obtainable or, even if obtainable, if such quorum of
Disinterested Directors so directs, by Independent Counsel in a
written opinion, a copy of which shall be delivered to the
Indemnitee; or as provided in Section 8(a); and, if it is so
determined that Indemnitee is entitled to indemnification,
payment to Indemnitee shall be made within ten (10) days after
such determination. Indemnitee shall cooperate with the person,
persons or entity making such determination with respect to
Indemnitee's entitlement to indemnification, including providing
to such person, persons or entity upon reasonable advance request
any documentation or information which is not privileged or
otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such
determination. Any costs or expenses (including attorneys' fees
and disbursements) incurred by Indemnitee in so cooperating with
the person, persons or entity making such determination shall be
borne by the Corporation (irrespective of the determination as to
Indemnitee's entitlement to indemnification) and the Corporation
hereby indemnities and agrees to hold Indemnitee harmless
therefrom. The person, persons or entity making the
determination with respect to Indemnitee's entitlement to
indemnification shall notify Indemnitee of such determination no
later than two (2) days after the determination is made.
(c) In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to
Section 7(b) hereof, the Independent Counsel shall be selected as
provided in this Section 7(c). The Independent Counsel shall be
selected by the Board of Directors, and the Corporation shall
give written notice to Indemnitee advising her of the identity of
the Independent Counsel so selected. Indemnitee may, within
seven (7) days after such written notice of selection shall have
been given, deliver to the Corporation a written objection to
such selection. Such objection may be asserted only on the
ground that the Independent Counsel so selected does not meet the
requirements of "Independent Counsel" as defined in Section 15
hereof, and the objection shall set forth with particularity the
factual basis of such assertion. If such written objection is
made, the Independent Counsel so selected may not serve as
Independent Counsel unless and until a court of competent
jurisdiction has determined that such objection is without merit.
If, within 20 days after submission by Indemnitee of a written
request for indemnification pursuant to Section 7(a) hereof,
Independent Counsel shall not have been selected or if selected,
shall have been objected to, Indemnitee may petition the Court of
Chancery of the State of Delaware or other court of competent
jurisdiction for resolution of any objection which shall have
been made by the Corporation or Indemnitee to the other's
selection of Independent Counsel and/or for the appointment as
Independent Counsel of a person selected by the Court or by such
other person as the Court shall designate, and the person with
respect to whom an objection is so resolved or the person so
appointed shall act as Independent Counsel under Section 7(b)
- 4 -
hereof. The Corporation shall pay any and all reasonable fees
and expenses of independent Counsel incurred by such Independent
Counsel in connection with acting pursuant to Section 7(b)
hereof, and the Corporation shall pay all reasonable fees and
expenses incident to the procedures of this Section 7(c),
regardless of the manner in which such independent Counsel was
selected or appointed. Upon the due commencement of any judicial
proceeding or arbitration pursuant to Section 9(a) hereof,
Independent Counsel shall be discharged and relieved of any
further responsibility in such capacity (subject to the
applicable standards of professional conduct then prevailing).
(d) If at the request of the Corporation Indemnitee is or
was serving as a fiduciary with respect to an employee benefit
plan, then for purposes of indemnification of Indemnitee under
this Agreement (i) if Indemnitee acted in good faith and in a
manner she reasonably believed to be in the interest of the
participants and beneficiaries of said plan, Indemnitee shall be
deemed to have acted in a manner not opposed to the best
interests of the Corporation and (ii) "fines", for the purposes
of the indemnification provided in Section 3 hereof shall be
deemed to include any excise taxes imposed on Indemnitee with
respect to such plan under applicable law.
Section 8. Presumptions and Effect of Certain Proceedings.
(a) If the person, persons or entity empowered or selected
under Section 7 hereof to determine whether Indemnitee is
entitled to indemnification shall not have made such
determination within 90 days after receipt by the Corporation of
the request therefor, the requisite determination of entitlement
to indemnification shall be deemed to have been made and
Indemnitee shall be entitled to such indemnification, absent (i)
a misstatement by Indemnitee of a material fact, or an omission
of a material fact necessary to make Indemnitee's statement not
materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification
under applicable law; provided, however, that such 90-day period
may be extended for a reasonable time, not to exceed an
additional 30 days, if the person, persons or entity making the
determination with respect to entitlement to indemnification in
good faith, after notice to Indemnitee prior to the expiration of
such 90-day period, requires such additional time for the
obtaining or evaluating of documentation and/or information
relating thereto.
(c) The termination of any Proceeding or of any claim,
issue or matter therein by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent,
shall not (except as otherwise expressly provided in this
Agreement) of itself adversely affect the right of Indemnitee to
indemnification or create a presumption that Indemnitee did not
act in good faith and in a manner which she reasonably believed
to be in or not opposed to the best interests of the Corporation
- 5 -
or, with respect to any criminal Proceeding, that Indemnitee had
reasonable cause to believe that her conduct was unlawful.
Section 9. Remedies of Indemnitee.
(a) Regardless of whether there has been a determination of
whether or not the Indemnitee is entitled to indemnification
hereunder, the Indemnitee may apply for indemnification to the
court conducting any Proceeding to which the Indemnitee is a
party or to any other court of competent jurisdiction. On
receipt of an application, the court, after giving any notice the
court considers necessary, may order indemnification and
advancement of Expenses if it determines the Indemnitee is
entitled to indemnification and advancement of Expenses.
Further, in the event that (i) a determination is made pursuant
to Section 7 hereof that Indemnitee is not entitled to
indemnification under this Agreement, (ii) advancement of
Expenses is not timely made pursuant to Section 6 hereof, (iii)
the determination of entitlement to indemnification is to be made
by Independent Counsel pursuant to Section 7(b) hereof and such
determination shall not have been made and delivered in a written
opinion within the time period provided in Section 7, or (iv)
payment of indemnification is not made within ten (10) days after
a determination has been made that Indemnitee is entitled to
indemnification or such determination is deemed to have been made
pursuant to Section 7 or 8 hereof, Indemnitee shall be entitled
to an adjudication in an appropriate court of the State of
Delaware, or in any other court of competent jurisdiction, of her
entitlement to such indemnification and advancement of Expenses.
Alternatively, Indemnitee, at her option, may seek an award in
arbitration to be conducted by a single arbitrator pursuant to
the rules of the American Arbitration Association. The
Corporation shall not oppose Indemnitee's right to seek any such
adjudication or award in arbitration.
(b) In the event that a determination shall have been made
pursuant to Section 7 hereof that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced
pursuant to this Section 9 shall be conducted in all respects as
a de novo trial, or arbitration, on the merits and Indemnitee
shall not be prejudiced by reason of that adverse determination.
(c) If a determination shall have been made or deemed to
have been made pursuant to Section 7 or 8 hereof that Indemnitee
is entitled to indemnification, the Corporation shall be bound by
such determination in any judicial proceeding or arbitration
commenced pursuant to this Section 9, absent (i) a misstatement
by Indemnitee of a material fact, or an omission of a material
fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification,
or (ii) a prohibition of such indemnification under applicable
law.
- 6 -
(d) Subject to any undertakings made in any filing with the
Securities and Exchange Commission approved by the Board and the
provisions of applicable law, the Corporation shall be precluded
from asserting in any judicial proceeding or arbitration
commenced pursuant to this Section 9 that the procedures and
presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any
such arbitrator that the Corporation is bound by all the
provisions of this Agreement.
(e) In the event that Indemnitee, pursuant to this Section
9, seeks a judicial adjudication of or an award in arbitration to
enforce her rights under, or to recover damages for breach of,
this Agreement, Indemnitee shall be entitled to recover from the
Corporation, and shall be indemnified by the Corporation against,
any and all expenses (of the types described in the definition of
Expenses in Section 15 of this Agreement) actually and reasonably
incurred by her in such judicial adjudication or arbitration, but
only if she prevails therein. If it shall be determined in said
judicial adjudication or arbitration that Indemnitee is entitled
to receive part but not all of the indemnification or advancement
of Expenses sought, the expenses incurred by Indemnitee in
connection with such judicial adjudication or arbitration shall
be appropriately prorated.
Section 10. Non-Exclusivity: Survival of Rights; Insurance.
(a) The rights of indemnification and to receive
advancement of Expenses as provided by this Agreement shall not
be deemed exclusive of any other rights to which Indemnitee may
at any time be entitled under applicable law, the Certificate of
Incorporation, the By-Laws, any other agreement, a vote of
stockholders or a resolution of directors, or otherwise. To the
extent that any amendment to the Corporation's Certificate of
Incorporation or By-Laws permits the Corporation to provide or
provides broader indemnification or advancement rights than
provided herein, the Corporation agrees, upon written request of
the Indemnitee, promptly to execute and deliver to Indemnitee an
amendment to this Agreement which provides such broader
indemnification or advancement rights, as the case may be, to
Indemnitee, which amendment shall be in form and substance
reasonably satisfactory to Indemnitee and her counsel and all
expenses of preparation and review of any such amendment shall be
the responsibility of the Corporation. Failure of Indemnitee to
request such an amendment shall neither create any presumption
that Indemnitee is not entitled to the rights provided by the
Company's Certificate of Incorporation or By-Laws nor limit
Indemnitee's rights under the Company's Certificate of
Incorporation or By-Laws. Notwithstanding any amendment,
alteration or repeal of any provision of this Agreement that
would diminish any of Indemnitee's rights hereunder, Indemnitee
shall, unless otherwise prohibited by law, have the rights of
indemnification and to receive advancement of Expenses as
provided by this Agreement in respect of any action taken or
- 7 -
omitted by Indemnitee in her Corporate status prior to or during
the time this Agreement was in effect and in respect of any claim
asserted in respect thereof. The provisions of this Agreement
shall continue as to an Indemnitee whose Corporate Status has
ceased and shall inure to the benefit of her heirs, executors,
administrators, and personal representatives.
(b) To the extent that the Corporation maintains an
insurance policy or policies providing liability insurance for
directors or officers of the Corporation or of any other
corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise which such person serves at the request
of the Corporation, Indemnitee shall be covered by such policy or
policies in accordance with its or their terms to the maximum
extent of the coverage available for any such director or officer
under such policy or policies.
(c) The Corporation shall not be liable under this
Agreement to make any payment of amounts otherwise indemnifiable
hereunder if and to the extent that Indemnitee has otherwise
actually received such payment under any insurance policy,
contract, agreement or otherwise.
(d) To the extent that any provisions of this Agreement and
any provision of the Corporation's By-Laws or Certificate of
Incorporation providing for indemnification of Indemnitee are
inconsistent as to the scope of such indemnification (except the
procedures for indemnification), then to the extent not
prohibited by applicable law, the provision providing for the
greater scope shall control. If any provision of this Agreement
and any provision of the Corporation's By-Laws or Certificate of
Incorporation are inconsistent as to the procedure to be followed
for indemnification of Indemnitee, the provisions set forth
herein shall govern, unless Indemnitee shall elect to have the
procedures set forth in the By-Laws or Certificate of
Incorporation apply or unless prohibited by law.
Section 11. Severability. If any provision or provisions
of this Agreement shall be held to be invalid, illegal or
unenforceable for any reason whatsoever: (a) the validity,
legality and enforceability of the remaining provisions of this
Agreement (including without limitation, each portion of any
Section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid,
illegal or unenforceable) shall not in any way be affected or
impaired thereby; and (b) to the fullest extent possible, the
provisions of this Agreement (including, without limitation, each
portion of any Section of this Agreement containing any such
provision held to be invalid, illegal or unenforceable, that is
not itself invalid, illegal or unenforceable) shall be construed
so as to give effect to the intent manifested by the provision
held invalid, illegal or unenforceable.
- 8 -
Section 12. Certain Persons Not Entitled to Indemnification
or Advancement of Expenses. Except as specifically authorized by
Section 9 hereof with respect to a judicial proceeding or
arbitration to enforce rights under this Agreement, neither the
Indemnitee nor any other person shall be entitled to
indemnification or advancement of Expenses under this Agreement
with respect to any Proceeding, or any claim therein, brought or
made by her against the Corporation, unless the Board of
Directors, by majority vote of a quorum of the Board consisting
of Disinterested Directors, specifically authorizes such
indemnification or advancement of Expenses.
Section 13. Contribution. If the indemnification provided
for in this Agreement is due in accordance with its terms but is
either held by a court of competent jurisdiction to be
unavailable or is insufficient to hold harmless the Indemnitee,
then the Corporation shall contribute to the amount paid or
payable by the Indemnitee as a result of the Expenses, judgments,
penalties, fines and amounts paid in settlement referred to
herein in such proportion as is appropriate to reflect the
relative fault of the Corporation and the Indemnitee in
connection with the action or omissions which resulted in
Expenses, judgments, penalties, fines and amounts paid in
settlement as well as any other relevant equitable
considerations. The amount paid by the Indemnitee as a result of
the Expenses, judgments, penalties, fines and amounts paid in
settlement referred to in the first sentence of this Section 13
shall be deemed to include any legal or other Expenses reasonably
incurred by the Indemnitee in connection with investigating or
defending any action or claim which is the subject of this
Section 13.
Section 14. Successors; Extraordinary Transactions.
(a) This Agreement shall be binding upon the Corporation
and its successors and assigns.
(b) The Corporation covenants and agrees that, in the event
of (i) any merger, consolidation or reorganization in which the
corporation is not the surviving entity, (ii) any transfer of all
or substantially all the assets of the Company, (iii) any Change
in control (each such event is referred to in the Agreement as an
"Extraordinary Transaction"), the Corporation shall retain its
obligations under this Agreement and cause the obligations of the
Corporation under this Agreement to be expressly assumed by the
survivor, purchaser or successor, as the case may be, in such
Extraordinary Transaction and shall use its best efforts to cause
the survivor, purchaser or successor, as the case may be, to (i)
obtain and/or maintain insurance in favor of the Indemnitee from
a reputable insurance carrier, which insurance shall provide at
least the same coverage terms and conditions as provided to the
Indemnitee immediately prior to such Extraordinary Transaction
(unless and to the extent such insurance becomes unavailable or
the premiums therefor become unreasonably expensive) for a period
- 9 -
of not less than five (5) years from the date of such
Extraordinary Transaction against any liability to which the
indemnification provided in this Agreement relates, or (ii)
otherwise adequately provide for the satisfaction of the
Corporation's obligations under this Agreement, in a manner
acceptable to the Indemnitee.
(c) In the event of a potential Change in Control, the
Corporation may create a trust for the benefit of the Indemnitee
(either alone or together with one or more other indemnitees) and
from time to time fund such trust in such amounts as the
Corporation's Board of Directors may determine to satisfy
Expenses reasonably anticipated to be incurred in connection with
investigating, preparing for and defending any Proceeding, and
all judgments, fines, penalties and settlement amounts of all
Proceedings from time to time paid or claimed, reasonably
anticipated or proposed to be paid. The terms of any trust
established pursuant hereto shall provide that upon a Change in
Control (i) the trust shall not be revoked or the principal
thereof invaded, without the written consent of the Indemnitee,
(ii) the trustee shall advance, within two business days of a
request by the Indemnitee all Expenses to the Indemnitee (and the
Indemnitee hereby agrees to reimburse the trust under the
circumstances under which the Indemnitee would be required to
reimburse the Corporation under this Agreement), (iii) the
trustee shall promptly pay to the Indemnitee all amounts for
which the Indemnitee shall be entitled to indemnification
pursuant to this Agreement or otherwise, and (iv) all unexpended
funds in such trust shall revert to the Corporation upon a final
determination by a court of competent jurisdiction that the
Indemnitee has been fully indemnified under the terms of this
Agreement. The trustee shall be a person or entity satisfactory
to the Indemnitee. Nothing in this Section 14 shall relieve the
Corporation of any of its obligations under this Agreement.
Section 15. Definitions. For purposes of this Agreement:
(a) "Corporate Status" describes the status of a person who
is or was or, to the maximum extent indemnification of such
person is permitted by law, has agreed to become, a director,
officer, employee or agent of the Corporation or of any other
corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise which such person is or was serving at
the request of the Corporation.
(b) "Disinterested Director" means a director of the
Corporation who is not and was not a party to the Proceeding in
respect of which indemnification is sought by Indemnitee.
(c) "Expenses" shall include all reasonable attorneys'
fees, retainers, court costs, transcript costs, fees of experts,
witness fees, travel expenses, duplicating costs, printing and
binding costs, telephone charges, postage, delivery service fees,
and all other disbursements or expenditures of the types
- 10 -
customarily incurred in connection with prosecuting, defending,
participating in, preparing to prosecute or defend or participate
in, or investigating a Proceeding.
(d) "Independent Counsel" means a law firm, or a member of
a law firm, that is experienced in matters of corporate law and
neither presently is, nor in the past five years has been,
retained to represent: (i) the Corporation or Indemnitee in any
matter material to either such party, or (ii) any other party to
the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term "Independent
Counsel" shall not include any person who, under the applicable
standards of professional conduct then prevailing, would have a
conflict of interest in representing either the Corporation or
Indemnitee in an action to determine Indemnitee's rights under
this Agreement.
(e) "Proceeding" includes any action, suit, arbitration,
alternate dispute resolution mechanism, investigation,
administrative hearing or any other proceeding whether civil,
criminal, administrative or investigative, except one initiated
by an Indemnitee pursuant to Section 9 of this Agreement to
enforce her rights under this Agreement.
Section 16. Modification and Waiver. No supplement,
modification or amendment of this Agreement shall be binding
unless executed in writing by both of the parties hereto. No
waiver of any of the provisions of this Agreement shall be deemed
or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a
continuing waiver.
Section 17. Notices. All notices, requests, demands and
other communications hereunder shall be in writing and shall be
deemed to have been duly given if (i) delivered by hand and
receipted for by the party to whom said notice or other
communication shall have been directed, on the date of such
delivery or (ii) mailed by certified or registered mail with
postage prepaid, on the fifth business day after the date on
which it is so mailed:
(a) If to Indemnitee, to:
Alison Taunton-Rigby
8 Farrar Road
Lincoln, MA 01773
(b) If to the Corporation to:
Cambridge Biotech Corporation
Biotechnology Research Park
365 Plantation Street
Worcester, MA 01605
Attention: Secretary
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or to such other address and with copies to such other persons as
may have been furnished to Indemnitee by the Corporation or to
the Corporation by Indemnitee, as the case may be.
Section 18. Governing Law. The parties agree that this
Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Delaware.
Section 19. Headings. The headings contained in this
Agreement are for reference purposes only and shall in no way
affect the meaning or interpretation of this Agreement.
Section 20. Counterparts. This Agreement may be executed
in duplicate counterparts, each of which shall be deemed to be an
original and all of which, taken together, shall constitute one
agreement.
Section 21. Miscellaneous. Use of the feminine pronoun
shall be deemed to include usage of the masculine pronoun where
appropriate.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
ATTEST CAMBRIDGE BIOTECH CORPORATION
By____________________________ By____________________________
Secretary
INDEMNITEE: ______________________________
Alison Taunton-Rigby
Address: 8 Farrar Road
Lincoln, MA 01773
- 12 -
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective as of August 21, 1995 (the
"Commencement Date") by and between Cambridge Biotech
Corporation, debtor and debtor in possession United States
Bankruptcy Court for the District of Massachusetts, Western
Division, Case Number 94-43054-JFQ, a Delaware Corporation,
having a principal place of business at 365 Plantation Street,
Worcester, Massachusetts ("CBC") and Gerald A. Beltz of
Lexington, Massachusetts 02173 ("Executive").
WHEREAS, CBC has filed a petition under Chapter 11 of the
United States Bankruptcy Code (the "Code");
WHEREAS, CBC and Executive are parties to an employment
agreement dated as of April 15, 1994, which CBC and Executive
have elected to terminate without liability or obligation to
either party;
WHEREAS, CBC desires to employ Executive for the period and
upon the terms and conditions provided in this Agreement; and
WHEREAS, Executive desires to serve in the employ of CBC on
a full-time basis upon the terms and conditions hereinafter
provided.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
1. Employment. CBC hereby employs Executive, and
Executive hereby accepts employment by CBC, for the period stated
in Paragraph 3 hereof and upon the terms and conditions herein
provided.
2. Position and Responsibilities; Principal Location.
(a) During the term of this Agreement, Executive will serve
as Vice President of Research and Development, subject to
election by the Board of Directors, reporting to the Chief
Executive Officer. Executive shall devote his primary energies,
attention and abilities to the business of CBC and shall perform
such duties as shall be assigned to him by the CEO. Executive
may not serve as a director of other companies without the prior
approval of the Chief Executive Officer.
(b) The principal location at which Executive will perform
his duties will be at CBC's principal offices in Worcester,
Massachusetts or in a location not more than fifty (50) miles
distant from Boston, Massachusetts.
3. Term of Employment. The term of Executive's employment
hereunder shall be for two years from the Commencement Date;
provided, however, that thereafter the term shall be extended
automatically to the date which is 180 days after either party
shall deliver written notice to the other of such party's
election not to extend the term of this Agreement. The last day
of such term, as may be extended from time to time, is herein
sometimes referred to as the "Expiration Date."
4. Compensation and Benefits. For all services rendered
by Executive during his employment hereunder, CBC shall
compensate Executive as follows:
(a) Salary. CBC shall pay Executive a base salary of
$140,000 per year, subject to increase from time to time in
accordance with the usual practice of CBC with respect to review
of compensation of its senior executives. Executive's salary
shall be payable in periodic installments in accordance with
CBC's usual practice for its senior executives.
(b) Regular Benefits. Executive shall be entitled to
participate in any and all employee benefit plans, medical
insurance plans, life insurance plans, disability income plans,
retirement plans, bonus incentive plans and other benefit plans
from time to time in effect for senior executives of CBC. Such
participation shall be subject to: (i) the terms of the
applicable plan documents; (ii) generally applicable policies of
CBC; and (iii) the discretion of the Board or any administrative
or other committee provided for in or contemplated by such plan.
(c) Business Expenses. CBC shall reimburse Executive for
all reasonable travel and other business expenses incurred by him
in the performance of his duties and responsibilities, subject to
such reasonable requirements with respect to substantiation and
documentation as may be specified by CBC.
(d) Vacation. Executive shall be entitled to paid vacation
in accordance with the policies of CBC (but in no event less than
four weeks per year), to be taken at such times and intervals as
shall be determined by Executive with the approval of CBC, which
approval shall not be unreasonably withheld.
(e) Bonus. Executive shall be eligible to receive an
annual bonus based upon achievement of corporate and individual
objectives; the award of any bonus shall lie solely in the
discretion of the Board of Directors.
5. Termination and Termination Benefits. Notwithstanding
the provisions of Paragraph 3, Executive's employment hereunder
shall terminate under the following circumstances:
(a) Death. In the event of Executive's death during his
employment hereunder, CBC shall continue to pay an amount equal
to Executive's base salary to Executive's beneficiary designated
in writing to CBC prior to his death (or to his estate if he
fails to make such designation) for a period of six (6) months
- 2 -
after the date of Executive's death, at the salary rate in effect
on the date of his death, said payments to be made on the same
periodic dates as base salary payments would have been made to
Executive had he not died.
(b) Termination by CBC for Cause. Executive's employment
hereunder may be terminated by CBC for cause, without further
liability on the part of CBC, effective immediately by notice to
Executive stating the nature of such cause. The following shall
constitute "cause" for such termination.
(i) Deliberate dishonesty of Executive with respect to
CBC or any subsidiary or affiliate thereof; or
(ii) Conviction of Executive of a crime involving moral
turpitude; or
(iii) The material failure by Executive to perform
Executive's duties hereunder (other than any such failure
resulting from the incapacity of Executive due to physical
or mental illness) which failure continues for thirty (30)
days after notice to Executive setting forth in reasonable
detail the manner in which Executive has not performed
Executive's duties; or
(iv) Unlawful conduct pertaining to CBC or any of its
affiliates or shareholders or involving a criminal act;
material and conscious falsification or unauthorized
disclosure of important records or reports; embezzlement or
unauthorized conversion of property; violation of conflict
of interest or vendor relations policies; or willful
disclosure of significant trade secrets or other information
likely to be used to the detriment of CBC.
(c) Termination by Executive for Cause. Executive may
terminate his employment hereunder without liability effective
after thirty (30) days notice by Executive to CBC in the event of
the material breach by CBC of this Agreement if such breach shall
continue for more than thirty (30) days after notice to CBC
setting forth in reasonable detail the nature of such breach.
(d) Termination by CBC Without Cause. Executive's
employment may be terminated without cause by CBC by thirty (30)
days written notice to Executive.
(e) Certain Termination Benefits. In the event of
termination pursuant to Paragraphs 5(c) or 5(d), Executive shall
be entitled to the following:
(i) Base Salary. For the period after the date of
termination until the Expiration Date, CBC shall continue to
pay Executive base salary at the rate in effect on the date
of termination.
- 3 -
(ii) Regular Benefits.
(A) For the period subsequent to the date of
termination until the Expiration Date, Executive shall
continue to receive at CBC's expense all benefits
described in Paragraph 4(b) existing on the date of
termination (except for any cash bonus plans which
shall be pro-rated through the date of termination),
provided that CBC's obligation to continue such
benefits shall cease on a benefit by benefit basis on
that date, if any, on which Executive is employed on a
full-time basis and Executive receives in connection
with such employment benefits which are substantially
equivalent to CBC's benefits.
(B) For purpose of application of CBC's benefits,
Executive shall be treated, to the extent that
applicable law pertaining to the particular CBC benefit
plan permits CBC to do so, as if he had remained in the
employ of CBC, with a total annual salary at the rate
in effect on the date of termination and service or
similar credits, if any, will continue to accrue during
such period as if Executive had remained in the employ
of CBC.
(C) If in spite of the provisions of this clause
(ii), benefits or service credits under any benefit
plan shall not be payable or provided under any such
plan to Executive, or to Executive's dependents,
beneficiaries or estate, because Executive is no longer
deemed to be an employee of CBC, CBC itself shall pay
or provide payment of such benefits and service credits
for such benefits to Executive or to Executive's
dependents, beneficiaries or estate.
(D) To the extent that applicable law does not
permit any CBC benefit referred to above to be
provided, paid, or funded through the applicable CBC
benefit plan, then CBC shall not be required to provide
such benefit through such plan and shall only be
required to provide in the case of a benefit the tax
treatment of which is enhanced by such plan an amount
equal to what would have been CBC's initial
contribution to such plan and not the equivalent
benefit.
(iii) Set-off. CBC shall be entitled to set off against
any cash compensation to be provided to Executive under
Paragraph 5(e) above 50 percent of the amount of any cash
compensation received by Executive from other employment
during the period in which Executive received cash
compensation under Paragraph 5(e). Executive shall inform
CBC of any such amounts of cash compensation and shall
refund to CBC any amount which CBC has paid which exceeds
- 4 -
the amounts due from CBC after application of the set-off
provided for in this paragraph. Notwithstanding the
foregoing and any other provision of this Agreement,
Executive shall be under no obligation to seek or accept any
employment after termination of employment with CBC for any
reason.
6. Disability.
(a) If, due to physical or mental illness, Executive shall
be disabled so as to be unable to perform substantially all of
his duties and responsibilities hereunder, CBC may designate
another executive to act in his place during the period of such
disability. Notwithstanding any such designation, Executive
shall continue to receive his full salary and benefits under
Paragraph 4 of this Agreement, unless his employment is
terminated as provided in this Paragraph 6.
(b) If Executive shall become totally and permanently
disabled, then CBC may terminate Executive's employment hereunder
and shall continue to pay to Executive his full salary and
provide him with the benefits he was receiving immediately prior
to such termination for six months, provided that such salary
shall be reduced by the amount of any disability insurance
proceeds actually paid to Executive or for his benefit with
respect to such period of time under any disability policy
provided by CBC for Executive.
(c) The determination that by virtue of total and permanent
disability Executive is unable to perform his duties hereunder
shall be made by a physician chosen by CBC and reasonably
satisfactory to Executive (or Executive's legal representative)
and such determination shall be conclusive. The cost of such
examination shall be borne by CBC. Executive shall be
conclusively presumed to be totally and permanently disabled if
for reasons involving physical or mental illness or injury
Executive fails to perform his duties hereunder for a period of
one hundred twenty (120) consecutive calendar days or for any
periods aggregating one hundred twenty (120) days or more in any
six (6) consecutive month period. The date of termination of
Executive's employment hereunder in the event of total and
permanent disability shall be the earlier of such physicians's
examination pursuant to which such determination is made or the
first business day after which either such 120-day period or such
six-month period has expired.
7. Non-competition, Confidential Information, and Non-
Solicitation.
(a) Non-competition. Executive agrees that he will not at
any time during the term of this Agreement and for a period of
two (2) years following the termination of this Agreement for any
reason, directly or indirectly, as a partner, officer, director,
consultant, employee, stockholder or otherwise, engage in any
- 5 -
employment, pursuit or association in which he shall have
substantial responsibility with respect to products and/or
services which are in direct competition with products and/or
services of CBC, provided however, in any event the holding by
Executive of any investment in any security shall not be deemed
to be a violation of this Paragraph 7 if such investment does not
constitute more than 5% of the outstanding issue of such
security.
(b) Confidential Information. Executive will not disclose
to any other person (except as required by applicable law or in
connection with the performance of his duties and
responsibilities hereunder), or use for his own benefit or gain,
any confidential information of CBC obtained by him incident to
his employment with CBC. The term "confidential information"
includes, without limitation, financial information, business
plans, prospects and opportunities (such as lending
relationships, financial product developments, possible
acquisitions or dispositions of businesses or facilities),
products, plans, intellectual property, analyses, projects,
processes, marketing, research or development activities, and all
technical or scientific information or know-how of CBC which have
been discussed or considered by CBC but does not include any
information which has become part of the public domain by means
other than Executive's non-observance of his obligations
hereunder.
(c) Non-solicitation. Executive agrees that he will not at
any time during the term of this Agreement and for a period of
three (3) years following the termination of this Agreement for
any reason, directly or indirectly, solicit or recruit any
employee of CBC to serve as an employee of, consultant to, or
partner of Executive or any entity.
(d) Relief; Interpretation. Executive agrees that CBC
shall be entitled to injunctive relief for any breach by him of
the covenants contained in Paragraphs 7(a), (b), or (c). In the
event that any provision of this Paragraph 7 shall be determined
by any court of competent jurisdiction to be unenforceable by
reason of its being extended over too great a period of time, too
large a geographic area, or too great a range of activities, it
shall be interpreted to extend only over the maximum period of
time, geographic areas, or range of activities as to which it may
be enforceable. For purposes of this Paragraph 7, the term "CBC"
shall mean CBC and any of its subsidiaries.
(e) Survival. Executive's obligations under this
Paragraph 7 shall survive termination of this Agreement.
8. Conflicting Agreements. Executive hereby represents
and warrants that the execution of this Agreement and the
performance of his obligations hereunder will not breach or be in
conflict with any other agreement to which he is a party or is
bound, and that he is not now subject to any covenants against
- 6 -
competition or similar covenants which would affect the
performance of his obligations hereunder.
9. Withholding. All payments made by CBC under this
Agreement shall be net of any tax or other amounts required to be
withheld by CBC under applicable law.
10. Arbitration of Disputes. Any controversy or claim
arising out of or relating to this Agreement or the breach
thereof shall be settled by arbitration in accordance with the
laws of the Commonwealth of Massachusetts by three arbitrators.
The party initiating arbitration shall nominate one arbitrator in
the request for arbitration and the other party shall nominate a
second in the answer thereto within thirty (30) days of receipt
of the request. The two arbitrators so named will then jointly
appoint the third arbitrator. If the answering party fails to
nominate its arbitrator within the thirty (30) day period, or if
the arbitrators named by the parties fail to agree on the third
arbitrator within sixty (60) days, then such arbitrator shall be
appointed by the American Arbitration Association in the City of
Boston. Such arbitration shall be conducted in the City of
Worcester, Massachusetts in accordance with the rules of the
American Arbitration Association, except with respect to the
selection of arbitrators which shall be provided in this
Paragraph 10. Judgment upon the award entered by the arbitrators
may be entered in any court having jurisdiction thereof.
11. Assignment, Successors and Assigns, etc. Neither the
employer nor Executive may make any assignment of this Agreement
or any interest herein, by operation of law or otherwise, without
the prior written consent of the other party; provided, however,
that CBC may assign its rights under this Agreement without the
consent of Executive in the event CBC shall hereafter consolidate
with or merge into any other person, or transfer all or
substantially all of its properties or assets to any other
person. In the event of the Executive's death prior to the
completion by CBC of all payments due him under this Agreement,
CBC shall continue such payments to the Executive's beneficiary
designated in writing to CBC prior to his death (or to his
estate, if he fails to make such designation). This Agreement
shall inure to the benefit of and be binding upon CBC and the
Executive, their respective successors, executors,
administrators, heirs and permitted assigns.
12. Enforceability. If any portion or provision of this
Agreement shall to any extent be declared illegal or
unenforceable by a court of competent jurisdiction, then the
remainder of this Agreement, or the application of such portion
or provision in circumstances other than those as to which it is
so declared illegal or unenforceable, shall not be affected
thereby, and each portion and provision of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
- 7 -
13. Waiver. No waiver of any provision hereof shall be
effective unless made in writing and signed by the waiving party.
The failure of any party to require the performance of any term
or obligation of this Agreement, or the waiver by any party of
any breach of this Agreement, shall not prevent any subsequent
enforcement of such term or obligation or be deemed a waiver of
any subsequent breach.
14. Notices. All notices and other communications required
or permitted hereunder shall be in writing and shall be
delivered, mailed by first-class mail, postage prepaid, or sent
by telex or facsimile with a mailed confirmation copy, addressed:
(a) If to CBC:
Cambridge Biotech Corporation
365 Plantation Street
Worcester, MA 01605
Attention: Secretary
Facsimile No: 508-797-4014
(b) If to Executive:
Gerald A. Beltz
4 Eustis Street
Lexington, MA 02173
or such other addresses or facsimile numbers as shall be
furnished in writing by either party and any such notice or
communication shall be deemed to have been given in the case of
notices or communications which have been delivered or sent by
facsimile or telex on the date of delivery or sending provided
such day is a business day and in the case of notices or
communications which have been mailed on the second business day
after the date mailed.
15. Amendment. This Agreement may be amended or modified
only by a written instrument signed by Executive and by a duly
authorized representative of CBC.
16. Governing Law. This is a Massachusetts contract and
shall be construed under and be governed in all respects by the
laws of the Commonwealth of Massachusetts without reference to
its conflict of laws provisions.
17. Entire Agreement. Except for the Invention and Non-
Disclosure Agreement dated August 17, 1983, which shall remain in
full force and effect in accordance with its terms, this
Agreement constitutes the entire understanding between the
parties with respect to the subject matter hereunder and
supersedes and replaces all prior agreements, including the
employment agreement between Executive and CBC dated April 15,
1994, understandings, writings, and discussions between the
parties.
- 8 -
IN WITNESS WHEREOF, this Agreement has been executed as a
sealed instrument by CBC, by its duly authorized officers, and by
the Executive, as of the date first above written.
CAMBRIDGE BIOTECH CORPORATION
_____________________________
Alison Taunton-Rigby
President and CEO
_____________________________
Gerald A. Beltz
- 9 -
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective as of August 21, 1995 (the
"Commencement Date") by and between Cambridge Biotech
Corporation, debtor and debtor in possession United States
Bankruptcy Court for the District of Massachusetts, Western
Division, Case Number 94-43054-JFQ, a Delaware Corporation,
having a principal place of business at 365 Plantation Street,
Worcester, Massachusetts ("CBC") and Deborah Blackburn Grabbe, of
Medfield, MA 02052 ("Executive").
WHEREAS, CBC has filed a petition under Chapter 11 of the
United States Bankruptcy Code (the "Code");
WHEREAS, CBC and Executive are parties to an employment
agreement dated as of February 14, 1994, which CBC and Executive
have elected to terminate without liability or obligation to
either party;
WHEREAS, CBC desires to employ Executive for the period and
upon the terms and conditions provided in this Agreement; and
WHEREAS, Executive desires to serve in the employ of CBC on
a full-time basis upon the terms and conditions hereinafter
provided.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
1. Employment. CBC hereby employs Executive, and
Executive hereby accepts employment by CBC, for the period stated
in Paragraph 3 hereof and upon the terms and conditions herein
provided.
2. Position and Responsibilities; Principal Location.
(a) During the term of this Agreement, Executive will serve
as Vice President of Regulatory Affairs and Product Quality,
subject to election by the Board of Directors, reporting to the
Chief Executive Officer. Executive shall devote her primary
energies, attention and abilities to the business of CBC and
shall perform such duties as shall be assigned to her by the CEO.
Executive may not serve as a director of other companies without
the prior approval of the Chief Executive Officer.
(b) The principal location at which Executive will perform
her duties will be at CBC's principal offices in Worcester,
Massachusetts or in a location not more than fifty (50) miles
distant from Boston, Massachusetts.
3. Term of Employment. The term of Executive's employment
hereunder shall be for two years from the Commencement Date;<PAGE>
provided, however, that thereafter the term shall be extended
automatically to the date which is 180 days after either party
shall deliver written notice to the other of such party's
election not to extend the term of this Agreement. The last day
of such term, as may be extended from time to time, is herein
sometimes referred to as the "Expiration Date."
4. Compensation and Benefits. For all services rendered
by Executive during her employment hereunder, CBC shall
compensate Executive as follows:
(a) Salary. CBC shall pay Executive a base salary of
$130,000 per year, subject to increase from time to time in
accordance with the usual practice of CBC with respect to review
of compensation of its senior executives. Executive's salary
shall be payable in periodic installments in accordance with
CBC's usual practice for its senior executives.
(b) Regular Benefits. Executive shall be entitled to
participate in any and all employee benefit plans, medical
insurance plans, life insurance plans, disability income plans,
retirement plans, bonus incentive plans and other benefit plans
from time to time in effect for senior executives of CBC. Such
participation shall be subject to: (i) the terms of the
applicable plan documents; (ii) generally applicable policies of
CBC; and (iii) the discretion of the Board or any administrative
or other committee provided for in or contemplated by such plan.
(c) Business Expenses. CBC shall reimburse Executive for
all reasonable travel and other business expenses incurred by her
in the performance of her duties and responsibilities, subject to
such reasonable requirements with respect to substantiation and
documentation as may be specified by CBC.
(d) Vacation. Executive shall be entitled to paid vacation
in accordance with the policies of CBC (but in no event less than
four weeks per year), to be taken at such times and intervals as
shall be determined by Executive with the approval of CBC, which
approval shall not be unreasonably withheld.
(e) Bonus. Executive shall be eligible to receive an
annual bonus based upon achievement of corporate and individual
objectives; the award of any bonus shall lie solely in the
discretion of the Board of Directors.
5. Termination and Termination Benefits. Notwithstanding
the provisions of Paragraph 3, Executive's employment hereunder
shall terminate under the following circumstances:
(a) Death. In the event of Executive's death during her
employment hereunder, CBC shall continue to pay an amount equal
to Executive's base salary to Executive's beneficiary designated
in writing to CBC prior to her death (or to her estate if she
fails to make such designation) for a period of six (6) months
- 2 -
after the date of Executive's death, at the salary rate in effect
on the date of her death, said payments to be made on the same
periodic dates as base salary payments would have been made to
Executive had she not died.
(b) Termination by CBC for Cause. Executive's employment
hereunder may be terminated by CBC for cause, without further
liability on the part of CBC, effective immediately by notice to
Executive stating the nature of such cause. The following shall
constitute "cause" for such termination.
(i) Deliberate dishonesty of Executive with respect to
CBC or any subsidiary or affiliate thereof; or
(ii) Conviction of Executive of a crime involving moral
turpitude; or
(iii) The material failure by Executive to perform
Executive's duties hereunder (other than any such failure
resulting from the incapacity of Executive due to physical
or mental illness) which failure continues for thirty (30)
days after notice to Executive setting forth in reasonable
detail the manner in which Executive has not performed
Executive's duties; or
(iv) Unlawful conduct pertaining to CBC or any of its
affiliates or shareholders or involving a criminal act;
material and conscious falsification or unauthorized
disclosure of important records or reports; embezzlement or
unauthorized conversion of property; violation of conflict
of interest or vendor relations policies; or willful
disclosure of significant trade secrets or other information
likely to be used to the detriment of CBC.
(c) Termination by Executive for Cause. Executive may
terminate her employment hereunder without liability effective
after thirty (30) days notice by Executive to CBC in the event of
the material breach by CBC of this Agreement if such breach shall
continue for more than thirty (30) days after notice to CBC
setting forth in reasonable detail the nature of such breach.
(d) Termination by CBC Without Cause. Executive's
employment may be terminated without cause by CBC by thirty (30)
days written notice to Executive.
(e) Certain Termination Benefits. In the event of
termination pursuant to Paragraphs 5(c) or 5(d), Executive shall
be entitled to the following:
(i) Base Salary. For the period after the date of
termination until the Expiration Date, CBC shall continue to
pay Executive base salary at the rate in effect on the date
of termination.
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(ii) Regular Benefits.
(A) For the period subsequent to the date of
termination until the Expiration Date, Executive shall
continue to receive at CBC's expense all benefits
described in Paragraph 4(b) existing on the date of
termination (except for any cash bonus plans which
shall be pro-rated through the date of termination),
provided that CBC's obligation to continue such
benefits shall cease on a benefit by benefit basis on
that date, if any, on which Executive is employed on a
full-time basis and Executive receives in connection
with such employment benefits which are substantially
equivalent to CBC's benefits.
(B) For purpose of application of CBC's benefits,
Executive shall be treated, to the extent that
applicable law pertaining to the particular CBC benefit
plan permits CBC to do so, as if she had remained in
the employ of CBC, with a total annual salary at the
rate in effect on the date of termination and service
or similar credits, if any, will continue to accrue
during such period as if Executive had remained in the
employ of CBC.
(C) If in spite of the provisions of this clause
(ii), benefits or service credits under any benefit
plan shall not be payable or provided under any such
plan to Executive, or to Executive's dependents,
beneficiaries or estate, because Executive is no longer
deemed to be an employee of CBC, CBC itself shall pay
or provide payment of such benefits and service credits
for such benefits to Executive or to Executive's
dependents, beneficiaries or estate.
(D) To the extent that applicable law does not
permit any CBC benefit referred to above to be
provided, paid, or funded through the applicable CBC
benefit plan, then CBC shall not be required to provide
such benefit through such plan and shall only be
required to provide in the case of a benefit the tax
treatment of which is enhanced by such plan an amount
equal to what would have been CBC's initial
contribution to such plan and not the equivalent
benefit.
(iii) Set-off. CBC shall be entitled to set off against
any cash compensation to be provided to Executive under
Paragraph 5(e) above 50 percent of the amount of any cash
compensation received by Executive from other employment
during the period in which Executive received cash
compensation under Paragraph 5(e). Executive shall inform
CBC of any such amounts of cash compensation and shall
refund to CBC any amount which CBC has paid which exceeds
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the amounts due from CBC after application of the set-off
provided for in this paragraph. Notwithstanding the
foregoing and any other provision of this Agreement,
Executive shall be under no obligation to seek or accept any
employment after termination of employment with CBC for any
reason.
6. Disability.
(a) If, due to physical or mental illness, Executive shall
be disabled so as to be unable to perform substantially all of
her duties and responsibilities hereunder, CBC may designate
another executive to act in her place during the period of such
disability. Notwithstanding any such designation, Executive
shall continue to receive her full salary and benefits under
Paragraph 4 of this Agreement, unless her employment is
terminated as provided in this Paragraph 6.
(b) If Executive shall become totally and permanently
disabled, then CBC may terminate Executive's employment hereunder
and shall continue to pay to Executive her full salary and
provide her with the benefits she was receiving immediately prior
to such termination for six months, provided that such salary
shall be reduced by the amount of any disability insurance
proceeds actually paid to Executive or for her benefit with
respect to such period of time under any disability policy
provided by CBC for Executive.
(c) The determination that by virtue of total and permanent
disability Executive is unable to perform her duties hereunder
shall be made by a physician chosen by CBC and reasonably
satisfactory to Executive (or Executive's legal representative)
and such determination shall be conclusive. The cost of such
examination shall be borne by CBC. Executive shall be
conclusively presumed to be totally and permanently disabled if
for reasons involving physical or mental illness or injury
Executive fails to perform her duties hereunder for a period of
one hundred twenty (120) consecutive calendar days or for any
periods aggregating one hundred twenty (120) days or more in any
six (6) consecutive month period. The date of termination of
Executive's employment hereunder in the event of total and
permanent disability shall be the earlier of such physicians's
examination pursuant to which such determination is made or the
first business day after which either such 120-day period or such
six-month period has expired.
7. Non-competition, Confidential Information, and Non-
Solicitation.
(a) Non-competition. Executive agrees that he will not at
any time during the term of this Agreement and for a period of
two (2) years following the termination of this Agreement for any
reason, directly or indirectly, as a partner, officer, director,
consultant, employee, stockholder or otherwise, engage in any
- 5 -
employment, pursuit or association in which he shall have
substantial responsibility with respect to products and/or
services which are in direct competition with products and/or
services of CBC, provided however, in any event the holding by
Executive of any investment in any security shall not be deemed
to be a violation of this Paragraph 7 if such investment does not
constitute more than 5% of the outstanding issue of such
security.
(b) Confidential Information. Executive will not disclose
to any other person (except as required by applicable law or in
connection with the performance of his duties and
responsibilities hereunder), or use for his own benefit or gain,
any confidential information of CBC obtained by him incident to
his employment with CBC. The term "confidential information"
includes, without limitation, financial information, business
plans, prospects and opportunities (such as lending
relationships, financial product developments, possible
acquisitions or dispositions of businesses or facilities),
products, plans, intellectual property, analyses, projects,
processes, marketing, research or development activities, and all
technical or scientific information or know-how of CBC which have
been discussed or considered by CBC but does not include any
information which has become part of the public domain by means
other than Executive's non-observance of his obligations
hereunder.
(c) Non-solicitation. Executive agrees that he will not at
any time during the term of this Agreement and for a period of
three (3) years following the termination of this Agreement for
any reason, directly or indirectly, solicit or recruit any
employee of CBC to serve as an employee of, consultant to, or
partner of Executive or any entity.
(d) Relief; Interpretation. Executive agrees that CBC
shall be entitled to injunctive relief for any breach by him of
the covenants contained in Paragraphs 7(a), (b), or (c). In the
event that any provision of this Paragraph 7 shall be determined
by any court of competent jurisdiction to be unenforceable by
reason of its being extended over too great a period of time, too
large a geographic area, or too great a range of activities, it
shall be interpreted to extend only over the maximum period of
time, geographic areas, or range of activities as to which it may
be enforceable. For purposes of this Paragraph 7, the term "CBC"
shall mean CBC and any of its subsidiaries.
(e) Survival. Executive's obligations under this
Paragraph 7 shall survive termination of this Agreement.
8. Conflicting Agreements. Executive hereby represents
and warrants that the execution of this Agreement and the
performance of his obligations hereunder will not breach or be in
conflict with any other agreement to which he is a party or is
bound, and that he is not now subject to any covenants against
- 6 -
competition or similar covenants which would affect the
performance of his obligations hereunder.
9. Withholding. All payments made by CBC under this
Agreement shall be net of any tax or other amounts required to be
withheld by CBC under applicable law.
10. Arbitration of Disputes. Any controversy or claim
arising out of or relating to this Agreement or the breach
thereof shall be settled by arbitration in accordance with the
laws of the Commonwealth of Massachusetts by three arbitrators.
The party initiating arbitration shall nominate one arbitrator in
the request for arbitration and the other party shall nominate a
second in the answer thereto within thirty (30) days of receipt
of the request. The two arbitrators so named will then jointly
appoint the third arbitrator. If the answering party fails to
nominate its arbitrator within the thirty (30) day period, or if
the arbitrators named by the parties fail to agree on the third
arbitrator within sixty (60) days, then such arbitrator shall be
appointed by the American Arbitration Association in the City of
Boston. Such arbitration shall be conducted in the City of
Worcester, Massachusetts in accordance with the rules of the
American Arbitration Association, except with respect to the
selection of arbitrators which shall be provided in this
Paragraph 10. Judgment upon the award entered by the arbitrators
may be entered in any court having jurisdiction thereof.
11. Assignment, Successors and Assigns, etc. Neither the
employer nor Executive may make any assignment of this Agreement
or any interest herein, by operation of law or otherwise, without
the prior written consent of the other party; provided, however,
that CBC may assign its rights under this Agreement without the
consent of Executive in the event CBC shall hereafter consolidate
with or merge into any other person, or transfer all or
substantially all of its properties or assets to any other
person. In the event of the Executive's death prior to the
completion by CBC of all payments due him under this Agreement,
CBC shall continue such payments to the Executive's beneficiary
designated in writing to CBC prior to his death (or to his
estate, if he fails to make such designation). This Agreement
shall inure to the benefit of and be binding upon CBC and the
Executive, their respective successors, executors,
administrators, heirs and permitted assigns.
12. Enforceability. If any portion or provision of this
Agreement shall to any extent be declared illegal or
unenforceable by a court of competent jurisdiction, then the
remainder of this Agreement, or the application of such portion
or provision in circumstances other than those as to which it is
so declared illegal or unenforceable, shall not be affected
thereby, and each portion and provision of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
- 7 -
13. Waiver. No waiver of any provision hereof shall be
effective unless made in writing and signed by the waiving party.
The failure of any party to require the performance of any term
or obligation of this Agreement, or the waiver by any party of
any breach of this Agreement, shall not prevent any subsequent
enforcement of such term or obligation or be deemed a waiver of
any subsequent breach.
14. Notices. All notices and other communications required
or permitted hereunder shall be in writing and shall be
delivered, mailed by first-class mail, postage prepaid, or sent
by telex or facsimile with a mailed confirmation copy, addressed:
(a) If to CBC:
Cambridge Biotech Corporation
365 Plantation Street
Worcester, MA 01605
Attention: Secretary
Facsimile No: 508-797-4014
(b) If to Executive:
Deborah Blackburn Grabbe
8 fieldstone Drive
Medfield, MA 02052
or such other addresses or facsimile numbers as shall be
furnished in writing by either party and any such notice or
communication shall be deemed to have been given in the case of
notices or communications which have been delivered or sent by
facsimile or telex on the date of delivery or sending provided
such day is a business day and in the case of notices or
communications which have been mailed on the second business day
after the date mailed.
15. Amendment. This Agreement may be amended or modified
only by a written instrument signed by Executive and by a duly
authorized representative of CBC.
16. Governing Law. This is a Massachusetts contract and
shall be construed under and be governed in all respects by the
laws of the Commonwealth of Massachusetts without reference to
its conflict of laws provisions.
17. Entire Agreement. Except for the Invention and Non-
Disclosure Agreement dated May 18, 1993, which shall remain in
full force and effect in accordance with its terms, this
Agreement constitutes the entire understanding between the
parties with respect to the subject matter hereunder and
supersedes and replaces all prior agreements, including the
employment agreement between Executive and CBC dated July 7,
1993, understandings, writings, and discussions between the
parties. Notwithstanding the foregoing, Executive shall be
- 8 -
entitled to an unsecured non-priority claim in the bankruptcy
proceedings of CBC representing any and all claims of Executive
against CBC for prior services or otherwise in the amount as set
forth in the Statement of Claim executed between Executive and
CBC contemporaneous herewith.
IN WITNESS WHEREOF, this Agreement has been executed as a
sealed instrument by CBC, by its duly authorized officers, and by
the Executive, as of the date first above written.
CAMBRIDGE BIOTECH CORPORATION
_____________________________
Alison Taunton-Rigby
President and CEO
_____________________________
Deborah Blackburn Grabbe
- 9 -
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective as of August 21, 1995 (the
"Commencement Date") by and between Cambridge Biotech
Corporation, debtor and debtor in possession United States
Bankruptcy Court for the District of Massachusetts, Western
Division, Case Number 94-43054-JFQ, a Delaware Corporation,
having a principal place of business at 365 Plantation Street,
Worcester, Massachusetts ("CBC") and Robert B. Kammer, of 30
Wedgewood Drive, Hopkinton, Massachusetts 01748 ("Executive").
WHEREAS, CBC has filed a petition under Chapter 11 of the
United States Bankruptcy Code (the "Code");
WHEREAS, CBC and Executive are parties to an employment
agreement dated as of July 7, 1993, which CBC and Executive have
elected to terminate without liability or obligation to either
party except as provided herein;
WHEREAS, CBC desires to employ Executive for the period and
upon the terms and conditions provided in this Agreement; and
WHEREAS, Executive desires to serve in the employ of CBC on
a full-time basis upon the terms and conditions hereinafter
provided.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
1. Employment. CBC hereby employs Executive, and
Executive hereby accepts employment by CBC, for the period stated
in Paragraph 3 hereof and upon the terms and conditions herein
provided.
2. Position and Responsibilities; Principal Location.
(a) During the term of this Agreement, Executive will serve
as Vice President of Medical Affairs, subject to election by the
Board of Directors, reporting to the Chief Executive Officer.
Executive shall devote his primary energies, attention and
abilities to the business of CBC and shall perform such duties as
shall be assigned to him by the CEO. Executive may not serve as
a director of other companies without the prior approval of the
Chief Executive Officer.
(b) The principal location at which Executive will perform
his duties will be at CBC's principal offices in Worcester,
Massachusetts or in a location not more than fifty (50) miles
distant from Boston, Massachusetts.
3. Term of Employment. The term of Executive's employment
hereunder shall be for two years from the Commencement Date;
provided, however, that thereafter the term shall be extended
automatically to the date which is 180 days after either party
shall deliver written notice to the other of such party's
election not to extend the term of this Agreement. The last day
of such term, as may be extended from time to time, is herein
sometimes referred to as the "Expiration Date."
4. Compensation and Benefits. For all services rendered
by Executive during his employment hereunder, CBC shall
compensate Executive as follows:
(a) Salary. CBC shall pay Executive a base salary of
$150,000 per year, subject to increase from time to time in
accordance with the usual practice of CBC with respect to review
of compensation of its senior executives. Executive's salary
shall be payable in periodic installments in accordance with
CBC's usual practice for its senior executives.
(b) Regular Benefits. Executive shall be entitled to
participate in any and all employee benefit plans, medical
insurance plans, life insurance plans, disability income plans,
retirement plans, bonus incentive plans and other benefit plans
from time to time in effect for senior executives of CBC. Such
participation shall be subject to: (i) the terms of the
applicable plan documents; (ii) generally applicable policies of
CBC; and (iii) the discretion of the Board or any administrative
or other committee provided for in or contemplated by such plan.
(c) Business Expenses. CBC shall reimburse Executive for
all reasonable travel and other business expenses incurred by him
in the performance of his duties and responsibilities, subject to
such reasonable requirements with respect to substantiation and
documentation as may be specified by CBC.
(d) Vacation. Executive shall be entitled to paid vacation
in accordance with the policies of CBC (but in no event less than
four weeks per year), to be taken at such times and intervals as
shall be determined by Executive with the approval of CBC, which
approval shall not be unreasonably withheld.
(e) Bonus. Executive shall be eligible to receive an
annual bonus based upon achievement of corporate and individual
objectives; the award of any bonus shall lie solely in the
discretion of the Board of Directors.
5. Termination and Termination Benefits. Notwithstanding
the provisions of Paragraph 3, Executive's employment hereunder
shall terminate under the following circumstances:
(a) Death. In the event of Executive's death during his
employment hereunder, CBC shall continue to pay an amount equal
to Executive's base salary to Executive's beneficiary designated
in writing to CBC prior to his death (or to his estate if he
fails to make such designation) for a period of six (6) months
- 2 -
after the date of Executive's death, at the salary rate in effect
on the date of his death, said payments to be made on the same
periodic dates as base salary payments would have been made to
Executive had he not died.
(b) Termination by CBC for Cause. Executive's employment
hereunder may be terminated by CBC for cause, without further
liability on the part of CBC, effective immediately by notice to
Executive stating the nature of such cause. The following shall
constitute "cause" for such termination.
(i) Deliberate dishonesty of Executive with respect to
CBC or any subsidiary or affiliate thereof; or
(ii) Conviction of Executive of a crime involving moral
turpitude; or
(iii) The material failure by Executive to perform
Executive's duties hereunder (other than any such failure
resulting from the incapacity of Executive due to physical
or mental illness) which failure continues for thirty (30)
days after notice to Executive setting forth in reasonable
detail the manner in which Executive has not performed
Executive's duties; or
(iv) Unlawful conduct pertaining to CBC or any of its
affiliates or shareholders or involving a criminal act;
material and conscious falsification or unauthorized
disclosure of important records or reports; embezzlement or
unauthorized conversion of property; violation of conflict
of interest or vendor relations policies; or willful
disclosure of significant trade secrets or other information
likely to be used to the detriment of CBC.
(c) Termination by Executive for Cause. Executive may
terminate his employment hereunder without liability effective
after thirty (30) days notice by Executive to CBC in the event of
the material breach by CBC of this Agreement if such breach shall
continue for more than thirty (30) days after notice to CBC
setting forth in reasonable detail the nature of such breach.
(d) Termination by CBC Without Cause. Executive's
employment may be terminated without cause by CBC by thirty (30)
days written notice to Executive.
(e) Certain Termination Benefits. In the event of
termination pursuant to Paragraphs 5(c) or 5(d), Executive shall
be entitled to the following:
(i) Base Salary. For the period after the date of
termination until the Expiration Date, CBC shall continue to
pay Executive base salary at the rate in effect on the date
of termination.
- 3 -
(ii) Regular Benefits.
(A) For the period subsequent to the date of
termination until the Expiration Date, Executive shall
continue to receive at CBC's expense all benefits
described in Paragraph 4(b) existing on the date of
termination (except for any cash bonus plans which
shall be pro-rated through the date of termination),
provided that CBC's obligation to continue such
benefits shall cease on a benefit by benefit basis on
that date, if any, on which Executive is employed on a
full-time basis and Executive receives in connection
with such employment benefits which are substantially
equivalent to CBC's benefits.
(B) For purpose of application of CBC's benefits,
Executive shall be treated, to the extent that
applicable law pertaining to the particular CBC benefit
plan permits CBC to do so, as if he had remained in the
employ of CBC, with a total annual salary at the rate
in effect on the date of termination and service or
similar credits, if any, will continue to accrue during
such period as if Executive had remained in the employ
of CBC.
(C) If in spite of the provisions of this clause
(ii), benefits or service credits under any benefit
plan shall not be payable or provided under any such
plan to Executive, or to Executive's dependents,
beneficiaries or estate, because Executive is no longer
deemed to be an employee of CBC, CBC itself shall pay
or provide payment of such benefits and service credits
for such benefits to Executive or to Executive's
dependents, beneficiaries or estate.
(D) To the extent that applicable law does not
permit any CBC benefit referred to above to be
provided, paid, or funded through the applicable CBC
benefit plan, then CBC shall not be required to provide
such benefit through such plan and shall only be
required to provide in the case of a benefit the tax
treatment of which is enhanced by such plan an amount
equal to what would have been CBC's initial
contribution to such plan and not the equivalent
benefit.
(iii) Set-off. CBC shall be entitled to set off against
any cash compensation to be provided to Executive under
Paragraph 5(e) above 50 percent of the amount of any cash
compensation received by Executive from other employment
during the period in which Executive received cash
compensation under Paragraph 5(e). Executive shall inform
CBC of any such amounts of cash compensation and shall
refund to CBC any amount which CBC has paid which exceeds
- 4 -
the amounts due from CBC after application of the set-off
provided for in this paragraph. Notwithstanding the
foregoing and any other provision of this Agreement,
Executive shall be under no obligation to seek or accept any
employment after termination of employment with CBC for any
reason.
6. Disability.
(a) If, due to physical or mental illness, Executive shall
be disabled so as to be unable to perform substantially all of
his duties and responsibilities hereunder, CBC may designate
another executive to act in his place during the period of such
disability. Notwithstanding any such designation, Executive
shall continue to receive his full salary and benefits under
Paragraph 4 of this Agreement, unless his employment is
terminated as provided in this Paragraph 6.
(b) If Executive shall become totally and permanently
disabled, then CBC may terminate Executive's employment hereunder
and shall continue to pay to Executive his full salary and
provide him with the benefits he was receiving immediately prior
to such termination for six months, provided that such salary
shall be reduced by the amount of any disability insurance
proceeds actually paid to Executive or for his benefit with
respect to such period of time under any disability policy
provided by CBC for Executive.
(c) The determination that by virtue of total and permanent
disability Executive is unable to perform his duties hereunder
shall be made by a physician chosen by CBC and reasonably
satisfactory to Executive (or Executive's legal representative)
and such determination shall be conclusive. The cost of such
examination shall be borne by CBC. Executive shall be
conclusively presumed to be totally and permanently disabled if
for reasons involving physical or mental illness or injury
Executive fails to perform his duties hereunder for a period of
one hundred twenty (120) consecutive calendar days or for any
periods aggregating one hundred twenty (120) days or more in any
six (6) consecutive month period. The date of termination of
Executive's employment hereunder in the event of total and
permanent disability shall be the earlier of such physicians's
examination pursuant to which such determination is made or the
first business day after which either such 120-day period or such
six-month period has expired.
7. Non-competition, Confidential Information, and Non-
Solicitation.
(a) Non-competition. Executive agrees that he will not at
any time during the term of this Agreement and for a period of
two (2) years following the termination of this Agreement for any
reason, directly or indirectly, as a partner, officer, director,
consultant, employee, stockholder or otherwise, engage in any
- 5 -
employment, pursuit or association in which he shall have
substantial responsibility with respect to products and/or
services which are in direct competition with products and/or
services of CBC, provided however, in any event the holding by
Executive of any investment in any security shall not be deemed
to be a violation of this Paragraph 7 if such investment does not
constitute more than 5% of the outstanding issue of such
security.
(b) Confidential Information. Executive will not disclose
to any other person (except as required by applicable law or in
connection with the performance of his duties and
responsibilities hereunder), or use for his own benefit or gain,
any confidential information of CBC obtained by him incident to
his employment with CBC. The term "confidential information"
includes, without limitation, financial information, business
plans, prospects and opportunities (such as lending
relationships, financial product developments, possible
acquisitions or dispositions of businesses or facilities),
products, plans, intellectual property, analyses, projects,
processes, marketing, research or development activities, and all
technical or scientific information or know-how of CBC which have
been discussed or considered by CBC but does not include any
information which has become part of the public domain by means
other than Executive's non-observance of his obligations
hereunder.
(c) Non-solicitation. Executive agrees that he will not at
any time during the term of this Agreement and for a period of
three (3) years following the termination of this Agreement for
any reason, directly or indirectly, solicit or recruit any
employee of CBC to serve as an employee of, consultant to, or
partner of Executive or any entity.
(d) Relief; Interpretation. Executive agrees that CBC
shall be entitled to injunctive relief for any breach by him of
the covenants contained in Paragraphs 7(a), (b), or (c). In the
event that any provision of this Paragraph 7 shall be determined
by any court of competent jurisdiction to be unenforceable by
reason of its being extended over too great a period of time, too
large a geographic area, or too great a range of activities, it
shall be interpreted to extend only over the maximum period of
time, geographic areas, or range of activities as to which it may
be enforceable. For purposes of this Paragraph 7, the term "CBC"
shall mean CBC and any of its subsidiaries.
(e) Survival. Executive's obligations under this
Paragraph 7 shall survive termination of this Agreement.
8. Conflicting Agreements. Executive hereby represents
and warrants that the execution of this Agreement and the
performance of his obligations hereunder will not breach or be in
conflict with any other agreement to which he is a party or is
bound, and that he is not now subject to any covenants against
- 6 -
competition or similar covenants which would affect the
performance of his obligations hereunder.
9. Withholding. All payments made by CBC under this
Agreement shall be net of any tax or other amounts required to be
withheld by CBC under applicable law.
10. Arbitration of Disputes. Any controversy or claim
arising out of or relating to this Agreement or the breach
thereof shall be settled by arbitration in accordance with the
laws of the Commonwealth of Massachusetts by three arbitrators.
The party initiating arbitration shall nominate one arbitrator in
the request for arbitration and the other party shall nominate a
second in the answer thereto within thirty (30) days of receipt
of the request. The two arbitrators so named will then jointly
appoint the third arbitrator. If the answering party fails to
nominate its arbitrator within the thirty (30) day period, or if
the arbitrators named by the parties fail to agree on the third
arbitrator within sixty (60) days, then such arbitrator shall be
appointed by the American Arbitration Association in the City of
Boston. Such arbitration shall be conducted in the City of
Worcester, Massachusetts in accordance with the rules of the
American Arbitration Association, except with respect to the
selection of arbitrators which shall be provided in this
Paragraph 10. Judgment upon the award entered by the arbitrators
may be entered in any court having jurisdiction thereof.
11. Assignment, Successors and Assigns, etc. Neither the
employer nor Executive may make any assignment of this Agreement
or any interest herein, by operation of law or otherwise, without
the prior written consent of the other party; provided, however,
that CBC may assign its rights under this Agreement without the
consent of Executive in the event CBC shall hereafter consolidate
with or merge into any other person, or transfer all or
substantially all of its properties or assets to any other
person. In the event of the Executive's death prior to the
completion by CBC of all payments due him under this Agreement,
CBC shall continue such payments to the Executive's beneficiary
designated in writing to CBC prior to his death (or to his
estate, if he fails to make such designation). This Agreement
shall inure to the benefit of and be binding upon CBC and the
Executive, their respective successors, executors,
administrators, heirs and permitted assigns.
12. Enforceability. If any portion or provision of this
Agreement shall to any extent be declared illegal or
unenforceable by a court of competent jurisdiction, then the
remainder of this Agreement, or the application of such portion
or provision in circumstances other than those as to which it is
so declared illegal or unenforceable, shall not be affected
thereby, and each portion and provision of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
- 7 -
13. Waiver. No waiver of any provision hereof shall be
effective unless made in writing and signed by the waiving party.
The failure of any party to require the performance of any term
or obligation of this Agreement, or the waiver by any party of
any breach of this Agreement, shall not prevent any subsequent
enforcement of such term or obligation or be deemed a waiver of
any subsequent breach.
14. Notices. All notices and other communications required
or permitted hereunder shall be in writing and shall be
delivered, mailed by first-class mail, postage prepaid, or sent
by telex or facsimile with a mailed confirmation copy, addressed:
(a) If to CBC:
Cambridge Biotech Corporation
365 Plantation Street
Worcester, MA 01605
Attention: Secretary
Facsimile No: 508-797-4014
(b) If to Executive:
Dr. Robert B. Kammer
30 Wedgewood Drive
Hopkinton, MA 01748
or such other addresses or facsimile numbers as shall be
furnished in writing by either party and any such notice or
communication shall be deemed to have been given in the case of
notices or communications which have been delivered or sent by
facsimile or telex on the date of delivery or sending provided
such day is a business day and in the case of notices or
communications which have been mailed on the second business day
after the date mailed.
15. Amendment. This Agreement may be amended or modified
only by a written instrument signed by Executive and by a duly
authorized representative of CBC.
16. Governing Law. This is a Massachusetts contract and
shall be construed under and be governed in all respects by the
laws of the Commonwealth of Massachusetts without reference to
its conflict of laws provisions.
17. Entire Agreement. Except for the Invention and Non-
Disclosure Agreement dated May 18, 1993, which shall remain in
full force and effect in accordance with its terms, this
Agreement constitutes the entire understanding between the
parties with respect to the subject matter hereunder and
supersedes and replaces all prior agreements, including the
employment agreement between Executive and CBC dated July 7,
1993, understandings, writings, and discussions between the
parties. Notwithstanding the foregoing, Executive shall be
- 8 -
entitled to an unsecured non-priority claim in the bankruptcy
proceedings of CBC representing any and all claims of Executive
against CBC for prior services or otherwise in the amount as set
forth in the Statement of Claim executed between Executive and
CBC contemporaneous herewith.
IN WITNESS WHEREOF, this Agreement has been executed as a
sealed instrument by CBC, by its duly authorized officers, and by
the Executive, as of the date first above written.
CAMBRIDGE BIOTECH CORPORATION
_____________________________
Alison Taunton-Rigby
President and CEO
_____________________________
Robert B. Kammer
- 9 -
EXHIBIT 10.21
MANAGEMENT BONUS PROGRAM
The Company's management bonus program is a discretionary incentive
program established by the Company to reward its executive officers. Under
the program adopted and in effect in 1996, each executive officer is eligible
to receive a bonus of up to 35% of his or her base salary based upon overall
company performance and outstanding individual achievement.
Bonus payments may be made in cash and/or in stock at the discretion
of the Company's compensation committee which manages the program.
EXHIBIT 22
CAMBRIDGE BIOTECH CORPORATION
SUBSIDIARIES
1.Cambridge Diagnostics Limited, a company incorporated in the Republic of
Ireland is a wholly owned subsidiary of the Company.
2.Cambridge Biotech International Corporation, a company incorporated in
Delaware, is a wholly owned subsidiary of the Company.
3.Cambridge Affiliate Corp, a company incorporated in Delaware, 51% of the
common stock of which is owned by the Company.
Each of the above companies does business under its own corporate name.
EXHIBIT 23.1
CONSENT OF COOPERS & LYBRAND, L.L.P.
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Cambridge Biotech Corporation (the "Company") on Form S-8 (File Nos. 2-91846,
33-19064, 33-4639 and 33-41266) of our report (which includes an explanatory
paragraph regarding the substantial doubt about the Company's ability to
continue as a going concern and uncertainties arising from shareholder
litigation and a Securities Exchange Commission order directing private
investigation), dated March 20, 1996, on our audits of the consolidated
financial statements and financial statement schedule of Cambridge Biotech
Corporation as of December 31, 1995 and 1994, and for the years ended December
31, 1995 and 1994, which report is included in this Annual Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
March 29, 1996
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