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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1994 Commission file no. 0-14587
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GENETICS INSTITUTE, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 04-2718435
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(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
87 CambridgePark Drive, Cambridge, MA 02140
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (617) 876-1170
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Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Depositary Shares, each representing one share of Common Stock
$.01 par value per share, subject to a call option and evidenced by a
depositary receipt, of Genetics Institute, Inc.*
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(Title of Class)
Common Stock, $.01 par value
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(Title of class)
Common Stock Purchase Warrants
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(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 X No .
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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. Yes X No .
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The approximate aggregate market value of voting stock held by
non-affiliates of the registrant was $218,302,740 as of February 22, 1995
(based on the closing sales price for such stock on that date).**
The number of shares of Common Stock (including 10,622,707 shares
represented by Depositary Shares) outstanding as of February 22, 1995 was
26,623,448.
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Portions of the following documents are incorporated by reference in this
Report.
Documents Incorporated by Reference
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<TABLE>
<CAPTION>
Document Form 10-K Part
<S> <C>
Definitive Proxy Statement with Part III
respect to the Annual Meeting of
Stockholders to be held on
May 16, 1995, to be filed with
the Securities and Exchange
Commission
</TABLE>
The 1995 Proxy Statement shall be deemed to have been "filed" only to
the extent that portions thereof are expressly incorporated by reference.
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* The Depositary Shares of Genetics Institute, Inc. (the "Company")
represent one share of Common Stock, $.01 par value, of the Company
("Common Stock"), subject to a certain stock purchase option (the "Call
Option") held by AHP Biotech Holdings, Inc. ("Holdings"), and are
evidenced by a depositary receipt.
** Excludes 16,000,741 shares of Common Stock and 947,000 Depositary
Shares held by Holdings and 3,611,742 Depositary Shares held by
directors and executive officers of the registrant and held by
stockholders of the registrant holding more than five percent of the
Depositary Shares outstanding. Exclusion of Depositary Shares held by
any person should not be construed to indicate that such person possesses
the power, direct or indirect, to direct or cause the direction of the
management or policies of the registrant, or that such person is
controlled by or under common control with the registrant.
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PART I
ITEM 1. Business.
Genetics Institute, Inc. ("Genetics Institute" or the "Company") was
organized in December 1980 as a Delaware corporation. The Company is
principally engaged in the discovery, development and commercialization of
protein-based therapeutic products, using recombinant DNA and other
technologies, for the treatment of a wide range of diseases and conditions,
including anemia, hemophilia, cancer, tissue damage, infectious disease,
cardiovascular disease and autoimmune diseases.
Unless otherwise indicated, all references in this Annual Report on
Form 10-K to Genetics Institute or the Company include the Company and its
wholly owned subsidiaries, Genetics Institute, Inc. of Japan, Genetics
Institute of Europe, Inc., Genetics Institute of Europe B.V., GI Europe, Inc.,
GI JJV, Inc., GI Japan, Inc., GI Manufacturing, Inc. and GI Drug Design, Inc.
Transaction with American Home Products Corporation
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On January 16, 1992, the Company's Common Stock shareholders approved
the Agreement and Plan of Merger, dated as of September 19, 1991 and amended as
of December 9, 1991 (the "Merger Agreement"), among the Company, American Home
Products Corporation ("AHP"), and certain AHP subsidiaries, pursuant to which,
among other things, (i) each share of Common Stock then outstanding was
converted into the right to receive $20.00 in cash and six-tenths of a
depositary share (a "Depositary Share"), each Depositary Share representing one
share of Common Stock subject to an AHP call option (the "Call Option") and
evidenced by a depositary receipt (a "Depositary Receipt"), (ii) AHP acquired
40% of the Company's then outstanding Common Stock and (iii) AHP purchased
9,466,709 shares of newly issued Common Stock (the "Additional Shares") from
the Company for $300 million in cash. As a result of the foregoing
transactions, subsequent open market purchases by AHP, and conversion of the
Company's Convertible Exchangeable Preferred Stock, effective July 15, 1993,
AHP owned, at February 22, 1995, approximately 64% of the outstanding shares of
Common Stock.
Independent of its right to call the Depository Shares, AHP may acquire
additional shares of Genetics Institute stock, provided that its aggregate
holdings do not exceed 75% of the Company's stock outstanding, subject to
certain exceptions. Under the terms of the Call Option, AHP has the right, but
not the obligation, to purchase the shares of Common Stock represented by the
Depositary Shares and held by The First National Bank of Boston, as depositary,
in whole but not in part at any time on or prior to December 31, 1996, at per
share call prices increasing by approximately $1.84 per share per quarter from
$72.11 per share for the period from January 1, 1995 through March 31, 1995 to
$85.00 per share for the period from October 1, 1996 through December 31, 1996.
In the event that AHP elects to call any shares of Common Stock, AHP must
purchase all of the shares that it does not already own. Accordingly, if the
Call Option is exercised, AHP will own 100% of the outstanding shares of Common
Stock of the Company, and all other stockholders of the Company will cease to
have any equity interest in the Company.
For information relating to certain governance provisions contained in
the Governance Agreement among the Company, AHP and its subsidiaries, see Item
13 in this Report.
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Overview
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Over the past fourteen years, Genetics Institute has financed its
business through collaborative research and development revenues from
licensees, royalties on product sales by certain licensees, product sales
(since December 1992), interest income and use of equity capital. This has
enabled the Company to undertake a broad range of research and development
programs and to build an approximate 1000-person organization with over 600,000
square feet of corporate office, research, development and manufacturing
facilities.
In recent years, the Company has dedicated a larger proportion of its
resources to the development of self-funded proprietary products. The Company
also has entered into joint ventures, development collaborations, partnerships
and other commercial arrangements for certain of its proprietary products,
which enable the Company to retain significant development, manufacturing and
marketing rights for such products.
Certain of the Company's corporate licensees have brought to market in
various territories four products developed by the Company: recombinant human
antihemophilic factor ("rhAHF"), erythropoietin ("rhEPO"),
granulocyte-macrophage colony stimulating factor ("rhGM-CSF"), and tissue
plasminogen activator ("rhtPA"). The Company receives royalties on commercial
sales by its licensees of these products and, in the case of rhAHF, receives
additional revenue from its manufacture of bulk concentrated drug substance.
The Company retains substantial manufacturing and marketing rights for
several product candidates which are in various stages of development,
including: a second recombinant coagulation factor ("rhFIX"), a platelet factor
("rhIL-11"), several bone morphogenetic proteins ("rhBMP-2" and others), and an
immune system modulator ("rhIL-12").
Principal Product Candidates, Discovery Research Areas and Licensed
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Products
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The following describes the Company's principal product candidates, its
discovery research areas and licensed products.
Principal Product Candidates
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Recombinant human Factor IX ("rhFIX")
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Recombinant human Factor IX ("rhFIX") is being developed as a potential
treatment for Hemophilia B, or Christmas Disease, which affects approximately
10,000 individuals in North America, Europe and Japan. Similar to Hemophilia A,
but less prevalent, Hemophilia B is a coagulation disorder that can result in
severe, often life threatening, and uncontrollable bleeding and crippling joint
destruction.
Currently, people with Hemophilia B rely on clotting products derived
from human blood to treat or prevent bleeding episodes. The Company believes
that the current plasma-derived market for Factor IX is approximately $150
million worldwide. The supply of Factor IX from this source is limited by blood
and plasma donations. Patients who rely on these plasma-derived products may
also risk exposure to human blood-borne viruses. A recombinant human Factor IX
product may provide a significant improvement over current plasma-derived
clotting factor products by eliminating the risk of human viral contamination
associated with such products and providing a means to manufacture large
quantities of clotting factor without the supply limitations faced by the
plasma-derived products. A recombinant Factor IX product may also have the
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potential to lower thrombogenic risk due to the absence of other
clotting factors that remain in some plasma-derived Factor IX products.
Phase I/II clinical studies of rhFIX commenced in the first quarter of
1995. If these studies proceed as planned, the Company may be able to commence
pivotal studies of rhFIX in 1995 or early 1996. GI currently has retained
worldwide development and commercialization rights to rhFIX.
In September 1994, the U.S. Patent and Trademark Office ("USPTO")
initiated a patent interference proceeding involving one of the Company's
issued U.S. patents relating to rhFIX and patent applications of three other
companies. See ITEM 3. LEGAL PROCEEDINGS at page 25 for additional information
about this interference.
In January 1993, Genetics Institute licensed patent rights from British
Technology Group, Limited to produce rhFIX protein from cell culture.
NeumegaTM Recombinant Human Interleukin-Eleven ("rhIL-11")
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Recombinant human interleukin-eleven ("rhIL-11") is a differentiation
cytokine which has been shown in preclinical studies, among other activities,
to stimulate the growth and proliferation of megakaryocytes, the cells which
produce platelets. Platelets, a critical component of the body's normal ability
to form blood clots and repair damaged tissues, are often severely depleted
during cancer treatments involving chemotherapy alone or with bone marrow or
peripheral blood progenitor cell transplantation, leaving some patients with
bleeding complications. Platelet depletion is expected to continue to grow as a
problem in cancer treatment as bone marrow and peripheral blood progenitor cell
transplantation become more common and other growth factors enable oncologists
to use higher doses of chemotherapy. rhIL-11 may be useful in accelerating the
body's ability to return platelets to a normal level following chemotherapy
alone or with bone marrow or peripheral blood progenitor cell transplant
procedures.
The only therapy currently available to patients suffering from
decreased platelet counts caused by cancer chemotherapy alone or with bone
marrow or peripheral blood progenitor cell transplantation is platelet
transfusion, the infusion of platelets which are taken from one or more blood
donors. This therapy is relatively expensive and exposes patients to blood
components that can introduce infectious complications. It also has the
potential to decrease in efficacy over time if the patient develops an immune
reaction to the transfused platelets. By stimulating the body's natural
production of platelets, rhIL-11 could potentially provide a safe and effective
alternative or supplement to the use of platelet transfusions.
Three phase II clinical studies and one phase I/II study of NeumegaTM
rhIL-11 are presently underway in the United States. The three phase II studies
involve treatment of: (1) patients who previously required a platelet
transfusion as a result of their cancer chemotherapy treatment; (2) breast
cancer patients undergoing moderately high-dose chemotherapy; and (3) patients
undergoing extremely high-dose chemotherapy supported with bone marrow and
progenitor cells harvested from peripheral blood. The phase I/II study involves
pediatric patients undergoing moderately high-dose cancer chemotherapy. Two
phase I/II studies in adult cancer patients were completed in the United
States. Platelet effects were observed in both of the phase I/II studies.
Pharmacokinetic studies in healthy volunteers have been completed in the U.S.
and Japan using a range of well-tolerated doses. Phase II studies in Japan are
underway.
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To date, over 200 patients and healthy volunteers have received
NeumegaTM rhIL-11 in various phase I and II studies conducted in the U.S. and
Japan.
Apart from NeumegaTM rhIL-11's potential effects on platelets, rhIL-11
also appears in preclinical research to have useful effects on mucosal surfaces
of the gastro-intestinal tract. This latter effect (i.e. maintaining mucosal
integrity) was first observed serendipitously by a researcher conducting a
platelet restoration experiment of NeumegaTM rhIL-11, and has now been extended
to preclinical models of inflammatory colitis. The Company plans to initiate a
phase I clinical study of NeumegaTM rhIL-11 in a gastro-intestinal indication
in 1995 to explore this new potential use for the cytokine.
In 1991, the Company and Essex Chemie A.G., an affiliate of
Schering-Plough Corporation ("Schering-Plough") formed an alliance under which
Schering-Plough will register and market rhIL-11 in Europe, Africa and Latin
America. Under the terms of its agreement with Schering-Plough, the Company has
received initial and milestone payments and is entitled to receive subsequent
milestone payments and royalties based on further development activities,
clinical results and eventual product sales of NeumegaTM rhIL-11 in the
licensed territories. The Company will manufacture and supply all of
Schering-Plough's requirements for bulk rhIL-11 protein.
In 1992, the Company granted GI-Yamanouchi, Inc. (the "GYJ"), a 50/50
joint venture with Yamanouchi Pharmaceutical Co., Ltd. ("Yamanouchi"), rights
to develop and market rhIL-11 in Japan, pursuant to a license agreement
providing for milestone payments, the payment of royalties to the Company on
product sales and the purchase of bulk rhIL-11 manufactured by the Company. Two
phase I normal volunteer studies were completed in Japan, and two early phase
II studies are underway in Japan in cancer patients receiving moderate dose
chemotherapy and in patients with hematological disorders.
In 1993, the Company granted Wyeth-Ayerst International Inc., an
affiliate of AHP, rights to develop and market rhIL-11 in the Pacific Basin
(excluding Japan), Australia and New Zealand pursuant to a license agreement
providing for milestone payments, the payment of royalties to the Company on
product sales and the purchase of bulk NeumegaTM rhIL-11 manufactured by the
Company.
GI has retained development and commercialization rights for rhIL-11 in
the United States.
The Company has four United States patents, and has filed additional
patent applications covering rhIL-11 in the United States and in other
territories. Regardless of whether the Company is successful in obtaining
patent protection for NeumegaTM rhIL-11, the field of platelet restoration is
expected to be highly competitive. A number of other cytokines are being
developed for this use, including ones previously discovered by the Company and
licensed to Sandoz Pharmaceutical Co., Ltd. (rhIL- 3 and rhIL-6). In addition,
Immunex Corporation is in phase III clinical trials with PIXY 321, and Amgen
Inc., Zymogenetics, Inc. and Genentech, Inc. have reported that they are
engaged in preclinical research involving thrombopoietin ("TPO"), each of which
is a potential platelet growth factor.
Recombinant Human BMP-Two ("rhBMP-2") and Other Bone
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Morphogenetic Proteins
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In humans and animals, bone normally undergoes constant resorption and
reformation (the natural process of breaking down and rebuilding existing
bone). This process is believed to play
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an important role during fracture healing. The Company, in conjunction
with certain collaborative partners, is conducting a program to develop
products based on certain protein factors which it believes regulate these
processes. The Company has cloned and produced a number of novel recombinant
human bone morphogenetic proteins. In several preclinical models, these
proteins have been shown to induce formation of new cartilage and bone.
One of these proteins, recombinant human bone morphogenetic protein-two
("rhBMP-2") is a manufactured version of a human protein naturally present in
very small quantities in the body. Genetics Institute believes it was first to
clone the human gene for the human BMP-2 protein and is currently manufacturing
rhBMP-2 protein for clinical evaluation.
Because rhBMP-2 protein causes cells to differentiate and form
cartilage and bone, it has been termed "osteoinductive". The Company is
currently developing this protein for uses in bone repair, such as healing
fractures and bony defects.
Current methods to stimulate bone growth and healing have some
disadvantages. For example, autogenous bone (autograft) is occasionally used to
facilitate bone repair. This material must be harvested from a bony site in the
patient and grafted at the repair site. Such a harvest procedure can cause
considerable pain and morbidity to a patient. rhBMP-2 may have the potential to
provide more reliable and convenient methods to facilitate, accelerate and help
assure bony healing, while avoiding the pain, morbidity and other disadvantages
associated with other approaches.
A lead product candidate containing rhBMP-2 is currently in pilot stage
human clinical testing for several indications, including orthopedic trauma,
maxillofacial repair and avascular necrosis of the hip. Additional clinical
trials are expected to begin in 1995. In the United States rhBMP-2 is being
regulated as a combination product (device and biologic) under the jurisdiction
of the device branch of the U.S. Food and Drug Administration. rhBMP-2 is
expected to be regulated either as a biologic or a drug outside the U.S.
The Company and its licensees are designing and implementing a global
clinical trial program to test multiple indications in pilot studies initially
in different geographic territories. Results will be shared among the Company
and its licensees, and if preliminary data are positive, approvals will be
pursued worldwide. To date, the Company's clinical studies have evaluated, or
are evaluating, the safety and clinical feasibility of a surgically-implanted
device that contains the rhBMP-2 protein in two matrix delivery systems in
orthopedic trauma and maxillofacial repair.
In 1993, the Company completed patient enrollment in one orthopedic
trauma study in the United States. This study had a two-year evaluation
endpoint and is ongoing. In 1994, Genetics Institute initiated two additional
pilot studies in the United States, one in orthopedic trauma (tibia fractures)
and one in maxillofacial repair. The Company also initiated and completed a
second pilot study through the GYJ in Japan in the area of maxillofacial repair
and completed enrollment in a second iliac crest defect study. In Europe, the
Company through the GI- Yamanouchi European Partnership (the "GYEP") initiated
and completed patient enrollment in a study of rhBMP-2 use in patients
suffering avascular necrosis of the femoral head. More studies are planned for
1995.
The Company holds several significant U.S. patents for rhBMP- 2 and
other members of the BMP family. These patents cover the DNA sequences and
recombinant production of BMP-1, BMP-2, BMP-3, BMP-4, BMP-5, BMP-6 and BMP-7.
The Company believes it has discovered many of the known members of the BMP
family.
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The Company is aware that a potential competitor has been issued
several patents in the field of bone-inducing proteins. Although no assurance
can be given, the Company believes that its commercialization of rhBMP-2
protein will not infringe any valid patent issued to any third party. However,
no assurance can be given that third parties will not obtain patents containing
claims which would materially interfere with the Company's commercialization of
rhBMP-2 or other bone morphogenetic proteins.
In 1990, the Company formed a United States partnership (the "GPDC")
with Yamanouchi to fund a substantial portion of the development of bone
morphogenetic proteins prior to phase III or pivotal clinical trials worldwide.
Capital contributions, profits and losses of the GPDC generally are divided 25%
and 75% between the Company and Yamanouchi, respectively, prior to the first
commercial sale in specified countries. After the first commercial sale, each
partner's capital contribution and share of profits or losses of the GPDC will
become 50%.
In 1990, the Company also entered into the GYJ joint venture with
Yamanouchi for the commercialization and marketing in Japan of the Company's
bone morphogenetic proteins and other potential future products. The GYJ is
responsible for clinical development, registration and marketing of
bone-inducing protein products in Japan. The ownership and profits and losses
of the GYJ are divided equally between the Company and Yamanouchi.
In 1993, the Company and Yamanouchi formed the GI-Yamanouchi European
Partnership (the "GYEP") for the commercialization of the GPDC's bone
morphogenetic proteins in Europe. The GYEP contracted with the Company to
manage the clinical development, registration and the core marketing activities
of the initial products in the field of localized bone repair. The GYEP has
entered into distribution agreements with Yamanouchi Europe B.V. (formerly
Brocades Pharma B.V.) and Wyeth-Ayerst International Inc., affiliates of
Yamanouchi and AHP, respectively, in return for distribution fees and milestone
payments. These distributors will assist in obtaining local country approvals
and market the products in their respective territories. The Company believes
this relationship will afford it the opportunity to develop a European
commercialization infrastructure with the cooperation and support of its
partners.
In 1994, the GPDC decided to focus GPDC resources on the development of
certain then-existing BMPs, and to discontinue funding of further research
activities at the Company directed toward discovery of additional members of
the BMP family. The Company, however, plans to continue its discovery research
activities in this area, alone and in collaboration with third parties, and
discoveries of additional bone morphogenetic proteins after November 30, 1994
will not be licensed to the GPDC.
The GPDC holds exclusive worldwide marketing rights for bone
morphogenetic proteins discovered by the Company prior to December 1, 1994 and
has exclusively sublicensed these rights to the Company in North America, to
the GYJ in Japan, and to the GYEP in Europe, as noted above. These bone
morphogenetic protein commercialization rights for the rest of the world will
be retained by the GPDC and may be sublicensed in the future to third parties
or to the Company, Yamanouchi or their respective affiliates. The Company has
retained manufacturing rights to BMPs worldwide and rights to its future
discoveries of new factors in this field.
In February 1995, the Company and Sofamor Danek Group, Inc. ("Danek")
announced their agreement to enter into an exclusive license to develop and
commercialize rhBMP-2 products for use in certain surgical procedures involving
the spine in North America. Under the agreement,
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Danek will have the exclusive right in North America to develop and
commercialize these products for spinal applications and Danek will pay GI
license fees of up to $50 million over the next four years. The two companies
will share the profits resulting from sales of these products upon a
predetermined formula. The Company retains the exclusive right to manufacture
rhBMP-2 for supply to Danek. Effectiveness of the agreement is subject to
regulatory clearance under the Hart Scott Rodino Act, as amended.
Recombinant Human Interleukin-12 ("rhIL-12")
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Natural IL-12 is an immune system modulating protein whose activity was
first discovered at the Wistar Institute of Anatomy and Biology ("Wistar") and
later cloned at Genetics Institute. It was originally named natural killer cell
stimulatory factor ("NKSF"). The Company believes Hoffmann-La Roche Inc.
("Roche") independently cloned rhIL-12 at about the same time as the Company
and Wistar.
Genetics Institute and Roche completed a preclinical development
collaboration on rhIL-12 in 1993. Roche and the Company decided to pursue
commercialization of rhIL-12 independently; however, in connection with their
agreement to collaborate on preclinical research, the Company and Roche have
agreed to a patent cross-license to eliminate their existing potential patent
conflicts.
IL-12 is a complex protein that is believed to link "natural immunity"
with "adaptive" or "acquired" immunity. Natural immunity is mediated by
specialized white blood cells that, in healthy people, perform surveillance and
kill invading bacteria, parasites, and viruses and may eliminate the growth of
tumor cells. IL-12 is believed to activate, and in some cases cause the
proliferation of, certain of these white blood cells, potentially enhancing the
immune system's killing ability. IL-12 also may trigger the production of other
immune system regulatory proteins that not only reinforce this natural immune
response but also may initiate an "adaptive" immune response.
Whereas natural immunity provides for an immediate immune response
to invading pathogens, adaptive immunity involves T and B cell "memory" that
can provide a sustained response against infectious agents and protect the body
against future challenges by these same agents. IL-12 is also believed to
stimulate the part of the immune system that is active in fighting cancer and
intra-cellular pathogens. Examples of diseases caused by intra- cellular
pathogens are tuberculosis, viral hepatitis, and HIV disease.
Given the biologic activities of IL-12, Genetics Institute launched
an effort to explore recombinant human interleukin-twelve ("rhIL-12") as a
therapeutic for certain infectious diseases by augmenting or replacing natural
IL-12 with a recombinant version of the protein. In test tube experiments,
rhIL-12 enhanced or augmented normal immune function in blood cells taken from
HIV- infected persons. Also, recent work has shown that cells from HIV-infected
persons are not able to make IL-12 in the same quantities as non-infected
persons. This suggests that rhIL-12 may have the potential to correct a
deficiency in the immune system of HIV-infected persons. Patient accrual for
initial phase I clinical safety trials for HIV-infected persons was completed
in early 1995, and biological activity was observed over a range of
well-tolerated doses. Other infectious diseases may be explored in the future.
In preclinical models of a variety of cancers including melanoma, lung
cancer, kidney cancer, lymphoma and colon cancer, rhIL-12 (or its recombinant
murine analog, "rmIL-12") has
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shown positive effects by either shrinking or entirely eliminating
tumors. In a mouse model of kidney cancer, rmIL-12 appears to trigger a memory
response, since new tumors would not grow in animals that had been previously
administered rmIL-12 to treat their tumors. Phase I clinical safety trials of
rhIL-12 for cancer patients began in May of 1994. Other studies of rhIL-12 for
cancer are planned for 1995.
In July 1994, the Company and Wyeth-Ayerst Laboratories, the
pharmaceutical division of AHP, agreed to form a 50/50 joint venture ("IL-12
Partners") to develop and commercialize rhIL-12 on a worldwide basis, except
for Japan. IL-12 Partners has a joint project team and steering committee to
oversee current and future clinical trials and other development activities.
These activities will be funded equally by the partners. The arrangement also
provides for certain payments to the Company. In 1994, reimbursement for
rhIL-12 research and development expenses by IL- 12 Partners and initial
milestone payments by AHP to the Company were approximately $23.1 million.
Future milestone payments will become due upon achievement of certain clinical
outcomes and submission or approval of specific regulatory filings -- the exact
value of such payments is contingent upon rhIL-12's success in various
therapeutic areas. The Company has the right to supply rhIL-12 to the joint
venture and will receive royalties based on the joint venture's sales of
rhIL-12. The Company will have marketing rights in North America; Wyeth-Ayerst
International will have marketing rights outside North America and Japan.
In July 1994, the Company granted the GYJ rights to develop and market
rhIL-12 in Japan pursuant to a license agreement providing for milestone
payments, the payment of royalties to the Company on product sales and the
purchase of bulk rhIL-12 manufactured by the Company.
MacstimTM Recombinant Human Macrophage Colony Stimulating Factor
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("rhM-CSF")
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The Company has cloned the human gene for rhM-CSF and is producing
MacstimTM rhM-CSF for preclinical and clinical evaluation. rhM-CSF is a blood
cell growth factor that acts predominantly on monocytes and macrophages, which
constitute a particular class of white blood cell. In 1991, the Company entered
into an arrangement with SciGenics, Inc. relating to the research, development,
use, manufacture and sale of MacstimTM rhM-CSF in North America. See
"SciGenics."
rhM-CSF was initially believed to have potential for treating cancer
and infectious disease as a result of its biologic effects on monocytes and
macrophages. In November 1994, SciGenics,the Company's North American licensee,
and the Company decided to cease exploration of the potential uses of rhM-CSF
in the treatment of cancer based on results in over 200 patients. In 1993,
SciGenics and Genetics Institute announced the decision to discontinue testing
of rhM-CSF for the treatment of infectious disease based on results in a broad
series of evaluations in preclinical models of infectious diseases.
In studies of rhM-CSF in cancer, rhM-CSF was observed to lower
cholesterol levels in cancer patients whose cholesterol levels were considered
to be normal. Subsequent studies have also shown that rhM-CSF treatment is
associated with lower cholesterol levels in normal volunteers. In 1993, the
Company commenced a phase I safety study for rhM-CSF in patients with extremely
high cholesterol. The patients in this study suffer from a hereditary disorder
known as familial hypercholesterolemia ("FH"). In its severest form, homozygous
FH, in which a person has inherited a defective gene from both parents,
cholesterol levels may be so high as to be acutely life-threatening. Existing
pharmacological therapies have limited effectiveness in the
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treatment of homozygous FH patients. At least one potentially
competitive gene therapy approach to treat hereditary high cholesterol,
however, is being tested in an experimental clinical protocol.
Preliminary data collected from the first seven homozygous FH patients
were presented at a scientific meeting in October 1994. The data presented
showed that there was some cholesterol reduction in these patients and that the
drug was well tolerated in this population. SciGenics and the Company presently
are accruing additional patients to the study, and there can be no assurance
that the final data from the study will be consistent with the preliminary data
from the study.
While the Company is initially testing rhM-CSF in the homozygous FH
population, the Company does not believe that this narrow indication will
itself be commercially viable. In order to develop a commercially viable
product suitable for a broader population (e.g., all FH patients and/or other
patients with significantly elevated cholesterol), significant additional
clinical and other development activities would be required to demonstrate that
the product would be competitive with current therapies that include orally
active agents. Furthermore, cholesterol reduction in itself may not be a
sufficient basis for FDA licensure of rhM-CSF. Other endpoints such as arterial
plaque reduction or a reduction in the incidence of coronary events are likely
to be required. To establish such endpoints may require very large clinical
trials over several years. In addition, before initiating further studies in a
broader population (e.g., heterozygous FH or atherosclerosis), the safety of
long-term or chronic dosing with rhM-CSF would need to be evaluated in a second
phase I safety study.
In order to determine what effect, if any, rhM-CSF may have on
sustained cholesterol reduction and arterial plaque reduction, the Company is
conducting a preclinical chronic dosing study. If this preclinical study
provides positive data, it may support initiation of a second phase I study to
test the safety of chronic dosing of rhM-CSF in humans. However, no assurances
can be given as to the likely results of either study with respect to either
safety or efficacy. There are also significant regulatory requirements which
must be satisfied in order to expand clinical testing into a broader population
with a less severe medical need. The Company will continue to evaluate the
rhM-CSF Program on an on-going basis to decide whether to continue funding the
rhM-CSF Program throughout 1995.
In 1991, the Company and Schering-Plough formed an alliance under which
Schering-Plough will register and market rhM-CSF in Europe, Africa and Latin
America. Under the terms of the agreement, the Company received an initial
payment and is entitled to receive subsequent milestone payments and royalties
on product sales of rhM-CSF in the licensed territories. The Company also has
the right to manufacture and supply all of Schering-Plough's requirements for
bulk protein. Schering-Plough is not obligated to proceed with development in
its territory until the Company has shown rhM-CSF to have a commercially
meaningful indication in a phase II study, and the Company cannot predict when
or whether this condition precedent can be satisfied.
The Company has granted an exclusive license to Morinaga Milk Industry
Company, Ltd. ("Morinaga") to market and, subject to certain conditions, to
manufacture the Company's rhM-CSF product in Japan and certain other Far
Eastern countries. Morinaga is obligated to pay the Company royalties on
commercial sales of rhM-CSF and to purchase its initial commercial requirements
of rhM-CSF from the Company until Morinaga develops its own manufacturing
capability for rhM-CSF. Commercial sales, however, will be dependent on
developing a commercially viable indication for rhM-CSF.
In 1990, the Company and Cetus Corp. (which was acquired by Chiron
Corporation in 1991) agreed to cross-license each other on a royalty-free basis
under patent rights in Europe and
-11-
<PAGE> 12
the United States and under any orphan drug designations they receive
from the United States Food and Drug Administration ("FDA") for rhM-CSF.
Discovery Research Areas
------------------------
Hematopoiesis and Immunology
----------------------------
The Company is devoting a substantial portion of its discovery research
resources to the fields of immunology and hematopoiesis (blood cell growth
factors). This area has historically been a source of important therapeutic
candidates and our efforts are continuing in this field. Attention has been
focused specifically on factors that regulate stem cell and lymphocyte
development as well as on factors which can modulate the immune response
including both immune-stimulators and immunosuppressive agents. Discoveries in
this field may lead to promising new anti-cancer and anti-infective therapies
as well as factors potentially useful for the treatment of autoimmune diseases
including rheumatoid arthritis, systemic lupus erythematosus and multiple
sclerosis as well as organ transplant rejection.
Bone and Connective Tissue Biology
----------------------------------
The Company is continuing its discovery research efforts in the field
of bone and connective tissue biology. Company scientists are continuing to
identify novel factors which may play an important role in the formation,
growth and repair of bone, cartilage and other connective tissues. In 1994, one
of these novel factors, rhBMP-12, was seen to potentially play a role in
inducing the repair of tendons and ligaments.
Soft Tissue Repair and Organ Regeneration
-----------------------------------------
Research continues in the study of the effects of growth factors on
tissue development and repair with the aim of developing therapies useful for
the treatment of human tissues damaged by injury or disease. The Company has
also continued its work in the embryonic growth and regulatory protein (EGRP)
program under its agreement with SciGenics, studying the effects of specific
gene expression and cellular interactions on the development of
insulin-expressing cells in the pancreas. It is believed that this work has the
potential to lead to the development of assays to identify potentially useful
EGRP factors. SciGenics will own any EGRP factors and certain related
technology which are discovered by the Company under its agreement with
SciGenics.
Small Molecule Drug Discovery ("SMDD")
--------------------------------------
The Company's research efforts have produced expertise in molecular and
structural biology, and in high throughput screening that is relevant to the
identification and utilization of novel human proteins as targets for the
discovery of small molecule based pharmaceuticals.
In recent years the Company's SMDD research has focused on: (i)
cellular adhesion proteins, molecules that play a critical role in the movement
of white blood cells into damaged or diseased tissues; and (ii) inhibitors to
cPLA2, an enzyme believed to play a key role in the production of inflammatory
mediators. By identifying the molecules that block the action of these
proteins, the Company hopes to develop new treatments for asthma, rheumatoid
arthritis, organ transplant rejection, and cancer metastasis. During 1994, the
Company continued its program to screen compounds that could potentially become
lead candidates as possible new drugs. Several potential leads have been
identified, and preclinical research is in progress.
-12-
<PAGE> 13
During 1992, the Company entered into two agreements with Wyeth-Ayerst.
The first agreement centers on the discovery of novel target areas for
developing new small molecule based drugs. This agreement provided Wyeth-Ayerst
with the option to enter into a collaboration agreement for each selected
target area. Pursuant to this option agreement, the Company signed a second
agreement with Wyeth-Ayerst to collaborate in the target area of cellular
adhesion. Wyeth-Ayerst presently contributes significantly to the funding of
this collaborative program. The option agreement expired at the end of fiscal
1993, and collaborative funding is committed through mid-1995.
Licensed Products
-----------------
Recombinant Human Antihemophilic Factor ("rhAHF")
-------------------------------------------------
Recombinant human antihemophilic factor ("rhAHF", or
recombinant human Factor VIII) is a manufactured version of a naturally
occurring protein that helps regulate activation of the body's coagulation
pathway -- the system that controls the formation of blood clots and prevents
bleeding. Hemophilia A, a condition affecting approximately one in 10,000 men
(or approximately 20,000 persons in the U.S.) is caused by deficient levels of
Factor VIII. Symptoms of hemophilia include uncontrolled bleeding into soft
tissues, muscles and weight-bearing joints.
For the past 20 years, people with hemophilia have had to rely on
Factor VIII products derived from human blood to treat or prevent bleeding
episodes. The supply of Factor VIII from this source is limited by blood and
plasma donations. Patients who rely on this product may also risk exposure to
blood-borne viruses, such as hepatitis and the AIDS virus.
Genetics Institute's development of a genetically engineered human
Factor VIII product is one of the most significant technical achievements by
the biotechnology industry. Recombinant Factor VIII is the largest protein ever
produced using genetic engineering technology.
In 1992, the FDA licensed the Company's concentrated rhAHF product and
its licensee's (Baxter Healthcare Corporation, Hyland Division ("Baxter"))
finished product, RecombinateTM Antihemophilic Factor (Recombinant), for the
treatment of hemophilia A. RecombinateTM Antihemophilic Factor (Recombinant)
brand Factor VIII is currently marketed in the U.S. and Europe by the Hyland
division of Baxter Healthcare Corporation, under the terms of a worldwide
license, and by Rhone-Poulenc Rorer Inc. ("RPR"), a Hyland distributor.
Applications for regulatory approval have been filed by Baxter in Japan and
other countries throughout the world.
The production of concentrated rhAHF by recombinant DNA technology
rather than from human blood eliminates the risk of transmitting human viruses
associated with plasma-derived Factor VIII products. In addition, it makes
possible a supply of Factor VIII which is not limited by the blood donor
system. These advantages should ultimately enable persons with hemophilia to
use rhAHF to prevent episodes of bleeding, and thereby improve the quality of
their lives.
Baxter is the Company's worldwide exclusive licensee of concentrated
rhAHF. The Company has retained substantial worldwide manufacturing rights and
will supply product concentrate to Baxter. Baxter further processes the
concentrated rhAHF and sells finished product. Genetics Institute has the right
to manufacture fifty percent of Baxter's requirements until December 2002, and
thirty percent of Baxter's requirements until December 2009. Currently, the
Company manufactures one hundred percent of Baxter's requirements for product
concentrate. Baxter has initiated activities to develop its own capacity to
manufacture product concentrate, and the Company expects Baxter to begin
supplying a portion of its worldwide commercial
-13-
<PAGE> 14
requirements beginning as early as 1997. The Company earns
manufacturing revenue on the supply of concentrated rhAHF material, and a
royalty on Baxter's sales of finished rhAHF product.
Recombinant Human Erythropoietin ("rhEPO")
------------------------------------------
Natural EPO is a protein that stimulates the production of red blood
cells. Inadequate production of EPO by the kidneys results in decreased red
blood cell production and anemia. Pharmaceutical compositions containing EPO
are used by kidney dialysis patients as an alternative to whole blood or red
cell transfusions. Such transfusions are the only other current treatments for
this form of anemia and may expose the patient to various side effects and the
risk of contracting blood-borne diseases.
Genetics Institute's rhEPO products are being sold in Japan, Europe and
certain other countries outside the United States by its licensees, Chugai
Pharmaceutical Co., Ltd. ("Chugai") and Boehringer Mannheim GmbH ("Boehringer
Mannheim"), respectively. Chugai has an exclusive, royalty-bearing license from
the Company to manufacture and market rhEPO in the Far East (except for China),
Australia, New Zealand, Canada and Mexico. The Company has granted Boehringer
Mannheim an exclusive, royalty-bearing license to manufacture and market rhEPO
in Europe, China, South America, Africa and the Middle East. The Company is
currently receiving royalties based on licensee sales of rhEPO in these
territories.
Due to blocking patents held by Amgen Inc. ("Amgen") in the United
States, the Company does not expect to receive any revenue from the sale of its
rhEPO products by licensees or by its own manufacturing or marketing efforts in
the United States.
In 1993, a long-standing EPO patent infringement dispute between the
Company and Amgen was settled. As part of the settlement, the Company paid
Amgen $14.0 million. An additional $2.0 million may become payable contingent
upon the outcome of certain future events. Ortho Pharmaceutical Corporation's
("Ortho") infringement claims against the Company were dismissed. An appeal by
Ortho of the dismissal of its infringement claims is pending. See ITEM 3. LEGAL
PROCEEDINGS at page 25.
EPO patent litigation is proceeding in Europe on a country- by-country
basis; and, absent settlement, is expected to continue for a number of years.
However, injunctive relief sought by Ortho or its affiliates could at any time
result in a loss of royalties in the country or countries where issued.
Royalties in fiscal 1994 totalled approximately $11.3 million for rhEPO sales
in Europe. See ITEM 3. LEGAL PROCEEDINGS at page 25.
In June 1994, the U.S. Patent and Trademark Office granted the Company
a new patent on homogeneous EPO compositions which the Company believes is
infringed by the making, using and selling of rhEPO in the United States by
Ortho and Amgen. The Company is engaged in legal proceedings with Ortho and
Amgen concerning this new patent and can provide no assurance as to their
outcome. See ITEM 3. LEGAL PROCEEDINGS at page 25.
Recombinant Novel Plasminogen Activater ("rNPA")
------------------------------------------------
Recombinant novel plasminogen activator ("rNPA") is a form of
thrombolytic (clot-dissolving) agent which may be useful in the treatment of
heart attacks and other conditions which may benefit from the dissolution of
blood clots.
-14-
<PAGE> 15
Heart attacks can result from blockage of the coronary arteries which
supply oxygen-rich blood to the cardiac muscle. Frequently, the final blockage
of a diseased (atherosclerotic), partially-obstructed artery results from the
formation of blood clots, or thrombi, which block the supply of blood to the
heart muscle. The degree of permanent damage to the heart depends on the
severity and duration of the blockage of the coronary artery. rNPA is being
evaluated in phase II clinical studies in Japan for its utility in dissolving
these blood clots.
Genetics Institute granted Suntory, Ltd. of Japan a license to develop
and commercialize rNPA for the Japanese market. The Company has commercial
rights to rNPA in the rest of the world, including the United States.
rNPA may have improved qualities over existing thrombolytic therapy.
Preclinical data and early clinical data suggest that rNPA's period of activity
in the body (its "half-life") is approximately ten times that of tPA. As a
result, unlike tPA, an existing thrombolytic agent which is administered by
infusion over several hours, rNPA is being developed and tested by Suntory for
administration as a single injection. If the clinical tests are successful,
rNPA could potentially be administered earlier and more easily than tPA.
In June 1994, the United States Court of Appeals for the Federal
Circuit ("CAFC") reversed a 1991 lower court decision and found in favor of
Genetics Institute that rNPA does not infringe any of Genentech, Inc.'s United
States tPA patents. The CAFC's decision recognized a significant distinction
between rNPA and tPA. As a result of this decision and Suntory's preliminary
clinical data, the Company is currently exploring commercialization options for
rNPA in territories outside of Japan.
rhGM-CSF, rhIL-3, and rhIL-6
----------------------------
GM-CSF is a blood cell growth factor which is produced by cells of the
body as part of the natural defense against infections. GM-CSF stimulates the
intermediate to late stages of development of several different blood cell
lineages, and is particularly effective in stimulating growth of cells in the
granulocyte and macrophage lineages.
The Company developed rhGM-CSF under a Research Agreement with Sandoz,
Ltd. ("Sandoz") and assigned its rhGM-CSF patent rights to Sandoz in return for
royalties on product sales. Schering-Plough also independently developed a
rhGM-CSF product. In 1988, Sandoz entered into an agreement with
Schering-Plough concerning worldwide co-development and co-promotion of
rhGM-CSF and Sandoz and Schering-Plough have received approval to sell rhGM-CSF
in Europe and certain other countries outside the United States. As a result of
this agreement, the Company receives royalties under Sandoz rhGM-CSF patent
rights on the combined worldwide sales of rhGM-CSF by Sandoz and
Schering-Plough at the same royalty rate due under the Company's agreement with
Sandoz.
rhIL-3 is a blood cell growth factor that is produced by cells of the
immune system as part of the body's natural defense against infections. The
Company believes that rhIL-3 acts earlier in the pathway of blood cell
production than certain other colony stimulating factors and stimulates a
broader range of cell types, including white blood cells, red blood cells and
platelets.
rhIL-6 is a blood cell growth factor that also is produced by cells of
the immune system as part of the body's natural defense against infections. The
Company believes that rhIL-6, like rhIL-3, acts early in the pathway of blood
cell production stimulating a broad range of cell types, including white blood
cells, red blood cells and platelets.
-15-
<PAGE> 16
The Company licensed to Sandoz the exclusive worldwide right to
manufacture and market rhIL-3 and rhIL-6 and is entitled to receive royalties
on commercial sales of both products. Both of the products are currently in
clinical development.
Development and License Agreements
----------------------------------
The Company has entered into agreements with a number of licensees to
conduct collaborative research and development programs, and to supply bulk
drug substance. While the terms of each agreement differ, the agreements
generally provide that the Company will perform research on specific products
or in a specific field and will use commercially reasonable and diligent
efforts to develop a specified product or group of products. Under most of
these agreements, the Company is reimbursed for a portion of its research and
development costs and/or is paid fixed fees for attaining specified technical
or product development benchmarks by the Company and/or the licensee. In
general, such agreements can be canceled on relatively short notice if certain
objectives are not met or, in some cases, for reasons unrelated to the
Company's research and development progress.
Generally, upon the completion of the Company's research and
development efforts, the licensee agrees to use its best or commercially
reasonable diligent efforts, subject to certain conditions, to conduct clinical
testing and obtain regulatory approvals, to market and, in some cases,
manufacture the developed product. Under most of the agreements, the licensee
acquires the exclusive right to exploit the developed technology in specified
geographic territories for specified products or within specified fields of
use, and the Company retains the right to use such technology for other
products or outside such fields of use or such territories. The Company is
generally entitled to receive royalties based on sales of products derived from
the technology developed by the Company. Royalty rates for patented products in
some cases are higher than those for unpatented products, and royalty periods
for patented products sometimes extend for longer periods of time. The Company
has retained the right, subject to certain conditions, to manufacture
commercial quantities of products for certain of its licensees, including
Baxter (relating to rhAHF), Schering-Plough (relating to rhM-CSF and rhIL-11),
the GPDC (relating to bone morphogenetic proteins), the GYJ (relating to
rhIL-11 and rhIL-12), Wyeth-Ayerst International (relating to rhIL-11), and
IL-12 partners (relating to rhIL-12).
The Company's licensees that have contributed 10% or more of the
Company's revenues during one or more of the past three years are Baxter, AHP,
Chugai, Yamanouchi, SciGenics and Boehringer Mannheim. Baxter provided
approximately 12%, 44% and 38% of the Company's revenues in fiscal 1992, 1993
and 1994, respectively. AHP provided 12% and 22% of the Company's revenue in
fiscal 1993 and 1994 respectively. Chugai provided approximately 21%, 16% and
17% of the Company's revenues in fiscal 1992, 1993 and 1994, respectively.
Yamanouchi provided approximately 24%, 13% and 10% of the Company's revenues in
fiscal 1992, 1993 and 1994, respectively. SciGenics provided approximately 12%
of the Company's revenues in fiscal 1992. Boehringer Mannheim provided
approximately 10% of the Company's revenues in fiscal 1992. Chugai and AHP are
shareholders of the Company.
The Company's research and development expenses were $89.6 million,
$99.0 million and $108.2 million in fiscal 1992, 1993 and 1994, respectively.
Under collaborative research and development agreements with corporate sponsors
and development partners, the Company recognized $60.4 million, $34.3 million
and $44.8 million of collaborative research and development revenue in fiscal
1992, 1993 and 1994, respectively.
-16-
<PAGE> 17
SciGenics
---------
In May 1991, the Company and SciGenics, Inc. ("SciGenics") completed a
public offering of 2,090,909 units (the "Offering"), each unit consisting of
one share of SciGenics Callable Common Stock and one warrant to purchase one
share of Common Stock of Genetics Institute, which resulted in gross proceeds
to SciGenics of approximately $42.0 million. In connection with the Offering,
the Company entered into various agreements with SciGenics.
The Company has entered into a technology license agreement and a
research and development agreement with SciGenics. Under the terms of the
technology license agreement, SciGenics has obtained exclusive licenses to the
Company's technology to develop and commercialize rhM-CSF in North America and
to develop and commercialize embryonic growth and regulatory proteins ("EGRP
Factors") throughout the world for all purposes other than for the inducement,
formation, growth, repair, regeneration or treatment of human or animal bone or
cartilage. Under the terms of the research and development agreement, SciGenics
has engaged the Company to continue the development of rhM-CSF and to conduct
early stage research and development of EGRP Factors. Pursuant to the
technology license agreement, SciGenics paid the Company a non-refundable
payment of $2.5 million. Pursuant to the research and development agreement,
SciGenics is obligated to pay to the Company approximately $39.0 million
(together with the non-refundable payment, substantially all of the net
proceeds raised by it in the Offering) for research and development services.
The Company has committed to match funds expended by SciGenics toward continued
development efforts of rhM-CSF up to $20.0 million of SciGenics rhM-CSF
funding. Such obligation (along with the Company's continuing obligation to
conduct rhM-CSF research and development) is terminable by the Company,
provided that if it elects to so terminate such obligation, the Company's
program purchase and stock purchase options described below will terminate.
Under the terms of the technology license agreement and the research and
development agreement, SciGenics will own worldwide rights to all EGRP Factors
(and related technology discovered on behalf of SciGenics) during the term of
the research and development agreement.
The Company has been granted an option to purchase all (but not less
than all) of the shares of Callable Common Stock of SciGenics. Except as noted
below, the option provides for escalating exercise prices per share ranging
from $54.04 (if exercised on or before May 31, 1995) to $69.83 (if exercised
from June 1, 1995 to May 31, 1996). The option will terminate no later than May
31, 1996 and may terminate earlier upon the occurrence of certain events.
The Company also has been granted options to acquire all technology and
related rights of SciGenics under either or both of the rhM-CSF and EGRP
programs. If the Company exercises a program purchase option for either the
rhM-CSF or EGRP program, the program purchase option for the remaining program
will terminate. In such event, the Company's call option on the outstanding
SciGenic's Callable Common Stock will remain in effect, however, the call
option price will be reduced by the per share equivalent price paid for the
exercise of a program purchase option. Such options will terminate no later
than May 31, 1996 and may terminate earlier upon the occurrence of certain
events. The exercise periods and the program purchase option exercise price for
each program are as follows:
-17-
<PAGE> 18
<TABLE>
<CAPTION>
Exercise Price
--------------
Exercise Period rhM-CSF EGRP
--------------- ------- ----
<S> <C> <C>
On or before May 31, 1995........... $103,500,000 $40,250,000
From June 1, 1995 to May 31, 1996.... 131,100,000 46,000,000
</TABLE>
If the Company exercises the program purchase option for the
EGRP program, it will be required to pay to SciGenics, in addition
to the applicable amount set forth above, $4.0 million (a
"Benchmark Payment") for each EGRP Factor that is identified by it
prior to November 30, 1996 and that enters phase I clinical trials
prior to November 30, 2001, subject to certain limitations and
conditions.
Patents and Proprietary Rights
------------------------------
As of February 1, 1995, 87 United States patents and a total
of 282 patents worldwide have been issued to the Company. There
can be no assurance as to how many patents will issue to the
Company or whether any issued patents will provide the Company and
its corporate sponsors with significant protection against
competitors.
United States patent office interference proceedings have
been declared or are likely with respect to a number of the
Company's United States patent applications, and the costs of such
proceedings may be significant. Moreover, there can be no
assurance that any patents issued to the Company will not be
infringed upon or designed around by others. See "Legal
Proceedings."
The patent position of biotechnology firms generally is
highly uncertain and involves complex legal and factual questions.
Competitors have filed applications for, or have been issued,
patents and may obtain additional patents relating to products or
processes which are similar to or improve upon many of the
products or processes being developed by the Company. The Company
is unable to predict how the courts will resolve issues relating
to the validity and scope of such patents. Companies that have or
obtain patents relating to such products or processes could bring,
and, in some cases, have brought, legal actions against the
Company or its licensees claiming damages and seeking to enjoin
them from manufacturing, marketing or clinically testing the
affected product. The costs of such litigation are significant.
If any such action were successful, in addition to any potential
liability for damages, in the case of an action against the
Company, or a reduction in royalties, in the case of an action
against a licensee, the Company or its licensees would be required
to obtain a license in order to continue to manufacture or market
the affected product. No assurance can be given that the Company
or its licensees would be able to prevail in any such action or
could obtain on acceptable terms any license required under any
such patent. See "Legal Proceedings."
Existing patents, including several owned by competitors of
the Company, claim basic aspects of genetic engineering
technology. A number of pending patent applications filed by
competitors make similar claims. It is unclear whether patents
will issue from these applications, or whether the broad claims
made in such applications will be allowed. If broad claims of
existing or future patents are upheld as valid by courts, certain
companies whose business consists of genetic engineering, such as
the Company, would be required to obtain licenses. There can be
no assurance that such licenses will be available on acceptable
terms or that the total royalties payable under such licenses
would not adversely affect the Company's operating results. If
the Company's licensees are required to pay royalties or make
similar payments to a third party in order to obtain
18
<PAGE> 19
any such licenses which are required to market and sell the
products developed by the Company for such licensees, such
licensees are generally entitled to deduct a portion of such
payments from royalties otherwise payable to the Company. In a few
cases, the Company is required to indemnify the licensees against
certain costs or liabilities incurred by the licensees as the
result of any patent infringement or similar claim asserted by a
third party with respect to technology or products developed by
the Company.
The Company intends to continue to apply for patent
protection in appropriate cases. The Company also intends to rely
on its unpatented proprietary know-how. There can be no assurance
that competitors will not develop or acquire equivalent
proprietary information. All key employees, consultants and
licensees of the Company have agreed to maintain the
confidentiality of the Company's proprietary information. The
Company's licensees may be competitors of the Company with respect
to products other than those covered by their development and
license agreements with the Company, and many of the Company's
consultants may be engaged in research projects outside the scope
of their consulting agreements with the Company.
The Company engages in research collaborations and enters
into preclinical and clinical testing agreements with academic
institutions and U.S. government agencies, such as the National
Institutes of Health ("NIH"), in order to benefit from their
technical expertise and staff and to gain access to clinical
testing models, patients and related technology. Consistent with
biopharmaceutical industry and academic standards, and the rules
and regulations under the Federal Technology Transfer Act of 1986,
these agreements may provide that results will be freely
published, that information or materials supplied by the Company
or developed under the agreement will not be treated as
confidential, and that the Company will receive either joint
ownership in or the right to negotiate a royalty-bearing license
to such results.
The Company has entered into, and may in the future enter
into, agreements with certain companies and institutions under
which the Company obtains royalty-bearing licenses to use certain
products, patent rights and processes in the manufacture of the
Company's products.
Manufacturing
-------------
Proteins produced by recombinant DNA technology are
manufactured by growing large quantities of genetically engineered
cells, purifying the desired protein from the cells or culture
medium and characterizing in detail the protein's chemical and
biological properties. Development groups within the Company have
expertise in engineering bacterial (e.g., E coli) and mammalian
cells (e.g. chinese hamster ovary cells) to produce recombinant
proteins and in characterizing the resulting products. The
optimal cell type for the production of a particular protein
product depends on the individual properties of that protein and
the quantities required for commercial use. The achievement and
maintenance of an optimal environment for the production of a
protein becomes more difficult as the scale of production
increases and may require extensive development efforts and
expenditures.
The Company owns and operates a 220,000 square foot product
development and manufacturing facility in Andover, Massachusetts.
The manufacturing portion of this facility contains four
independent production suites. Two of the four suites are
currently licensed by the FDA for the commercial production of
rhAHF. The Company also has a production suite at its facilities
in Cambridge, Massachusetts. These facilities are designed to be
adequate to address clinical and early commercial-scale production
requirements of the Company and its licensees, as applicable, for
the next several years.
19
<PAGE> 20
The Company presently does not have its own fill and finish
capabilities for producing and labelling final drug products from
bulk drug substance or bulk proteins. The Company has agreements
with its licensees, such as Baxter with respect to rhAHF, to
perform such services, and contracts with suppliers for its own
proprietary products currently in clinical development to perform
fill and finish services. In 1994, the Company relied
substantially on Wyeth-Ayerst Laboratories, the pharmaceutical
division of AHP, and one other third party for the fill and finish
of products used in clinical testing.
Currently, 100% of the Company's product sales are dependent
upon the manufacture of rhAHF concentrate. Raw materials used in
the manufacture of rhAHF are supplied by vendors qualified by the
Company and conform to specifications set by the Company that meet
regulatory requirements. In the event a qualified vendor cannot
provide sufficient raw materials to meet rhAHF production
requirements, no assurance can be given that an alternate vendor
can be qualified by the Company, and make up any shortfall of raw
materials in a timely fashion.
Both the Cambridge and Andover production facilities have
been inspected by the FDA and are designed to meet applicable
standards for "Good Manufacturing Practices" or GMPs established
by the FDA and other applicable government standards. The Company
anticipates that these facilities will be subject to ongoing
inspections by the FDA and international regulatory authorities in
connection with their reviews of the Company's products. GMPs
require that all manufacturing processes be monitored and
controlled, and prohibit the release of any products which fail to
comply with applicable product and process specifications. Because
the manufacture of proteins is complex, the Company cannot
guarantee that in the event of a failure or series of failures in
the production of a protein resulting in GMP non-compliance, that
it will have adequate manufacturing capacity to meet all of the
Company's clinical and commercial manufacturing requirements.
Government Regulation
---------------------
The production and marketing of the Company's products and
its ongoing research and development activities are subject to
regulation by numerous governmental authorities in the United
States and other countries.
FDA Approval. Pharmaceutical products or devices intended
for preventative, therapeutic or diagnostic use in humans are
governed by FDA regulations in the United States. The process of
completing clinical testing and obtaining FDA approvals for a new
drug, device or biological product is likely to take a number of
years and requires the expenditure of substantial resources. No
product is assured of ultimately receiving such approvals.
The steps required before a new human pharmaceutical product
or device can be marketed in the United States typically include
preclinical testing, filing an Investigational New Drug ("IND")
application or an Investigational Device Exemption ("IDE"),
conducting clinical trials and filing with and approval by the FDA
of a marketing application, either a New Drug Application for
drugs, a Product License Application for biologics or a Premarket
Approval Application for devices. Preclinical studies are
conducted in the laboratory and in animal model systems to gain
preliminary information on the investigational product's efficacy
and to identify significant safety problems. The results of these
studies are submitted to the FDA for review as part of the IND or
IDE application before a company can commence testing in humans.
20
<PAGE> 21
The human clinical testing program is conducted in phases, is
designed to collect data relating to the dosing, safety, side
effects and efficacy of a product candidate, and may include a
comparison with any currently accepted therapy. Phase I clinical
trials are usually conducted with a small number of individuals
and are designed to determine the metabolic and pharmacologic
activities of the pharmaceutical product and to assess its safety.
Pilot studies, in the case of devices, are similarly designed to
test the general biocompatibility of the device and its safety in
humans. While phase I and pilot study results have received
increasing attention in the biotechnology industry, it is
important to recognize that phase I and pilot study results only
represent the first step in the clinical testing of a product and
are important insofar as they provide the safety data and the
initial clinical evidence needed to proceed to phase II and
pivotal trials in which efficacy is ultimately measured.
Phase II clinical trials generally involve studies in a
limited patient population to provide preliminary evidence of
efficacy of the product for specific targeted indications and to
determine optimal dosage. Phase II studies generally do not
involve enough patients to demonstrate efficacy in support of
regulatory approval, and the Company cautions investors that
positive phase II results alone do not assure that a product
candidate will ultimately demonstrate efficacy in larger-scale
phase III or pivotal trials. Phase III or pivotal clinical trials
will be required to further evaluate clinical efficacy, to test
for safety within an expanded patient population and to support
registration of the product.
Upon completion of clinical testing demonstrating that the
new product is safe and effective for a specific indication, a
marketing application may be filed with the FDA, and no assurance
can be given that an application will be approved based on the
data collected. This marketing application includes details of
the manufacturing and testing processes, preclinical studies and
clinical trials. The FDA must approve the application before the
applicant may market the new product.
Once an FDA license has been obtained or the FDA approves a
marketing application, further studies may be required to provide
additional data on safety or to gain approval for the promotion of
a product as a treatment for clinical indications other than those
for which the product was initially tested. Also, the FDA may
require post-approval testing for certain products and also
requires surveillance programs to monitor a product's longer-term
effects. Side effects resulting from the use of pharmaceutical
products may prevent or limit the further marketing of the
products.
In addition to product licensing or product marketing
approval, a company producing biological products must obtain an
establishment license from the FDA covering the company's
manufacturing facilities before a biological product manufactured
by the company can be marketed in the United States. Prior to
granting such a license, the FDA will review the company's
manufacturing procedures and inspect its facilities and equipment
for compliance with applicable rules and regulations. Since any
establishment license which may be granted by the FDA is both site
and process specific, any material change by a company in its
manufacturing process, equipment or location would necessitate
additional FDA review and approval. In 1992, the Company received
an Establishment License from the FDA for the manufacture of
concentrated rhAHF for sale to Baxter which will further process
and resell the rhAHF.
Health Care Reform. The debate regarding health care reform
has raised the level of risk associated with biopharmaceutical
development. The Company cannot predict with certainty what
impact health care reform or the continuing competitive pricing
pressures in the pharmaceutical
21
<PAGE> 22
markets, particularly from large buyers, managed care
organizations and government purchasers, might have on the
Company's products.
Other Regulation. The federal government regulates certain
recombinant DNA research activity through the NIH guidelines for
research involving recombinant DNA molecules (the "NIH
Guidelines"). The Company complies with the NIH Guidelines which,
among other things, restrict or prohibit certain recombinant DNA
experiments and establish levels of biological and physical
containment of recombinant DNA molecules that must be met for
various types of research.
Genetics Institute is also subject to regulation under the
Occupational Safety and Health Act, the Environmental Protection
Act, the Toxic Substances Control Act, the Federal Insecticide,
Fungicide and Rodenticide Act, the Research Conservation and
Recovery Act, national restrictions on technology transfer,
federal regulations on the protection of human subjects in
clinical studies, the protection of animal welfare in preclinical
studies, import, export and customs regulations and other present
or possible future local, state or federal regulation. From time
to time Congressional Committees and federal agencies have
indicated an interest in implementing further regulation of
biotechnology and its applications.
Orphan Drug Act. The Orphan Drug Act is intended to provide
incentives to manufacturers to develop and market drugs for rare
diseases or conditions affecting fewer than 200,000 persons in the
United States at the time of application for orphan drug
designation. Historically, both drugs (filed under NDAs) and
biologicals (filed under PLAs) have been eligible for orphan drug
designation.
A product that receives orphan drug designation and is the
first product to receive an FDA license for its product claim is
entitled to a seven-year exclusive marketing period in the United
States for that product claim. However, a product that is
considered by the FDA to be different than a particular orphan
drug is not barred from sale in the United States during such
seven-year exclusive marketing period even if it receives
marketing approval for the same product claim.
Foreign Regulatory Approval. Whether or not FDA approval has
been obtained, approval of a pharmaceutical product by comparable
governmental regulatory authorities in foreign countries must be
obtained prior to the commencement of clinical trials and
subsequent marketing of such product in such countries. The
approval procedure varies from country to country, and the time
required may be longer or shorter than that required for FDA
approval. Although there are now procedures for unified filing in
Western Europe for the fifteen members of the European Union, many
member countries require pricing reviews and approvals prior to
marketing.
At present, pharmaceutical products generally may not be
exported from the United States for other than research purposes
until the FDA has approved the product for marketing in the United
States. However, a company may apply to the FDA for permission to
export finished products or partially processed biologics to a
limited number of countries prior to obtaining FDA marketing
approval for the United States.
Competition
-----------
The Company believes that it is likely to encounter
significant competition with respect to its principal products.
Companies that are able to complete clinical trials, obtain
required regulatory approvals and commence commercial sales of
their products before their competitors may achieve a significant
competitive advantage. Research in biotechnology is also being
carried
22
<PAGE> 23
out in universities and other nonprofit research organizations.
These entities have become increasingly active in seeking patent
protection and licensing revenues for their research results.
Moreover, these institutions continue to compete with the Company
in recruiting skilled scientific personnel.
Amgen and its licensees are marketing rhEPO in the United
States, Europe and Japan. Cutter Biologicals, Inc. ("Cutter"), a
division of Miles Laboratories, Inc. (a subsidiary of Bayer AG),
has developed a recombinant antihemophilic factor which competes
directly with the Company and Baxter's jointly-developed rhAHF
product in the United States and certain other countries excluding
Japan. rhAHF also competes throughout the world with plasma-
derived Factor VIII, which is marketed worldwide by several major
healthcare companies, including Baxter, RPR, Pharmacia A.B.,
Behringwerke Gmbh, Alpha Therapeutics, Inc. and its parent The
Green Cross Corporation, Immuno A.G., the American Red Cross and
similar Red Cross organizations. There is also potential for
competition from second generation recombinant Factor VIII
molecules. Pharmacia A.B. is conducting clinical trials with a
second generation molecule and the Company has also discovered a
second generation molecule which it may consider for development.
The Company believes that its patent rights in second generation
recombinant Factor VIII molecules will protect against competition
from Pharmacia A.B. However, no assurance can be given as to the
strength and breadth of such patent rights.
In connection with the settlement of the Factor VIII patent
litigation (see "Legal Proceedings"), Baxter agreed to sell rhAHF
to Rhone-Poulenc Rorer, Inc. ("RPR") as a distributor under RPR's
own name. The Company believes RPR is seeking regulatory
approvals in the United States and abroad, and Rorer will compete
with Baxter upon entering such market. The Company may earn
additional manufacturing revenue if RPR purchases rhAHF from
Baxter. However, RPR's sales of rhAHF may reduce the manufacturing
profit or royalties received from sales of rhAHF by Baxter.
Significant potential competition exists with respect to the
Company's principal proprietary product candidates: rhFIX, rhIL-
11, rhBMP-2, and rhIL-12. Plasma derived Factor IX is currently
marketed and sold worldwide by RPR, Pharmacia A.B., Alpha
Therapeutics, Inc. and its parent the Green Cross Corporation, Red
Cross organizations, Bayer AG, Behringwerke AG, Immuno AG, Armour
Pharmaceutical Company, and is expected to compete with rhFIX.
Pharmaceutical Proteins Ltd. is developing a recombinant Factor IX
product which it produces in transgenic sheep. Roche, with whom
the Company has a cross-license with respect to rhIL-12, is
actively developing a competitive rhIL-12 product.
Immunex Corporation is developing PIXY-321, which is in phase
III clinical trials, as a agent to restore platelets, and if
successful, it could compete with NeumegaTM rhIL-11. Genentech,
Inc., Zymogetics, Inc. and Amgen, Inc. are each testing TPO in
preclinical models, to determine if it has potential as a platelet
restoration agent, and Sandoz is testing both rhIL-3 and rhIL-6 in
the clinic in that indication as well. The Company believes that
NeumegaTM rhIL-11 has the potential to compete favorably with each
of these molecules; however, without final clinical data, and
regulatory approval, it is not possible to provide any assurances
as to the relative labelling and efficacy of these various product
candidates.
Creative BioMolecules, Inc. and Stryker Corporation are
developing a bone morphogenic protein which could potentially
compete with rhBMP-2. Other companies are developing bovine-
derived bone growth factors, as well as other growth factors for
the repair of bone and cartilage tissue.
23
<PAGE> 24
Competitors have also commenced clinical trials on, filed for
marketing approval for, or received marketing approval for
products that will compete with rhM-CSF, rNPA, rhGM-CSF, rhIL-3,
and rhIL-6.
The field of biotechnology is expected to continue to undergo
rapid and significant technological change and to involve
significant competition. One example is the emerging field of gene
therapy in which the gene for a protein is inserted in the patient
to enable the patient to manufacture the protein that he or she
lacks. In the future, gene therapy could reduce much of the need
for rhAHF or rhFIX, and other protein therapeutics. As a result,
the Company has entered into research collaborations with gene
therapy companies with respect to the rhAHF and rhFIX genes, and
is evaluating the desirability of entering into similar
collaborations with respect to its other proprietary genes.
Genetics Institute believes that its ability to compete
effectively in the biotechnology industry will be based on a
number of factors. These factors include the Company's ability to
create and maintain scientifically advanced discovery, development
and manufacturing technology, develop proprietary products or
processes, attract and retain qualified personnel, raise capital,
obtain patent or other protection for its products or processes,
obtain required government approvals on a timely basis, select and
pursue product candidates with significant market potential,
manufacture its products on a cost-effective basis and
successfully commercialize its products. Many of the Company's
competitors have substantially greater financial resources,
experience and sales and marketing organizations than Genetics
Institute.
Human Resources
---------------
As of December 31, 1994, the Company had 941 full-time
regular employees, of which 741 were engaged in research, product
development, manufacturing, clinical development and regulatory
affairs, 116 in operations support and 84 in general
administration. Of the Company's employees, 161 have Ph.D. or
M.D. degrees and another 133 hold other advanced degrees.
None of the Company's employees is covered by a collective
bargaining agreement. Genetics Institute considers its relations
with its employees to be excellent.
The Company's ability to maintain its competitive position
will depend, in part, upon its continued ability to attract and
retain qualified scientific and managerial personnel. Competition
for such personnel is intense.
ITEM 2. Properties.
- ------ ----------
The Company's executive, administrative and research offices
as well as a small-scale production facility and research and
development laboratories, all comprising approximately 220,000
square feet, are located in four buildings in Cambridge,
Massachusetts. The Company owns one building, and leases the
remaining three buildings. The lease terms for the Company's two
principal Cambridge facilities extend through 1999 and 2009,
respectively. In addition, the Company leases approximately 5,000
square feet of office space in Tokyo, Japan, and Paris, France.
24
<PAGE> 25
The Company also owns an approximately 220,000 square foot
process development and manufacturing facility in Andover,
Massachusetts. This facility contains four independent production
suites. See "Manufacturing." The Company recently added a 40,000
square foot central utility plant and a new 130,000 square foot
preclinical biology and product development facility at its
Andover campus. In addition, the Company leases 18,000 square feet
of warehouse space in an adjacent Andover building.
ITEM 3. Legal Proceedings.
- ------ -----------------
The Company has been engaged in legal proceedings relating to
the amount of damages payable by the Company as a result of the
holding of the U.S. Court of Appeals for the Federal Circuit
("CAFC") that the Company infringed a U.S. patent of Amgen Inc.
("Amgen") relating to recombinant erythropoietin ("EPO"). On May
11, 1993, the Company and Amgen agreed to settle all then
outstanding claims of Amgen against the Company in the United
States relating to recombinant EPO.
In August 1991, Ortho Pharmaceutical Corporation and its
affiliates ("Ortho"), a licensee of Kirin-Amgen, Inc.'s
recombinant EPO patents, initiated infringement proceedings
against the Company in the U.S. District Court in Massachusetts.
Ortho moved to consolidate the case with the infringement suit
brought by Amgen. Upon motion by the Company and Amgen, Ortho's
claims were dismissed and Ortho has appealed the District Court's
decision. A decision on the Ortho appeal is pending. The Company
and Amgen also jointly moved to dismiss similar claims brought by
Ortho against the Company in the U.S. District Court in California
in 1989, and the court granted the motion in March 1994.
In June 1994, the Company sued Ortho in the U.S. District
Court in Delaware. The Company's suit claimed that Ortho's
manufacture, use and sale of EPO in the U.S. infringes a patent
covering pharmaceutical compositions containing homogeneous EPO
that was issued to the Company by the U.S. Patent and Trademark
Office on June 21, 1994 (the '837 patent). In September 1994,
Amgen sued the Company in U.S. District Court in Massachusetts.
Amgen's suit asked the court to declare that the Company's '837
patent is invalid and not infringed by Amgen and to declare that
any dispute over the patent was resolved by the prior litigation.
The Company has filed counterclaims against Amgen for infringement
of the '837 patent. Ortho intervened in the Amgen suit in
Massachusetts, and the action against Ortho in Delaware was
stayed. In February 1995, the Massachusetts court granted a
motion by Amgen for summary judgment. The court ruled that the
CAFC decision in the prior litigation invalidating an earlier U.S.
EPO patent of the Company precluded the assertion of the '837
patent. The Company plans to appeal. The Company can provide no
assurances as to the outcome of these disputes with Ortho and
Amgen.
The Company and its licensees are engaged in various patent
litigation proceedings in Europe related to EPO. Beginning in
1991, Ortho and certain Ortho affiliates initiated patent
infringement litigation in Europe against Boehringer Mannheim, the
Company's European EPO licensee, based on a European recombinant
EPO patent issued to Kirin-Amgen, Inc. ("Kirin-Amgen"), its
licensor. The suits have included requests for damages and/or
injunctive relief. Boehringer Mannheim filed suits against Ortho
and/or certain of its affiliates in Europe claiming infringement
of the Company's European EPO patents. This litigation has
expanded into many of the European Community countries in
Boehringer Mannheim's territory. In some countries, where the
patentee is a legally necessary party to a suit to enforce a
patent, the Company has joined as a plaintiff. The Company is
also a defendant in suits in the United Kingdom, Germany, Italy
and the
25
<PAGE> 26
Netherlands brought by an Ortho affiliate seeking to invalidate
and revoke the Company's EPO patents in the United Kingdom, the
former East Germany, Italy and the Netherlands, respectively. The
revocation suit in Germany was dismissed in May 1994. However, it
is subject to appeal.
In June 1994, a claim in the Company's European patent
covering homogeneous EPO compositions (the '539 patent) was upheld
by the Opposition Division of the European Patent Office. This
decision has been appealed. In September 1994, an appellate
hearing was held before the Board of Technical Appeals (the
"Board") of the European Patent Office relating to the oppositions
to Kirin-Amgen's European recombinant EPO patent. The Board ruled
that a modified version of certain of Kirin-Amgen's original
claims in the patent filing was valid.
The Company can provide no assurance as to the outcome of
these European proceedings. If the courts ultimately rule in
Ortho's favor in these European proceedings, including issuing an
injunction against the future manufacture or sale of recombinant
EPO by Boehringer Mannheim, or if this litigation is otherwise
concluded in a manner adverse to Boehringer Mannheim or the
Company, future royalty income from EPO in Europe, which totaled
$11.3 million in fiscal 1994, could be reduced or eliminated.
The Company is engaged in a patent interference proceeding
among the Company, Genentech, Inc. and Chiron Corporation
concerning the Factor VIII U.S. patent rights which are cross-
licensed between Baxter (the Company's licensee) and Genentech,
Inc. While the Company believes it or Genentech should prevail in
the interference, no assurance can be given as to the outcome of
this interference. Any disposition of this proceeding in a manner
unfavorable to the Company or its licensee could have a material
adverse effect on the Company's future consolidated results of
operations.
In September 1994, the Company's U.S. patent directed to the
use of vitamin K as a culture medium supplement in the manufacture
of recombinant Factor IX was put into a patent interference
proceeding among the Company, Transgene, Inc., Zymogenetics, Inc.
and British Technology Group, Ltd. ("BTG"). BTG has licensed its
Factor IX patent rights to the Company. In addition, in late
October 1994, one of the Company's U.S. patents covering
recombinant BMP-2 was put into a patent interference proceeding
between the Company and Stryker Corporation, the assignee of
Creative BioMolecules, Inc. The Company can provide no assurance
as to the outcome of these proceedings.
ITEM 4. Submission of Matters to Vote of Security Holders.
- ------ -------------------------------------------------
Not applicable.
Executive Officers of the Registrant
------------------------------------
The following table sets forth the names and ages of, and the
positions and offices with the Company as of February 1, 1995 held
by, all executive officers of the Company under Section 16 of the
Securities and Exchange Act:
26
<PAGE> 27
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Gabriel Schmergel 54 President; Chief Executive
Officer; Director
Patrick Gage, Ph.D. 52 Chief Operating Officer
Garen G. Bohlin 47 Executive Vice President;
Chief Financial Officer
Tuan Ha-Ngoc 42 Executive Vice President
Steven C. Clark, Ph.D. 45 Senior Vice President-
Discovery Research
Lawrence V. Stein 44 Senior Vice President,
General Counsel and
Secretary
Joseph Grimm 43 Vice President-Finance
Jack Morgan 43 Vice President-Corporate
Development
- -----------------
</TABLE>
Business Experience
Mr. Schmergel has been President, Chief Executive Officer and
a director of the Company since April 1981.
Dr. Gage joined the Company in November 1989 as Senior Vice
President-Scientific Affairs, was subsequently promoted to
Executive Vice President in January 1990 and then was promoted to
Chief Operating Officer in November 1993. From 1971 to October
1989, Dr. Gage held various scientific and management positions at
Hoffmann-La Roche Inc., most recently as Vice President, Director
of Exploratory Research.
Mr. Bohlin joined the Company in December 1983 as Director of
Finance and Treasurer and was subsequently promoted to Vice
President-Finance and then to Senior Vice President-Finance and
Administration. He has been serving as Executive Vice President
and Chief Financial Officer since January 1990.
Mr. Ha-Ngoc joined the Company in May 1984 as Marketing
Manager and was subsequently promoted to Director of Marketing,
then to Vice President-Marketing and Business Development and then
to Senior Vice President-Pharmaceutical Business. He has been
serving as Executive Vice President since January 1990.
Dr. Clark joined the Company in March 1981 as one of the
founding Senior Scientists and was subsequently promoted to
Director of Hematopoiesis Research in September 1986. He was
promoted to Vice President-Research and Development in April 1989,
and then to Senior Vice President-Discovery Research in
November 1993.
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<PAGE> 28
Mr. Stein joined the Company in November 1992 as Senior Vice
President and General Counsel. From 1976 to November 1992, he was
an attorney with the law firm of Arnold & Porter, where he became
a partner in 1984.
Mr. Grimm joined the Company in July 1986 as Director of
Finance. He has been serving as Treasurer since December 1987 and
was promoted to Vice President-Finance in January 1992.
Mr. Morgan joined the Company as Director, Corporate
Development in April 1991 and has been serving as Vice President-
Corporate Development since November 1993. Prior to joining the
Company, he spent 12 years at Baxter Healthcare Corporation where,
among other responsibilities, he was Vice President of Corporate
Planning.
PART II
ITEM 5. Market for Registrant's Common Equity and Related
- ----------------------------------------------------------
Stockholder Matters
- -------------------
STOCK PROFILE
Genetics Institute's Common Stock (now represented by Depositary
Shares) and Warrants are traded on the National Market System of
NASDAQ under the symbols GENIZ and GENIW, respectively. At
January 31, 1995, shareholders of record of the Company's
Depositary Shares totaled approximately 1,600. The Company has
not paid cash dividends on its Common Stock since its inception.
The following table sets forth the high and low sale prices per
share of the Common Stock on the NASDAQ National Market System
since December 1, 1992.
PRICE RANGE OF COMMON STOCK
<TABLE>
<CAPTION>
Fiscal 1994 High Low
<S> <C> <C>
First Quarter 49 3/4 42
Second Quarter 46 3/4 39 1/2
Third Quarter 45 1/2 37 1/4
Fourth Quarter 45 1/2 34 1/2
Month of December 1993 49 45 3/4
Fiscal 1993
First Quarter 32 3/4 25 1/2
Second Quarter 32 26 3/4
Third Quarter 38 3/4 30 3/4
Fourth Quarter 46 1/2 37 1/4
</TABLE>
28
<PAGE> 29
ITEM 6. Selected Financial Data
- --------------------------------
<TABLE>
<CAPTION>
Year Years Ended November 30,
Ended ---------------------------------------
1994 1993 1992 1991 1990
------ ---- ---- ---- ----
(In thousands except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenue $130,880 $102,041 $ 87,774 82,551 40,374
Investment income 14,084 20,852 17,053 5,122 6,571
Research and development expense 108,161 99,002 89,571 69,930 61,074
Net loss (18,875) (16,895) (36,957) (10,740) (24,530)
Net loss per common share (.71) (.81) (1.80) (1.05) (2.04)
Dividends per common share -- -- -- -- --
BALANCE SHEET DATA
Cash and marketable securities $269,763 $291,484 $354,226 71,432 68,011
Total assets 421,593 440,737 460,549 192,270 182,338
Shareholders' equity 389,004 413,695 427,285 164,330 166,527
</TABLE>
ITEM 7. Management's Discussion and Analysis of Financial
- ------------------------------------------------------------------
Condition and Results of Operations
- -----------------------------------
OVERVIEW
Genetics Institute, Inc. and subsidiaries (the "Company") are
principally engaged in discovering, developing and commercializing
protein-based therapeutic products using recombinant DNA and
related technologies.
Significant volatility has been associated with the business and
operations of biopharmaceutical companies. Announcements by the
Company or its competitors concerning technological innovations,
new commercial products, results of clinical trials, developments
concerning patents, proprietary rights and related infringement
disputes, results of litigation, and the expense and time
associated with obtaining requisite government approvals may have
a significant impact on the Company's business.
The Company's consolidated results of operations have fluctuated
from period to period and may continue to fluctuate in the near-
term as a result of: the timing of production and shipment of bulk
protein products; changes in the timing and composition of funding
under its collaborative research and development agreements; the
ability to consummate new collaborative agreements; royalty income
(and the impact of infringement litigation on royalty income);
investment income; and the amount of expenditures committed to
research and development programs.
As of December 31, 1994, four of the Company's proprietary product
candidates were in phase I or phase II human clinical trials.
Phase I and phase II data are preliminary measurements of a
product's safety and efficacy and do not assure positive phase III
data or ultimate regulatory approval for commercial sale. The
Company's market valuation could be subject to volatility as
investors interpret the results of the Company's current and
future clinical trials.
The Company and American Home Products Corporation ("AHP") entered
into a transaction (the "AHP Transaction") through which AHP
acquired a majority interest in the Company effective January 16,
1992 (see Note 2 of Notes to Consolidated Financial Statements).
The Company changed its fiscal year to a calendar year effective
January 1, 1994. Results for the month of December 1993 are
included in the accompanying financial statements as a transition
period.
29
<PAGE> 30
RESULTS OF OPERATIONS
The Company reported a net loss of $18.9 million for fiscal 1994,
an increase of $2.0 million from the loss of $16.9 million in
fiscal 1993. The fiscal 1994 loss reflects the ongoing expansion
of product development activities in the United States, as well as
in Japan through a joint venture. In fiscal 1994, revenue
increases from the prior year were more than offset by increases
in operating and other expenses and by a decrease in investment
income.
The net loss for the December 1993 transition period was $4.4
million. This loss exceeded the average monthly net loss recorded
in fiscal 1993 and 1994 primarily due to lower than average
collaborative research and development revenues.
The net loss of $37.0 million reported for fiscal 1992 included
special charges of $32.0 million, primarily relating to the AHP
Transaction. The increase in the net loss from fiscal 1992
(exclusive of the special charges) to fiscal 1993 was primarily
due to significant expansion of the Company's product development
activities and discovery research programs during fiscal 1993.
The Company's revenues include product sales from the supply of
recombinant human antihemophilic factor concentrate ("rhAHF") to
Baxter Healthcare Corporation ("Baxter"), royalties on sales of
products by marketing partners, and collaborative research and
development revenue for activities conducted under the Company's
agreements with its various collaborative partners. Revenues
increased 28% or $28.8 million in fiscal 1994. In fiscal 1994,
product sales increased 5% to $43.5 million, royalties increased
61% to $42.6 million and collaborative research and development
revenues, including $23.1 million recognized in connection with a
joint venture with AHP discussed below, increased 31% to $44.8
million. Revenues for fiscal 1993 increased 16% from fiscal 1992
primarily in relation to the Company's first year of commercial
product sales, partly offset by a decrease in collaborative
research and development revenues.
Product sales increased 5% or $2.2 million in fiscal 1994.
Product sales in fiscal 1993 included $5.8 million of
manufacturing profit relating to shipments of rhAHF to Baxter made
prior to the December 1992 commercial approval date. Pre-
commercial shipments of rhAHF were originally billed to Baxter at
cost and were included in collaborative research and development
revenues prior to fiscal 1993. Excluding this $5.8 million of
one-time manufacturing profit recognized in fiscal 1993, product
sales increased 22% or $8.0 million in fiscal 1994, due to an
increase in the volume of rhAHF shipped to Baxter.
Royalties increased 61% or $16.1 million in fiscal 1994 primarily
due to increases in the volume of recombinant erythropoietin
("EPO") sold by the Company's marketing partners. Royalties also
include $2.2 million recognized in fiscal 1994 representing a
payment of EPO royalties earned prior to 1994. Such royalties
were initially withheld in escrow by the Company's licensee,
Boehringer Mannheim GmbH ("Boehringer Mannheim"), to fund the
Company's share of the cost of EPO patent suits filed against
Ortho Pharmaceutical Co., Ltd. and its affiliates ("Ortho") in
Europe. Pursuant to an agreement between the Company and
Boehringer Mannheim which specifies the terms for such cost
sharing, $2.2 million was released from escrow in the third
quarter of fiscal 1994. In addition, a significant increase in
the volume of finished rhAHF product sold by Baxter also
contributed to the increase in royalty revenue in fiscal 1994.
Royalty revenues decreased 3% in fiscal 1993 despite increases
in the volume of finished drug product sold by the Company's
marketing partners. The decrease was due to a reduced royalty
rate on sales of EPO in Japan as a result of the settlement
of a potential patent infringement dispute, and due to royalties
withheld to fund the Company's contribution to the cost of EPO
patent litigation in Europe as discussed above.
30
<PAGE> 31
Collaborative research and development revenues increased 31% or
$10.5 million in fiscal 1994, principally due to $23.1 million
recognized in fiscal 1994 in connection with a joint venture
formed by the Company and AHP to develop and commercialize
recombinant human interleukin-twelve ("rhIL-12"), a cellular
immune system activator, worldwide (except Japan). The amount
recognized included $20.0 million in initial milestone and
signature payments. The Company also recognized $3.0 million in
milestone and signature payments in connection with an agreement
between the Company and GI-Yamanouchi, Inc., a joint venture
between the Company and Yamanouchi Pharmaceutical Co., Ltd.
("Yamanouchi"), to develop and commercialize rhIL-12 in Japan.
The increases in collaborative research and development revenues
relating to the rhIL-12 program were offset by decreases in
reimbursable activities and a lower level of benchmark payments
from collaborative partners in other development programs.
Collaborative research and development revenues decreased 43% from
fiscal 1992 to fiscal 1993 principally due to the absence in
fiscal 1993 of pre-commercial sales of rhAHF at cost and to a
higher level of benchmark payments recognized in fiscal 1992 under
collaborative agreements. Collaborative research and development
revenues include $28.9 million, $11.8 million and $8.7 million for
fiscal years 1994, 1993 and 1992, respectively, relating to
collaborations with AHP.
Cost of sales includes royalties payable to third parties upon the
receipt of certain royalty revenues from collaborative partners.
Such third party royalties totaled $3.8 million and $1.6 million
in fiscal 1994 and 1993, respectively. Cost of sales excluding
third party royalties, as a percentage of product sales (and also
excluding the $5.8 million of one-time manufacturing profit
recognized in fiscal 1993 as discussed above) was 56% and 58% for
fiscal 1994 and 1993, respectively. The decrease in fiscal 1994
was due to lower unit manufacturing costs.
Research and development expense increased 9% to $108.2 million in
fiscal 1994 and increased 11% to $99.0 million in fiscal 1993.
The increase in fiscal 1994 was primarily attributable to higher
staffing levels in the research and product development areas of
the Company and expansion of clinical development activities and
outside research collaborations. The increase in fiscal 1993 was
primarily due to expansion of the Company's research programs and
product development activities.
General and administrative expenses decreased 10% in fiscal 1994
and increased 15% in fiscal 1993, primarily due to higher
litigation-related costs in fiscal 1993.
Investment income decreased 32% in fiscal 1994 and increased 22%
in fiscal 1993. The increase in fiscal 1993 reflected the higher
average balance of cash and marketable securities in fiscal 1993
resulting from the issuance of common stock in January 1992 to AHP
in the AHP Transaction. The decrease in fiscal 1994 was due to a
lower average balance of cash and marketable securities and net
realized losses recorded on sales of certain marketable securities
as cash was used during the year, primarily to fund capital
expenditures. The Company expects the level of investment income
to continue to decrease in fiscal 1995 as cash is used for ongoing
capital expenditures and working capital requirements.
Income (loss) of affiliates, net, was $5.3 million of net expense
in fiscal 1994, $3.3 million of net income in fiscal 1993 and $0.4
million of net expense in fiscal 1992. In fiscal 1993 the Company
recorded $5.0 million of equity income relating to distribution
agreements entered into by the GI-Yamanouchi European Partnership
(the "GYEP"), which was formed by the Company and Yamanouchi for
the commercialization of bone morphogenetic proteins in Europe.
The GYEP entered into distribution agreements with AHP and
Yamanouchi in return for distribution fees and milestone payments.
Excluding the $5.0 million of equity income relating to the GYEP
31
<PAGE> 32
distribution agreements, the increases in loss of affiliates, net,
in fiscal 1994 and 1993 were due primarily to increases in the
Company's equity in the net losses of GI-Yamanouchi, Inc.,
relating to expansion of product development activities in Japan.
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 115 "Accounting for Certain
Investments in Debt and Equity Securities" ("SFAS No. 115").
Implementation of SFAS No. 115 had no impact on the Company's
fiscal 1994 results of operations because the Company's marketable
securities, which consist of debt securities, are classified as
available-for-sale. Under SFAS No. 115, the net unrealized gain
or loss on an available-for-sale portfolio of debt securities is
recorded in shareholders' equity. The net unrealized gain on the
Company's marketable securities recorded in shareholders' equity
at January 1, 1994 was $2.6 million. A net unrealized loss of
$11.2 million was reflected in shareholders' equity at December
31, 1994.
LEGAL PROCEEDINGS
The Company has been engaged in legal proceedings relating to the
amount of damages payable by the Company as a result of the
holding of the U.S. Court of Appeals for the Federal Circuit
("CAFC") that the Company infringed a U.S. patent of Amgen Inc.
("Amgen") relating to recombinant EPO. On May 11, 1993, the
Company and Amgen agreed to settle all then outstanding claims of
Amgen against the Company in the United States relating to
recombinant EPO.
In August 1991, Ortho, a licensee of Kirin-Amgen, Inc.'s ("Kirin-
Amgen") recombinant EPO patents, initiated infringement
proceedings against the Company in the U.S. District Court in
Massachusetts. Ortho moved to consolidate the case with the
infringement suit brought by Amgen. Upon motion by the Company
and Amgen, Ortho's claims were dismissed and Ortho has appealed
the District Court's decision. A decision on the Ortho appeal is
pending. The Company and Amgen also jointly moved to dismiss
similar claims brought by Ortho against the Company in the U.S.
District Court in California in 1989, and the court granted the
motion in March 1994.
In June 1994, the Company sued Ortho in the U.S. District Court in
Delaware. The Company's suit claimed that Ortho's manufacture,
use and sale of EPO in the U.S. infringes a patent covering
pharmaceutical compositions containing homogeneous EPO that was
issued to the Company by the U.S. Patent and Trademark Office on
June 21, 1994 (the '837 patent). In September 1994, Amgen sued
the Company in U.S. District Court in Massachusetts. Amgen's suit
asked the court to declare that the Company's '837 patent is
invalid and not infringed by Amgen and to declare that any dispute
over the patent was resolved by the prior litigation. Ortho
intervened in the Amgen suit in Massachusetts and the action
against Ortho in Delaware was stayed. In February 1995, the
Massachusetts court granted a motion by Amgen for summary
judgment. The court ruled that the CAFC decision in the prior
litigation invalidating an earlier U.S. EPO patent of the Company
precluded the assertion of the '837 patent. The Company plans to
appeal. The Company can provide no assurances as to the outcome
of these disputes with Ortho and Amgen.
The Company and its licensees are engaged in various patent
litigation proceedings in Europe related to EPO. Beginning in
1991, Ortho and certain Ortho affiliates initiated patent
infringement litigation in Europe against Boehringer Mannheim,
based on a European recombinant EPO patent issued to Kirin-Amgen,
its licensor. The suits have included requests for damages and/or
injunctive relief. Boehringer Mannheim filed suits against Ortho
and/or certain of its affiliates in
32
<PAGE> 33
Europe claiming infringement of the Company's European EPO
patents. This litigation has expanded into many of the European
Community countries in Boehringer Mannheim's territory. In some
countries, where the patentee is a legally necessary party to a
suit to enforce a patent, the Company has joined as a plaintiff.
The Company is also a defendant in suits in the United Kingdom,
Germany, Italy and the Netherlands brought by an Ortho affiliate
seeking to invalidate and revoke the Company's EPO patents in the
United Kingdom, the former East Germany, Italy and the
Netherlands, respectively. The revocation suit in Germany was
dismissed in May 1994. However, it is subject to appeal.
In June 1994, a claim in the Company's European patent covering
homogeneous EPO compositions (the '539 patent) was upheld by the
Opposition Division of the European Patent Office. This decision
has been appealed. In September 1994, an appellate hearing was
held before the Board of Technical Appeals of the European Patent
Office relating to oppositions to Kirin-Amgen's European
recombinant EPO patent. The Board ruled that a modified version
of certain of Kirin-Amgen's original claims in the patent filing
was valid.
The Company can provide no assurance as to the outcome of these
European proceedings. If the courts ultimately rule in Ortho's
favor in these European proceedings, including issuing an
injunction against the future manufacture or sale of recombinant
EPO by Boehringer Mannheim, or if this litigation is otherwise
concluded in a manner adverse to Boehringer Mannheim or the
Company, future royalty income from EPO in Europe, which totaled
$11.3 million in fiscal 1994, could be reduced or eliminated.
The Company is engaged in a patent interference proceeding among
the Company, Genentech, Inc. and Chiron Corporation concerning the
Factor VIII U.S. patent rights which are cross-licensed between
Baxter (the Company's licensee) and Genentech, Inc. While the
Company believes it or Genentech should prevail in the
interference, no assurance can be given as to the outcome of this
interference. Any disposition of this proceeding in a manner
unfavorable to the Company or its licensee could have a material
adverse effect on the Company's future consolidated results of
operations.
The Company is engaged in a patent interference proceeding among
the Company, Transgene, Inc., Zymogenetics, Inc. and British
Technology Group, Ltd. ("BTG") concerning U.S. patent rights
directed to the use of vitamin K as a culture medium supplement in
the manufacture of recombinant Factor IX. BTG has licensed its
Factor IX patent rights to the Company. In addition, the Company
is engaged in a patent interference proceeding with Stryker
Corporation, the assignee of Creative BioMolecules, Inc.,
concerning one of the Company's U.S. patents covering recombinant
BMP-2. Both Factor IX and BMP-2 are currently in the clinical
development stage. The Company can provide no assurance as to the
outcome of these proceedings.
LIQUIDITY AND CAPITAL RESOURCES
Cash and marketable securities totaled $269.8 million at December
31, 1994, a decrease of $21.7 million from November 30, 1993.
This decrease included a non-cash net unrealized loss on
marketable securities of $11.2 million and a net use of cash and
marketable securities of $10.5 million for the thirteen-month
period which includes the transition period of December 1993 and
the year ended December 31, 1994. For the thirteen-month period:
operating activities generated $3.0 million of cash; stock
issuances under stock option and employee stock purchase plans
generated $9.0 million of cash; equipment sale-leaseback
transactions generated cash proceeds of $26.6 million; and cash
was used for capital expenditures totaling $49.0 million and other
net investments of $0.2 million.
33
<PAGE> 34
Cash flow in 1995 will be affected by a change in the contractual
terms for the payment of rhAHF product revenue to the Company by
Baxter. The change in payment terms is expected to increase
average accounts receivable from Baxter by up to $20.0 million
during 1995.
The Company expects that its available cash and marketable
securities, together with investment income, operating revenues
and lease and debt financing arrangements, will be sufficient to
finance its working capital and capital requirements for the
foreseeable future. Over the next several years, the Company's
working capital and capital requirements will be subject to change
depending upon numerous factors including the level of capital
expenditures, changes in the amount of expenditures committed to
self-funded research and development programs, results of research
and development activities, competitive and technological
developments, the levels of resources which the Company devotes to
the expansion of its clinical testing, manufacturing and marketing
activities and the timing and cost of obtaining required
regulatory approvals for new products.
ITEM 8. Financial Statements and Supplementary Data.
- ------ -------------------------------------------
All financial statements and schedules required to be filed
hereunder are filed as exhibits hereto, are listed under Item 14
(a), and are incorporated herein by reference.
PART III
ITEM 10. Directors and Executive Officers of the Registrant.
- ------- --------------------------------------------------
(a) Directors. The information with respect to directors
required under this item is incorporated herein by reference to
the section captioned "Election of Directors" in the Company's
Proxy Statement with respect to the Annual Meeting of Stockholders
to be held on May 16, 1995.
(b) Executive Officers. The information with respect to
executive officers required under this item is incorporated herein
by reference to Part I of this Report.
ITEM 11. Executive Compensation.
- ------- ----------------------
The information required under this item is incorporated
herein by reference to the sections entitled "Election of
Directors -- Compensation for Directors," "-- Compensation of
Executive Officers," "-- Compensation Arrangements and Employment
Agreements," "-- Report of the Compensation Committee," "-- Stock
Performance Chart," in the Company's Proxy Statement with respect
to the Annual Meeting of Stockholders to be held on May 16, 1995.
ITEM 12. Security Ownership of Certain Beneficial Owners and
- ------- ---------------------------------------------------
Management.
----------
The information required under this item is incorporated
herein by reference to the section entitled "Principal
Stockholders" in the Company's Proxy Statement with respect to the
Annual Meeting of Stockholders to be held on May 16, 1995.
34
<PAGE> 35
ITEM 13. Certain Relationships and Related Transactions.
- ------- ----------------------------------------------
The information required under this item is incorporated
herein by reference to the sections entitled "Election of
Directors -- Compensation Arrangements and Employment Agreements"
and "-- Certain Transactions" in the Company's Proxy Statement
with respect to the Annual Meeting of Stockholders to be held on
May 16, 1995.
The Company, AHP and its affiliate, AHP Biotech Holdings,
Inc. ("Holdings") have entered into a Governance Agreement (the
"Governance Agreement") providing, among other things, for (i) the
inclusion of nominees designated by Holdings on, and the change in
composition on January 1, 1997 of, an expanded Board of Directors
of the Company, (ii) the establishment of committees of the Board
of Directors addressing compensation, scientific affairs and
intellectual property rights and the membership of the directors
designated by Holdings on such new as well as existing committees,
(iii) approval rights on the part of the directors designated by
Holdings with respect to material acquisitions by the Company,
dispositions of all or any substantial portion of its business or
assets, issuances and repurchases of equity securities, amendments
to the Certificate of Incorporation or By-Laws of the Company and
any action otherwise within the purview of the Intellectual
Property Committee, Scientific Affairs Committee or Compensation
Committee of the Board of Directors established pursuant to the
Governance Agreement which is presented to the full Board for
action, (iv) certain rights of first refusal granted to AHP with
respect to material licensing and marketing arrangements with
third parties, including an obligation to first offer to AHP
marketing rights to products before offering them to third
parties, (v) certain restrictions on acquisitions and dispositions
of New Shares by AHP and its affiliates and (vi) certain
agreements as to Holdings' voting of its Common Stock with respect
to elections of directors and amendments to the terms of the
Depositary Shares.
35
<PAGE> 36
PART IV
ITEM 14. Exhibits, Financial Statements Schedules, Supplementary
- ------- --------------------------------------------------------
Data and Reports on Form 8-K.
----------------------------
<TABLE>
<S> <C>
Report of Independent Public Accountants.......................... F-1
Report of Independent Accountants................................. F-2
(a)(1) Index to Financial Statements
Consolidated Balance Sheets as of
December 31, 1994 and November 30, 1993........................... F-3
Consolidated Statements of Operations
for the year ended December 31, 1994,
the month ended December 31, 1993 and
the years ended November 30, 1993, and 1992....................... F-4
Consolidated Statements of Cash Flows
for year ended December 31, 1994,
the month ended December 31, 1993 and
the years ended November 30, 1993, and 1992....................... F-5
Consolidated Statements of Changes in
Shareholders' Equity for year ended
December 31, 1994, the month ended
December 31, 1993 and the years
ended November 30, 1993, and 1992................................. F-6
Notes to Consolidated Financial Statements........................ F-7
(a)(2) Index to Financial Statement Schedules.
The following Financial Statement Schedule is filed as part of this
Report:
Schedule II- Valuation, Qualifying and Reserve
Accounts -- for the year ended
December 31, 1994, the month ended
December 31, 1993, and the years ended
November 30, 1993, and 1992......................... S-1
</TABLE>
All other schedules are omitted because they are not applicable, or
not required, or because the required information is included in the
consolidated financial statements or notes thereto.
(a)(3) Index to Exhibits.
The Exhibits filed as part of this Form 10-K are listed on the
Exhibit Index immediately preceding such Exhibits, which Exhibit Index
is incorporated herein by reference.
36
<PAGE> 37
(b) Reports on Form 8-K.
The Company filed no reports on Form 8-K during the quarter
ended December 31, 1994.
37
<PAGE> 38
SIGNATURES
Pursuant to the requirements of Section 13 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.
GENETICS INSTITUTE, INC.
March 15, 1995 By: /s/Gabriel Schmergel
--------------------------
Chief Executive 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.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/Gabriel Schmergel President; March 15, 1995
- --------------------
Gabriel Schmergel Chief Executive Officer
(Principal Executive
Officer); Director
/s/Garen G. Bohlin Executive Vice March 15, 1995
- ------------------ President (Principal
Garen G. Bohlin Financial and
Accounting Officer)
/s/Benno C. Schmidt Chairman of the March 15, 1995
- ------------------- Board: Director
Benno C. Schmidt
/s/James G. Andress Director March 15, 1995
- -------------------
James G. Andress
/s/J. Richard Crout, M.D. Director March 15, 1995
- -------------------------
J. Richard Crout, M.D.
/s/Anthony B. Evnin Director March 15, 1995
- -------------------
Anthony B. Evnin
/s/Fred Hassan Director March 15, 1995
- --------------
Fred Hassan
/s/ Thomas P. Maniatis Director March 15, 1995
- -------------------------
Thomas P. Maniatis, Ph.D.
/s/Robert I. Levy Director March 15, 1995
- --------------------
Robert I. Levy, M.D.
</TABLE>
-38-
<PAGE> 39
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and the Shareholders of Genetics Institute, Inc.:
We have audited the accompanying consolidated balance sheets of
Genetics Institute, Inc., and subsidiaries as of December 31, 1994 and November
30, 1993 and the related consolidated statements of operations, cash flows and
stockholders' equity for the years then ended and the month ended December 31,
1993. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with 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 audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Genetics Institute,
Inc. and subsidiaries as of December 31, 1994 and November 30, 1993 and the
results of their operations and their cash flows for the years then ended and
the month ended December 31, 1993 in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of the
financial statements is presented for the purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
Arthur Andersen LLP
Boston, Massachusetts
January 18, 1995
F-1
<PAGE> 40
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Genetics Institute, Inc.:
We have audited the accompanying consolidated statements of operations,
cash flows, and changes in shareholders' equity for Genetics Institute, Inc.
and subsidiaries for the year ended November 30, 1992. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 disclosure 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 financial statements referred to above present
fairly, in all material respects, the consolidated results of operations and
cash flows of Genetics Institute, Inc. and subsidiaries for the year ended
November 30, 1992 in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of the
financial statements is presented for the purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
December 29, 1992
F-2
<PAGE> 41
CONSOLIDATED BALANCE SHEETS
GENETICS INSTITUTE, INC. AND SUBSIDIARIES
(In thousands except share data)
<TABLE>
<CAPTION>
December 31, November 30,
1994 1993
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 21,793 $ 5,859
Marketable securities 247,970 285,625
Accounts receivable 16,127 24,434
Inventories 18,673 15,480
Other current assets 5,275 5,426
------- -------
Total current assets 309,838 336,824
------- -------
Property, plant and equipment, net 105,315 96,437
Other assets 6,440 7,476
------- -------
$421,593 $440,737
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 11,544 $ 7,309
Accrued expenses 21,045 19,733
------- -------
Total current liabilities 32,589 27,042
------- -------
Shareholders' equity:
Common stock, par value $.01;
authorized 50,000,000 shares 266 262
Additional paid-in capital 595,360 585,636
Accumulated deficit (206,622) (172,203)
------- -------
Total shareholders' equity 389,004 413,695
------- -------
$421,593 $440,737
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-3
<PAGE> 42
CONSOLIDATED STATEMENTS OF OPERATIONS
GENETICS INSTITUTE, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(In thousands except per share data)
Years Ended
Year Ended Month Ended November 30,
December 31, December 31, --------------------
1994 1993 1993 1992
------------ ------------ -------- --------
<S> <C> <C> <C> <C>
REVENUE
Product sales $ 43,482 $ 3,217 $ 41,313 $ --
Royalties 42,603 2,252 26,474 27,306
Collaborative research
and development 44,795 1,771 34,254 60,438
------- ------ ------- ------
Total revenue 130,880 7,239 102,041 87,744
------- ------ ------- ------
OPERATING EXPENSES
Cost of sales 28,369 1,704 22,035 --
Research and development 108,161 9,327 99,002 89,571
General and administrative 18,719 1,196 20,784 18,005
Special items -- -- -- 31,995
------- ------ ------- ------
Total operating expenses 155,249 12,227 141,821 139,571
------- ------ ------- ------
LOSS FROM OPERATIONS (24,369) (4,988) (39,780) (51,827)
------- ------ ------- ------
OTHER INCOME, NET
Investment income 14,084 1,260 20,852 17,053
(Loss) income of
affiliates, net (5,308) (462) 3,275 (404)
Other, net (3,282) (182) (1,242) (1,779)
------- ------ ------- ------
Total other income, net 5,494 616 22,885 14,870
------- ------ ------- ------
NET LOSS (18,875) (4,372) (16,895) (36,957)
Dividends on preferred stock -- -- (3,436) (4,589)
------- ------ ------- ------
Net loss applicable to common
shares outstanding $(18,875) $ (4,372) $(20,331) $(41,546)
======= ====== ======= ======
Weighted average common
shares outstanding 26,440 26,302 25,103 23,107
======= ====== ======= ======
NET LOSS PER COMMON SHARE $ (.71) $ (.17) $ (.81) $ (1.80)
======= ====== ======= ======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 43
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
GENETICS INSTITUTE, INC. AND SUBSIDIARIES
<CAPTION>
(In thousands) Year Ended Month Ended Years Ended November 30,
December 31, December 31, ------------------------
1994 1993 1993 1992
---------- --------- -------- --------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (18,875) $ (4,372) $(16,895) $(36,957)
---------- --------- --------- --------
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities-
Depreciation and amortization 13,192 1,185 11,649 10,571
Compensation related to incentive plans 691 79 1,146 1,358
Loss on sale of investment in affiliate -- -- -- 1,995
Equity in net loss (income) of affiliates 5,308 462 (3,275) 404
Changes in assets and liabilities-
Accounts receivable 642 3,915 (950) (931)
Inventories and other current assets (2,745) (297) 2,930 (1,282)
Accounts payable (2,331) 4,857 1,889 824
Accrued expenses 5,360 (4,049) 2,889 4,495
Reserve for patent-related damages -- -- (11,000) --
---------- --------- --------- ---------
Net cash provided by (used in)
operating activities 1,242 1,780 (11,617) (19,523)
---------- --------- --------- ---------
INVESTING ACTIVITIES
Purchase of marketable securities (165,014) (22,084) (343,114) (453,289)
Proceeds from sale/maturity of marketable
securities 189,321 24,260 347,092 214,700
Additions to property, plant and equipment (44,323) (4,687) (46,886) (18,276)
Proceeds from sale of investment in affiliate -- -- -- 23,850
(Investments in) distributions from affiliates (5,307) 5,000 (2,725) --
Other investing activities 563 (409) (3,673) (1,940)
---------- --------- --------- ---------
Net cash (used in) provided by
investing activities (24,760) 2,080 (49,306) (234,955)
---------- --------- --------- ---------
FINANCING ACTIVITIES
Stock issuances 7,728 1,233 6,040 303,141
Preferred stock dividends -- -- (3,436) (4,589)
Redemption of preferred stock -- -- (445) --
Proceeds from sale-leaseback transactions 16,714 9,917 -- --
---------- --------- --------- ---------
Net cash provided by financing activities 24,442 11,150 2,159 298,552
---------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents 924 15,010 (58,764) 44,074
Cash and cash equivalents, beginning of period 20,869 5,859 64,623 20,549
---------- --------- --------- ---------
Cash and cash equivalents, end of period $ 21,793 $ 20,869 $ 5,859 $ 64,623
========== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 44
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
GENETICS INSTITUTE, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Convertible
Exchangeable Additional Total
Preferred Common Paid-in Accumulated Shareholders'
Stock Stock Capital Deficit Equity
------------ ------- ---------- --------------- --------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE AT NOVEMBER 30, 1991 $1,150 $146 $273,362 $(110,326) $164,332
Issuance of 5,271 shares of common
stock upon conversion of 3,695
shares of preferred stock (4) -- 4 -- --
Issuance of 295,224 shares of
common stock under incentive plans -- 3 4,496 -- 4,499
Issuance of 9,466,709 shares of
common stock to AHP -- 95 299,905 -- 300,000
Preferred stock dividends -- -- -- (4,589) (4,589)
Net loss -- -- -- (36,957) (36,957)
----- --- ------- ------- -------
BALANCE AT NOVEMBER 30, 1992 1,146 244 577,767 (151,872) 427,285
Issuance of 231,804 shares of common
stock under incentive plans -- 2 6,849 -- 6,851
Issuance of 1,625,370 shares of
common stock upon conversion of
1,137,815 shares of preferred stock (1,138) 16 1,012 -- (110)
Redemption of 8,490 shares of
preferred stock (8) -- (437) -- (445)
Issuance of 14,864 shares of
common stock to AHP -- -- 445 -- 445
Preferred stock dividends -- -- -- (3,436) (3,436)
Net loss -- -- -- (16,895) (16,895)
----- --- ------- ------- -------
BALANCE AT NOVEMBER 30, 1993 -- 262 585,636 (172,203) 413,695
Issuance of 48,183 shares of common
stock under incentive plans -- 1 1,311 -- 1,312
Net loss -- -- -- (4,372) ( 4,372)
----- --- ------- ------- -------
BALANCE AT DECEMBER 31, 1993 -- 263 586,947 (176,575) 410,636
Issuance of 288,260 shares of common
stock under incentive plans -- 3 8,413 -- 8,416
Unrealized loss on marketable
securities -- -- -- (11,172) (11,172)
Net loss -- -- -- (18,875) (18,875)
----- --- ------- ------- -------
BALANCE AT DECEMBER 31, 1994 $ -- $266 $595,360 $(206,622) $389,004
===== === ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-6
<PAGE> 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GENETICS INSTITUTE, INC. AND SUBSIDIARIES
1. Summary of Significant Accounting Policies
Business: Genetics Institute, Inc. and subsidiaries (the "Company") are
principally engaged in discovering, developing and commercializing therapeutic
products using recombinant DNA and related technologies.
Basis of Presentation: The consolidated financial statements include
all accounts of Genetics Institute, Inc. and its wholly-owned subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation. Certain amounts in the prior year financial statements have been
reclassified to conform to the current year presentation.
Change in Fiscal Year: The Company changed its fiscal year-end from
November 30 to December 31, effective January 1, 1994. Financial information
for the preceding fiscal year has not been restated because the information is
reasonably comparable with the current year. The one-month transition period
ended December 31, 1993 is presented separately in the financial statements.
Comparative unaudited condensed statement of operations data for the one-month
period ended December 31, 1992 is as follows: revenue $9.5 million; operating
income $0.7 million; net income $1.9 million; and net income per common share
$.06.
Revenue Recognition: Product sales revenue is recognized upon shipment
of commercial product and represents commercial sales of recombinant human
antihemophilic factor concentrate ("rhAHF") under a supply contract with Baxter
Healthcare Corporation ("Baxter") for Baxter's final product manufacturing and
distribution. Shipments of rhAHF and other products at cost for periods prior
to commercial approval are included in collaborative research and development
revenue. The Company has entered into agreements with a number of collaborative
partners to conduct collaborative research and development programs. In some
cases, these programs are conducted through development partnerships. Revenue
under these arrangements is included in collaborative research and development
revenue and is generally recognized as the related costs are incurred by the
Company, as benchmarks are achieved or as pre-commercial product is shipped, as
applicable. Collaborative research and development revenue from development
partnerships is recorded net of amounts funded to the partnerships by the
Company. Royalty revenue is recognized in the period that commercial product is
sold by the licensee.
Research and Development costs, including those incurred in relation to
the Company's collaborative research and development programs, are expensed in
the period incurred.
Cash Equivalents, for purposes of reporting cash flows, include highly
liquid instruments purchased with a maturity of three months or less. The
Company adopted Statement of Financial Accounting Standards No. 115 "Accounting
for Certain Investments in Debt and Equity Securities" ("SFAS No. 115")
effective January 1, 1994. Under SFAS No. 115, the Company's cash equivalents
are classified as held-to-maturity (recorded at amortized cost).
Marketable Securities consist of debt securities which are classified
under SFAS No. 115 as available-for-sale (recorded at fair value). At January
1, 1994, the cumulative effect of implementing SFAS No. 115 was to record a net
unrealized gain of $2.6 million on available-for-sale securities. Under SFAS
No. 115, such net unrealized holding gains or losses are recorded in
shareholders' equity. For periods prior to fiscal 1994, marketable securities
are recorded at cost which approximates market. In computing realized gains or
losses, the cost of securities sold is
F-7
<PAGE> 46
based on average cost. The estimated fair value of marketable
securities is based primarily on market quotations.
Inventories are valued at the lower of cost or market. Cost is
determined on the first-in, first-out method.
Property, Plant and Equipment is carried at cost. Depreciation is
provided, using the straight-line method, over the assets' estimated useful
lives, or for leasehold improvements and leased equipment, over the lesser of
the lease term or the useful life, as follows (in years): buildings and
building improvements, 10- 30; machinery and equipment, 3-10; and leasehold
improvements, 3-15.
Foreign Currency Transactions: The Company enters into foreign exchange
forward and option contracts to hedge royalties on sales in foreign currencies
by marketing partners. The purpose of this hedging activity is to protect the
Company from the risk that dollar cash flows from such royalties will be
adversely affected by changes in exchange rates. Gains and losses on forward
and option contracts that are hedges of firm commitments are deferred and
recognized in revenue in the same period as the hedged transactions. Contracts
that hedge anticipated royalty transactions are marked to market and unrealized
gains and losses are recorded in income for the period. The net loss on such
contracts was $0.6 million in fiscal 1994 and was not material in fiscal 1993.
At December 31, 1994, the Company had forward exchange contracts, all having
maturities of less than one year, to sell Japanese yen in the amount of $20.0
million and German deutschmarks in the amount of $5.5 million.
Financial Instruments consist of cash equivalents, marketable
securities, foreign currency contracts and accounts receivable. The estimated
fair value of these financial instruments approximates their carrying value
and, except for accounts receivable, is based primarily on market quotes. The
Company's cash equivalents and marketable securities are generally obligations
of the federal government or investment grade corporate or municipal issuers.
The Company, by policy, limits the amount of credit exposure to any one
financial institution. The counter parties to foreign currency contracts are
major financial institutions. The Company does not anticipate any losses from
non-performance on such contracts.
Net Loss Per Common Share is computed based on the weighted average
number of common shares outstanding during the period. Common share equivalents
have not been included in the calculations because their effect would be
antidilutive. For periods prior to July 1993, the net loss applicable to common
shares consists of the reported net loss plus dividends declared on the
Company's then outstanding Convertible Exchangeable Preferred Stock (the
"Preferred Stock").
2. Transactions with American Home Products Corporation
The Company and American Home Products Corporation ("AHP") entered into
a transaction (the "AHP Transaction") through which AHP acquired a majority
interest in the Company effective January 16, 1992. In connection with the AHP
Transaction, the Company issued 9,466,709 new shares of Genetics Institute,
Inc. Common Stock (the "Common Stock") to AHP for an aggregate purchase price
of $300.0 million and, for shares of Common Stock owned, the Company's
shareholders received from AHP a combination of cash and Depositary Shares
subject to a call option (the "Depositary Shares"). Under the terms of the call
option, AHP has the right, but not the obligation, to purchase the outstanding
Depositary Shares that it does not own, in whole but not in part, at any time
until December 31, 1996, at a call price of $72.11 per share for the period
January 1, 1995 to March 31, 1995 and increasing by approximately $1.84 on a
quarterly basis to $85.00 per share for the quarter ending December 31, 1996.
The Company incurred a special charge of $30.0 million in AHP
Transaction-related expenses in fiscal 1992.
F-8
<PAGE> 47
Independent of its right to call the Depositary Shares, AHP is
permitted by the terms of the agreements with the Company to acquire additional
Depositary Shares through open market purchases or privately negotiated
purchases, provided that its aggregate holdings do not exceed 75% of the
Company's outstanding equity, subject to certain exceptions. As of December 31,
1994, AHP had purchased 947,000 additional Depositary Shares through such
purchases . In addition, in connection with the call for redemption of the
Company's Preferred Stock in July 1993, holders of Preferred Stock elected to
convert 1,136,815 shares, or approximately 99% of the outstanding shares of
such stock, into 1,624,021 shares of Common Stock which, pursuant to the AHP
Transaction, were exchanged for the same combination of cash and Depositary
Shares received by shareholders in the AHP Transaction. Pursuant to agreements
with AHP, the Company issued to AHP 14,864 shares of Common Stock, the proceeds
of which funded the cash required for the redemption of the 8,490 shares of
Preferred Stock not converted. As of December 31, 1994, such transactions have
brought AHP's total ownership position in the Company to approximately 64%.
Effective July 8, 1994, the Company and AHP entered into an agreement
to form a joint venture to develop and commercialize recombinant human
interleukin-twelve (rhIL-12), an immune system modulatory protein, on a
worldwide basis except for Japan. In connection with this agreement, the
Company recognized $23.1 million of collaborative research and development
revenue in fiscal 1994 of which $20.0 million represented initial milestone and
signature payments and $3.1 million represented funding of product development
costs. Collaborative research and development revenue also includes $5.8
million, $11.8 million and $8.7 million, for fiscal years ended 1994, 1993 and
1992, respectively, relating to collaborations with AHP in the area of cell
adhesion technology and the potential commercialization of recombinant human
interleukin-eleven (rhIL-11), a blood cell growth factor, in certain Pacific
Basin territories.
3. Investments in Debt Securities
The Company's investment portfolio of debt securities consists of cash
equivalents classified as held-to-maturity and marketable securities classified
as available-for-sale. The fair value of cash equivalents approximated the
amortized cost of $21.4 million at December 31, 1994. Aggregate fair value,
amortized cost and average maturity for marketable securities held at December
31, 1994 are presented below. The average maturities presented below include
estimates of the effective life for certain securities whose actual maturities
will differ from contractual maturities because the borrowers have the right to
call or prepay the obligations without call or prepayment penalties.
<TABLE>
<CAPTION>
Fair Gross Unrealized Amortized
(In thousands) Value Holding Gains and (Losses) Cost
----- -------------------------- ---------
<S> <C> <C> <C> <C>
U.S. Government and Agency securities
(average maturity of 3.1 years) $137,691 $143 $ (6,369) $143,917
Corporate and other debt securities
(average maturity of 2.7 years) 110,279 43 (4,989) 115,225
-------- ---- --------- --------
$247,970 $186 $(11,358) $259,142
======== ==== ========= ========
</TABLE>
Gross realized gains and losses on sales of marketable securities in
fiscal 1994 were $0.8 million and $2.4 million, respectively. Approximately
$5.5 million in debt securities at December 31, 1994 has been pledged as
collateral pursuant to obligations under operating leases (Note 9).
F-9
<PAGE> 48
4. Inventories
Inventories include $14.3 million and $11.6 million of rhAHF at
December 31, 1994 and November 30, 1993, respectively, and consisted of:
<TABLE>
<CAPTION>
December 31, November 30,
(In thousands) 1994 1993
----------- -----------
<S> <C> <C>
Raw materials $ 4,354 $ 3,924
Work in process 776 406
Finished goods 13,543 11,150
------ ------
$18,673 $15,480
======= =======
</TABLE>
5. Property, Plant and Equipment, Net
Property, plant and equipment consisted of:
<TABLE>
<CAPTION>
December 31, November 30,
(In thousands) 1994 1993
----------- -----------
<S> <C> <C>
Land and land improvements $ 9,988 $ 6,066
Construction in progress 10,891 28,034
Buildings and building improvements 76,323 47,455
Machinery and equipment 47,067 41,666
Leasehold improvements 14,443 15,461
Accumulated depreciation and amortization (53,397) (42,245)
------- -------
$105,315 $96,437
======== =======
</TABLE>
Machinery and equipment with an aggregate cost of $16.7 million and
$9.9 million were sold and leased-back in fiscal 1994 and in the month ended
December 31, 1993, respectively, as discussed in Note 9.
6. Income Taxes
As of December 31, 1994, the Company had, for federal income tax
purposes, carryforwards of net operating losses (NOL) and research and
development credits (R&D) available as an offset against future taxable income
and income taxes payable as follows (in thousands):
<TABLE>
<CAPTION>
Year of
NOL R&D Expiration
-------- ------- ----------
<S> <C> <C>
$ -- $ 777 1995-1999
-- 699 2000
3,896 816 2001
14,498 1,442 2002
19,906 1,115 2003
34,943 984 2004
3,885 1,196 2005
20,114 630 2006
23,379 1,988 2007
2,527 214 2008
-- 1,878 2009
-------- -------
$123,148 $11,739
======== =======
</TABLE>
The Company utilized approximately $13.1 million of NOLs in 1994 due to
revenue recognized for tax purposes in connection with the rhIL-12 joint
venture discussed in Note 2. Based on the Internal Revenue Code and the change
in ownership of the Company resulting from the AHP Transaction discussed in
Note 2, utilization of the NOL may be subject to an annual limitation.
F-10
<PAGE> 49
The Company's NOLs, tax credits and other temporary differences ($51.8
million) represent a deferred tax asset of $74.3 million. Because the level of
future taxable income is uncertain, the Company has recorded a valuation
allowance equal to the total tax asset.
7. Special Items
Special items in fiscal 1992 include a charge of $30.0 million in AHP
Transaction-related expenses as discussed in Note 2 and a charge of $2.0
million to recognize a loss on the sale of the Company's interest in a
manufacturing partnership.
8. SciGenics, Inc.
In May 1991 SciGenics, Inc. and the Company completed an initial public
offering of 2,090,909 units, each unit consisting of one share of callable
common stock of SciGenics, and one warrant to purchase one share of the
Company's Common Stock at an exercise price of $35.92 per share, exercisable at
any time from December 1, 1992 through May 31, 1996 ("the Warrants"). SciGenics
received net proceeds of $42.0 million from the unit offering. These funds are
being used to engage the Company to conduct research and development on
recombinant human macrophage colony stimulating factor ("rhM-CSF") for North
America and embryonic growth and regulatory proteins worldwide in accordance
with a development contract. The Company has the option to reacquire the rights
for either program or to acquire all of the shares of SciGenics callable common
stock, in each case for predetermined amounts during specified future periods.
The Company committed, commencing December 1, 1991, to match SciGenics funds
expended toward development and clinical trials conducted in the rhM-CSF
program up to a maximum of $20.0 million. Through December 31, 1994, $14.2
million had been expended under this commitment. The Company may terminate this
commitment, in which event, the program purchase option with respect to the
rhM-CSF program and the stock purchase option will terminate. The value of the
Warrants ($8.3 million), representing an incentive to enter into the
development contract, is included in Other Assets and is being amortized as a
charge to operating expenses on the basis of revenues received by the Company
from SciGenics each period to projected total revenues to be received.
Amortization expense, included in general and administrative expenses, was $0.5
million, $1.1 million and $2.0 million in fiscal 1994, 1993 and 1992,
respectively. Accumulated amortization was $6.4 million and $5.9 million at
December 31, 1994 and November 30, 1993, respectively.
In September 1991 the units separated into their two components. As
noted above, the units were to have separated on December 1, 1992. However, the
separation date was advanced due to the Company's announcement of a merger
agreement with AHP as discussed in Note 2. The expiration date of the Warrants
is unaffected by the merger and remains May 31, 1996. From and after the AHP
Transaction, the Warrants are exercisable for the same consideration received
by shareholders in the AHP Transaction.
9. Commitments and Contingencies
Litigation: The Company has been engaged in legal proceedings relating
to the amount of damages payable by the Company as a result of the holding of
the U.S. Court of Appeals for the Federal Circuit ("CAFC") that the Company
infringed a U.S. patent of Amgen Inc. ("Amgen") relating to recombinant EPO. On
May 11, 1993, the Company and Amgen agreed to settle all then outstanding
claims of Amgen against the Company in the United States relating to
recombinant EPO.
In August 1991, Ortho Pharmaceutical Co., Ltd. and its affiliates
("Ortho"), a licensee of Kirin-Amgen, Inc.'s ("Kirin-Amgen") recombinant EPO
patents, initiated infringement proceedings against the Company in the U.S.
District Court in Massachusetts. Ortho moved to consolidate the
F-11
<PAGE> 50
case with the infringement suit brought by Amgen. Upon motion by the
Company and Amgen, Ortho's claims were dismissed and Ortho has appealed the
District Court's decision. A decision on the Ortho appeal is pending. The
Company and Amgen also jointly moved to dismiss similar claims brought by Ortho
against the Company in the U.S. District Court in California in 1989, and the
court granted the motion in March 1994.
In June 1994, the Company sued Ortho in the U.S. District Court in
Delaware. The Company's suit claimed that Ortho's manufacture, use and sale of
EPO in the U.S. infringes a patent covering pharmaceutical compositions
containing homogeneous EPO that was issued to the Company by the U.S. Patent
and Trademark Office on June 21, 1994 (the '837 patent). In September 1994,
Amgen sued the Company in U.S. District Court in Massachusetts. Amgen's suit
asked the court to declare that the Company's '837 patent is invalid and not
infringed by Amgen and to declare that any dispute over the patent was resolved
by the prior litigation. The Company has filed counterclaims against Amgen for
infringement of the '837 patent. Ortho intervened in the Amgen suit in
Massachusetts and the action against Ortho in Delaware was stayed. In February
1995, the Massachusetts court granted a motion by Amgen for summary judgment.
The court ruled that the CAFC decision in the prior litigation invalidating an
earlier U.S. EPO patent of the Company precluded the assertion of the '837
patent. The Company plans to appeal. The Company can provide no assurances as
to the outcome of these disputes with Ortho and Amgen.
The Company and its licensees are engaged in various patent litigation
proceedings in Europe related to EPO. Beginning in 1991, Ortho and certain
Ortho affiliates initiated patent infringement litigation in Europe against
Boehringer Mannheim, the Company's European EPO licensee, based on a European
recombinant EPO patent issued to Kirin-Amgen, its licensor. The suits have
included requests for damages and/or injunctive relief. Boehringer Mannheim
filed suits against Ortho and/or certain of its affiliates in Europe claiming
infringement of the Company's European EPO patents. This litigation has
expanded into many of the European Community countries in Boehringer Mannheim's
territory. In some countries, where the patentee is a legally necessary party
to a suit to enforce a patent, the Company has joined as a plaintiff. The
Company is also a defendant in suits in the United Kingdom, Germany, Italy and
the Netherlands brought by an Ortho affiliate seeking to invalidate and revoke
the Company's EPO patents in the United Kingdom, the former East Germany, Italy
and the Netherlands, respectively. The revocation suit in Germany was dismissed
in May 1994. However, it is subject to appeal.
In June 1994, a claim in the Company's European patent covering
homogeneous EPO compositions (the '539 patent) was upheld by the Opposition
Division of the European Patent Office. This decision has been appealed. In
September 1994, an appellate hearing was held before the Board of Technical
Appeals of the European Patent Office relating to the oppositions to
Kirin-Amgen's European recombinant EPO patent. The Board ruled that a modified
version of certain of Kirin-Amgen's original claims in the patent filing was
valid.
The Company can provide no assurance as to the outcome of these
European proceedings. If the courts ultimately rule in Ortho's favor in these
European proceedings, including issuing an injunction against the future
manufacture or sale of recombinant EPO by Boehringer Mannheim, or if this
litigation is otherwise concluded in a manner adverse to Boehringer Mannheim or
the Company, future royalty income from EPO in Europe, which totaled $11.3
million in fiscal 1994, could be reduced or eliminated.
The Company is engaged in a patent interference proceeding among the
Company, Genentech, Inc. and Chiron Corporation concerning the Factor VIII U.S.
patent rights which are cross-licensed
F-12
<PAGE> 51
between Baxter (the Company's licensee) and Genentech, Inc. While the
Company believes it or Genentech should prevail in the interference, no
assurance can be given as to the outcome of this interference. Any disposition
of this proceeding in a manner unfavorable to the Company or its licensee could
have a material adverse effect on the Company's future consolidated results of
operations.
The Company is engaged in a patent interference proceeding among the
Company, Transgene, Inc., Zymogenetics, Inc. and British Technology Group, Ltd.
("BTG") concerning U.S. patent rights directed to the use of vitamin K as a
culture medium supplement in the manufacture of recombinant Factor IX. BTG has
licensed its Factor IX patent rights to the Company. In addition, the Company
is engaged in a patent interference proceeding with Stryker Corporation, the
assignee of Creative BioMolecules, Inc. concerning one of the Company's U.S.
patents covering recombinant BMP-2. The Company can provide no assurance as to
the outcome of these proceedings.
Leases: The Company has entered into operating leases for various
facilities and equipment. The most significant of these arrangements relates to
the Company's headquarters facility which was sold at cost in 1984 and then
leased back. The terms of this 20-year lease provide for rental adjustments and
purchase options at the end of every fifth year of the lease. In addition, the
Company has pledged certain of its marketable securities as collateral pursuant
to obligations under the lease (Note 3) and the lease agreement requires that
the Company maintain certain levels of net worth and working capital, as
defined, throughout the term of the lease. In December 1993 and fiscal 1994,
the Company entered into several operating leases involving the sale-leaseback
of certain machinery and equipment. The Company is responsible for taxes,
insurance and maintenance under all of its facility and equipment leasing
arrangements.
Future minimum rental payments under operating leases at December 31, 1994
are as follows (in thousands):
<TABLE>
<CAPTION>
Year ending December 31,
<S> <C>
1995 ....................................... $11,131
1996 ....................................... 8,931
1997 ....................................... 8,931
1998 ....................................... 8,860
1999 ....................................... 6,603
Thereafter.................................. 23,023
------
$67,479
=======
</TABLE>
Rent expense under operating leases was $11.2 million, $9.1 million and
$9.3 million in fiscal 1994, 1993 and 1992, respectively.
Commitments: In connection with facilities expansion and improvement
projects, the Company had commitments for capital expenditures of approximately
$11.5 million at December 31, 1994.
10. Other Income, Net
Other, net items included in Other Income, Net for the three years ended
December 31, 1994, November 30, 1993 and 1992 are as follows:
F-13
<PAGE> 52
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Foreign withholding taxes $(2,235) $(1,650) $(1,810)
Net (loss) gain on foreign
currency transactions (642) 92 (206)
Interest expense (146) (45) (50)
Other, net (259) 361 287
-------- -------- --------
$(3,282) $(1,242) $(1,779)
======== ======== ========
</TABLE>
11. Capital Stock
There were 26,589,948 shares and 26,253,505 shares of Common Stock
issued and outstanding at December 31, 1994 and November 30, 1993,
respectively. In July 1993, the Company elected to call for redemption all of
the outstanding shares of its Preferred Stock at a redemption price of $52.40
per share, as discussed in Note 2.
12. Incentive and Benefit Plans
Stock Option Plans: The Company has reserved 3,800,000 shares of Common
Stock under 1982 incentive and non-qualified stock option plans and 4,400,000
shares under the 1991 incentive and non-qualified stock option plan. These
plans were implemented to enable the Company to attract and retain key
employees and consultants. In addition, the Company reserved 100,000 shares of
Common Stock in both fiscal 1990 and 1993 to establish non-qualified stock
option plans for non-employee directors of the Company. Shares under option,
which are granted at fair market value, generally vest ratably over a five-year
period. The Company reserves the right to cancel those options not vested at
termination of the related stock option agreements. Activity under these plans
for the fiscal years ended November 30, 1992 and 1993, the month ended December
31, 1993 and the year ended December 31, 1994 is summarized as follows:
<TABLE>
<CAPTION>
Number of Price Range
Shares per Share
--------- -----------
<S> <C> <C>
Outstanding, November 30, 1991 2,747,110 $ 2.50 - 42.50
Granted 2,070,035 28.50 - 37.25
Exercised (101,535) 2.50 - 34.50
Canceled (1,685,030) 2.50 - 42.50
----------
Outstanding, November 30, 1992 3,030,580 2.50 - 42.50
Granted 1,086,200 27.75 - 43.25
Exercised (174,025) 2.50 - 30.88
Canceled (74,150) 17.25 - 32.00
----------
Outstanding, November 30, 1993 3,868,605 10.00 - 43.25
Exercised (18,184) 15.25 - 32.00
Canceled (11,200) 28.50 - 43.25
----------
Outstanding, December 31, 1993 3,839,221 10.00 - 43.25
Granted 1,002,200 40.25 - 48.75
Exercised (222,539) 10.00 - 40.00
Canceled (136,900) 26.25 - 48.75
----------
Outstanding, December 31, 1994 4,481,982 $10.00 - 48.75
==========
Options exercisable at December 31, 1994 1,996,902 $10.00 - 48.75
</TABLE> ==========
F-14
<PAGE> 53
Pursuant to the AHP Transaction, each holder of an employee stock
option had an opportunity to make a cash-out election with respect to up to 40%
of all vested options held. Further, at the time of the approval of the AHP
Transaction by the shareholders of the Company, each outstanding employee stock
option that was not then vested became vested with respect to 50% of the
unvested portion in addition to the portion that already was vested.
On January 16, 1992, the effective date of the AHP Transaction,
733,045 vested employee stock option shares that were subject to a cash-out
election and were not exercised, were canceled and, immediately after the
effective date, the Company paid the holder an amount in cash of $50.00 less
the applicable exercise price for each option. Also, immediately after the
effective date, the remaining portion of those options was canceled and
exchanged for substitute options to purchase, at a per share price equal to the
per share price of the canceled options, an equal number of callable Depositary
Shares. The substitute options are subject to the same terms and conditions as
the options for which they were exchanged, including the terms related to
vesting and the conditions relating to exercise.
Directors of the Company who are not employees of the Company were not
entitled to make a cash-out election. However, all unvested stock options for
such non-employee directors became fully vested in connection with the AHP
Transaction. All such options that were not exercised prior to the AHP
Transaction were canceled at the effective date and exchanged for substitute
options to purchase, at a per share price equal to the per share price of such
canceled options and subject to the same terms and conditions as such canceled
options, an equal number of callable Depositary Shares.
Pursuant to the AHP Transaction, if AHP exercises the call option
discussed in Note 2, all outstanding options granted under the 1982 and the
1991 option plans will automatically accelerate and become fully vested and
exercisable.
Effective April 14, 1992, the Company provided stock option exchange
offers to certain non-officer option holders allowing for the surrender of
options granted at prices above $28.50 in exchange for new options granted at
the then fair market value of $28.50 per share. The old options were
exercisable at prices ranging from $30.00 to $42.50 per share. Options to
purchase 827,835 shares were exchanged in the offering. The new options were
vested to the same extent as the old options and continue to vest under the
same terms as the old options.
Restricted Stock Plan: Under the Company's 1991 restricted stock plan,
which was approved by shareholders on January 16, 1992, the Company is
authorized to award up to 300,000 restricted Depositary Shares to a limited
number of key employees for nominal consideration. Awards totaling 150,000
shares were granted under the plan during fiscal 1992. At December 31, 1994,
67,500 shares had vested under the plan.
Stock Purchase Plans: In 1992, the Company established an employee
stock purchase plan which allows substantially all employees to purchase
Depositary Shares upon exercise of options granted. The options are exercisable
at the lower of 85% of the fair market value of the Depositary Shares at either
the date of grant or of exercise. Purchases under this plan are subject to
certain limitations and may not exceed 480,000 shares during the term of the
plan which expires in May 1997. During fiscal 1994, 1993 and 1992, 70,721,
57,779 and 38,418 shares, respectively, were issued under this plan at prices
ranging from $25.39 to $36.97.
F-15
<PAGE> 54
Savings Plan: The Company has a voluntary 401(k) savings plan for
all employees. In fiscal 1992, the Company began matching 100% of
employee contributions of up to 3% of base salary and 50% of
employee contributions from 3% to 6% of base salary. Company
contributions to the savings plan in fiscal 1994, 1993 and 1992
were approximately, $1,934,000, $1,542,000 and $918,000,
respectively.
13. Major Customers and Related Party Transactions
The percentage of total revenues for customers who contributed 10%
or more of total revenue, and revenues from foreign customers for
the three years ending December 31, 1994, November 30, 1993 and
1992 are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Major customers -
Baxter Healthcare Corporation 38% 44% 12%
American Home Products Corporation 22 12 -
Chugai Pharmaceutical Co., Ltd. 17 16 21
Yamanouchi Pharmaceutical Co., Ltd. 10 13 24
Foreign Customers -
Western Europe $13,474 $ 9,729 $17,706
Asia 35,632 29,516 39,996
</TABLE>
Accounts receivable in the accompanying consolidated balance
sheets include $13.3 million and $14.7 million at December 31,
1994 and November 30, 1993, respectively, from major customers.
At December 31, 1994, AHP and Chugai Pharmaceutical Co., Ltd. were
holders of the Company's Common Stock or Depositary Shares.
Revenues from Yamanouchi Pharmaceutical Co., Ltd. ("Yamanouchi")
include collaborative revenue from development partnerships formed
by the Company and Yamanouchi to direct licensing activities and
oversee commercial development of certain products in Japan and
Europe. The partnerships have entered into agreements with the
Company and with Yamanouchi to perform research and development on
their behalf. Under the partnership agreements, until product
commercialization, Yamanouchi is committed to share in the
partnerships' losses, which principally represent research and
development costs billed by the Company and by Yamanouchi to the
partnerships. In connection with such partnerships, reimbursement
for research and development costs and benchmark payments from
Yamanouchi are included in collaborative research and development
revenue and totaled $12.6 million, $13.3 million and $21.1 million
in fiscal 1994, 1993 and 1992, respectively.
The GI-Yamanouchi European Partnership (the "GYEP") was formed in
fiscal 1993 by the Company and Yamanouchi for the
commercialization of bone morphogenetic proteins in Europe. The
GYEP entered into distribution agreements with AHP and Yamanouchi
in return for distribution fees totaling $10.0 million and future
milestone payments. The Company recorded equity income of $5.0
million in fiscal 1993 relating to these distribution agreements.
F-16
<PAGE> 55
14. Quarterly Financial Information (Unaudited - in thousands
except for per share amounts)
<TABLE>
<CAPTION>
First Second Third Fourth
Year Ended December 31, 1994 Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Revenue $26,950 $24,787 $51,190 $27,953
Income (loss) from operations (11,991) (11,978) 11,825 (12,225)
Net income (loss) (10,051) (9,543) 12,643 (11,924)
Net income (loss) per common share (.38) (.36) .46 (.45)
Year Ended November 30, 1993
Revenue $25,130 $21,445 $26,073 $29,393
Loss from operations (6,986) (13,958) (9,956) (8,880)
Net loss (2,202) (8,810) (5,548) (335)
Net loss per common share (.14) (.41) (.26) (.01)
</TABLE>
F-17
<PAGE> 56
SCHEDULE II-VALUATION, QUALIFYING AND RESERVE ACCOUNTS
GENETICS INSTITUTE, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Balance at Balance at
Beginning End of
of Period Additions Deductions Period
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
RESERVE FOR PATENT-RELATED
DAMAGES
Year ended
November 30, 1992 $11,000,000 $ - $ - $11,000,000
========== ======== =========== ==========
Year ended
November 30, 1993 $11,000,000 $ - $(11,000,000) $ -
========== ======== =========== ==========
Month ended
December 31, 1993 $ - $ - $ - $ -
========== ======== =========== ==========
Year ended
December 31, 1994 $ - $ - $ - $ -
========== ======== =========== ==========
</TABLE>
F-18
<PAGE> 57
EXHIBIT INDEX
Exhibit No. Description Page Number
----------- ----------- -----------
3.1 Restated Certificate of Incorporation,
as amended, of Genetics Institute, Inc.
(the "Company").(12)
3.2 Restated By-Laws of the Company.(2)
4.1 Depositary Agreement among Genetics
Institute, Inc., American Home Products
Corporation ("AHP"), AHP Biotech
Holdings, Inc. ("Holdings") and The
First National Bank of Boston, as
Depositary.(12)
10.1 1982 Incentive Stock Option Plan, as
amended.(3)
10.2 1982 Non-Qualified Stock Option Plan,
as amended.(3)
10.3 Amendment to 1982 Incentive Stock
Option Plan dated December 16, 1986.(4)
10.4 Amendment to 1982 Incentive Stock
Option Plan dated September 19, 1991.(12)
10.5 Amendment to 1982 Non-Qualified Stock
Option Plan dated September 19, 1991.(12)
10.6 1991 Stock Option Plan.(12)
10.7 1987 Employee Stock Purchase Plan.(5)
10.8 Amendment to 1987 Employee Stock
Purchase Plan.(8)
10.9 1991 Employee Stock Purchase Plan, as
amended.(12)
10.10 1990 Outside Director Stock Option Plan.(9)
<PAGE> 58
10.11 Amendment to 1990 Outside Director Stock
Option Plan.(12)
10.12 1991 Restricted Stock Plan, as amended.(12)
10.13 Research Agreement between the Company
and Sandoz Ltd., dated as of June 9, 1982,
as amended.(3)(19)
10.14 Agreement between the Company and Chugai
Pharmaceutical Co., Ltd., as amended.(3)(19)
10.15 Agreement between the Company and Chugai
Pharmaceutical Co., Ltd. dated as of
November 27, 1985.(3)(19)
10.16 Development and License Agreement between
the Company and Boehringer Mannheim GmbH
dated as of October 8, 1985.(3)(19)
10.17 Lease between the Company and Fleet Real
Estate, Inc. dated as of November 29, 1984.(3)
10.18 Lease between the Company and Cambridge
I Associates dated as of December 1, 1983,
as amended.(3)
10.19 Indenture of Lease between the Company
and Judith Ann Spinelli dated as of
August 27, 1984.(3)
10.20 Extension and Fourth Amendment of Lease
dated as of November 20, 1992 between the
Company and Cambridge I Associates.(14)(19)
10.21 Amendment dated as of October 9, 1986 to
Research Agreement between the Company and
Sandoz Ltd. dated as of June 9, 1982.(4)(19)
10.22 Development and License Agreement between the
Company and Morinaga Milk Industry Co., Ltd.
dated as of March 30, 1987.(2)(19)
<PAGE> 59
10.23 Agreement between the Company and
Boehringer Mannheim GmbH dated as of
May 5, 1988.(7)(19)
10.24 Agreement between the Company and Morinaga
Milk Industry Co., Ltd. dated as of
May 30, 1988.(8)(19)
10.25 License Agreement between the Company
and Suntory Limited dated as of
November 24, 1988.(7)(19)
10.26 Agreement between the Company and
Boehringer Mannheim GmbH dated as of
January 11, 1989.(8)(19)
10.27 Supply Agreement between the Company
and Baxter Healthcare Corporation dated
as of July 31, 1989.(8)(19)
10.28 Partnership Agreement of GPDC Partnership
dated as of May 30, 1990 by and between
GI Japan, Inc., and Yamanouchi
Pharmaceutical Co., Ltd. (10)(19)
10.29 Organizational Agreement of
GI-Yamanouchi, Inc., dated as of
June 30, 1990 among Genetics Institute,
Inc., GI JJV, Inc. and Yamanouchi
Pharmaceutical Co., Ltd.(10)(19)
10.30 Research and Development Agreement
dated as of May 30, 1990, between the
Company and GPDC Partnership.(10)(19)
10.31 License Agreement dated as of May 30,
1990 between Genetics Institute, Inc.
and GI Japan, Inc.(10)(19)
10.32 GI Sublicense Agreement dated as of
May 30, 1990 between GPDC Partnership
and Genetics Institute, Inc.(10)(19)
10.33 JJV Sublicense Agreement dated as of
September 20, 1990 between GPDC
Partnership and GI-Yamanouchi, Inc.
(10)(19)
10.34 Agreement between Genetics Institute,
Inc. and Cetus Corporation dated as of
May 1, 1990 and related Agreement
<PAGE> 60
between the Company and EuroCetus
International, N.V. dated as of
May 1, 1990.(10)(19)
10.35 Strategic Alliance Agreement between
the Company and Essex Chemie A.G. dated
June 26, 1991.(12)(19)
10.36 Option Agreement dated as of February
28, 1992 between the Company and
AHP.(14)(19)
10.37 Cellular Adhesion Strategic Alliance
Agreement dated as of May 15, 1992
between the Company and AHP.(14)(19)
10.38 Agreement and Plan of Merger dated as
of September 19, 1991 and amended as of
December 9, 1991 among the Company,
AHP, Holdings and AHP Merger Subsidiary
Corporation.(11)
10.39 Governance Agreement among the Company,
AHP and Holdings.(12)
10.40 Research and Development Agreement,
dated as of May 22, 1991, between the
Company and SciGenics, Inc.
("SciGenics").(13)
10.41 Technology License Agreement, dated as
of May 22, 1991, between the Company
and SciGenics.(13)
10.42 Stock Purchase Option Agreement, dated
as of May 23, 1991, among the Company
and the Underwriters (as defined
therein).(13)
10.43 Services Agreement, dated as of May 22,
1991, between the Company and SciGenics.(13)
10.44 Program Purchase Option Agreement,
dated as of May 22, 1991, between the
Company and SciGenics.(13)
10.45 Administrative Agreement, dated as of
May 22, 1991, between the Company and
SciGenics.(13)
10.46 Class A Note dated as of May 22, 1991.(13)
<PAGE> 61
10.47 Employment Agreement entered into
between the Company and Patrick Gage
dated January 14, 1992.(12)
10.48 Employment Agreement entered into
between the Company and Lawrence V. Stein
dated November 9, 1992.(14)
10.49 Letter dated April 11, 1991 from the
Company to Dr. Thomas Maniatis regarding
certain consulting arrangements and a
related memorandum dated July 1, 1991.(14)
10.50 Partnership Agreement of GI-Yamanouchi
European Partnership dated as of May 19,
1993 between GI Europe, Inc. and
Yamanouchi B.V. (15)(19)
10.51 European Partnership Sublicense Agreement
dated as of May 19, 1993 between GPDC
Partnership and GI-Yamanouchi European
Partnership.(15)(19)
10.52 Participation Agreement Number 1 dated
as of May 19, 1993 between GI Netherlands
B.V. and Yamanouchi B.V.(15)(19)
10.53 Product Management Agreement Number 1
dated as of May 19, 1993 between GI
Netherlands B.V. and GI-Yamanouchi
European Partnership (15)(19)
10.54 Parent Company Agreement dated as of
May 19, 1993 between Genetics Institute, Inc.
and Yamanouchi Pharmaceutical Co., Ltd. (15)
10.55 License Agreement dated as of August 11, 1993
between Genetics Institute, Inc. and American
Home Products Corporation. (16)(19)
10.56 Sales and Distribution Agreement between
GI-Yamanouchi European Partnership and
Wyeth-Ayerst International Inc. (17)(19)
<PAGE> 62
10.57 Sales and Distribution Agreement between
GI-Yamanouchi European Partnership and
Brocades Pharma B.V. (17)(19)
10.58 Master Lease Agreement, dated as of
December 22, 1993, between the Company
and BancBoston Leasing, Inc. (17)
10.59 Master Equipment Lease Agreement, dated
as of December 27, 1993, between the
Company and Fleet Credit Corporation.(17)
10.60 Amended and Restated Addendum to Master
Equipment Lease Agreement between the
Company and Fleet Credit Corporation
dated December 20, 1994. (l)
10.61 Equipment Lease Agreement, dated as of
December 28, 1987, between Maryland
Nationalease Corporation and the
Company. (1)
10.62 Amendment to Equipment Lease Agreement,
dated as of December 28, 1993, by and
between the Company and General
Electric Capital Corporation.(17)
10.63 Agreement among the Company, Hoffmann-
LaRoche Inc. and F. Hoffmann-LaRoche
Ltd. dated July 7, 1994. (18)(19)
10.64 IL-12 Joint Development Agreement and
License Agreement between the Company
and GI-Yamanouchi, Inc. dated August 4,
1994. (18)(19)
10.65 License Agreement between British
Technology Group Limited and the
Company dated December 23, 1992.(1)(20)
10.66 Partnership Agreement of IL-12 Partners
between AHP IL-12 Corporation and GI
Drug Design, Inc. effective July 1,
1994. (l)(20)
10.67 License Agreement between the Company
and GI Drug Design, Inc. effective
July 1, 1994. (1)(20)
<PAGE> 63
10.68 Assignment and Assumption Agreement
among GI Drug Design, Inc., IL-12
Partners and the Company effective
July 1, 1994. (1)(20)
10.69 Sale, Assignment and Assumption
Agreement between AHP IL-12 Corporation
and GI Drug Design, Inc. effective
July 1, 1994. (1)(20)
10.70 Parent Company Agreement among the
Company, American Home Products
Corporation and AHP Biotech Holdings,
Inc. effective July 1, 1994.(1)
10.71 GI Research and Development Agreement
between IL-12 Partners and the Company
effective July 1, 1994. (1)(20)
10.72 Wyeth Research and Development Agreement
between IL-12 Partners and American
Home Products Corporation effective
July 1, 1994.(1)
21 Subsidiaries of the Company.(12)
23.1 Consent of Arthur Andersen LLP(1)
23.2 Consent of Coopers & Lybrand L.L.P.(1)
_______________
(1) Filed as an exhibit to this Annual Report on Form 10-K.
(2) Filed as an exhibit to the Company's Registration
Statement on Form S-1 (Registration No. 33-14013) on
May 5, 1987 and incorporated herein by reference.
(3) Filed as an exhibit to the Company's Registration
Statement on Form S-1 (Registration No. 33-4746) on
April 11, 1986 and incorporated herein by reference.
(4) Filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended November 30, 1986 (File No.
0-14587) on February 27, 1987 and incorporated herein by
reference.
(5) Filed as an exhibit to the Company's Registration
Statement on Form S-8 (Registration No. 33-13528) on
April 16, 1987 and incorporated herein by reference.
<PAGE> 64
(6) Filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended November 30, 1987 (File No.
0-14587) on February 26, 1988 and incorporated herein by
reference.
(7) Filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended November 30, 1988 (File No.
0-14587) on February 27, 1989 and incorporated herein by
reference.
(8) Filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended November 30, 1989 (File No.
0-14587) on February 27, 1990 and incorporated herein by
reference.
(9) Filed as an exhibit to the Company's Registration
Statement on Form S-8 (Registration No. 33-34629)
on April 30, 1990 and incorporated herein by reference.
(10) Filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended November 30, 1990 (File No.
0-14587) on February 28, 1991 and incorporated herein by
reference.
(11) Filed as an exhibit to the Company's Registration
Statement on Form S-4 (Registration No. 33-44418) on
December 9, 1991 and incorporated herein by reference.
(12) Filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended November 30, 1991 (File No.
0-14587) on February 28, 1992 and incorporated herein by
reference.
(13) Filed as an exhibit to the Annual Report on Form 10-K of
SciGenics, Inc. (Commission File No. 0-19088) for the
year ended November 30, 1991 filed on February 28, 1992
and incorporated herein by reference.
(14) Filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended November 30, 1992 (File No.
0-14587) on February 28, 1993 and incorporated herein by
reference.
(15) Filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended May 31, 1993 (File No.
0-14587) on July 1, 1993 and incorporated herein by
reference.
(16) Filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended August 31, 1993 (File
No. 0-14587) on September 29, 1993 and incorporated
herein by reference.
<PAGE> 65
(17) Filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended November 30, 1993 (File No.
0-14587) on February 28, 1994 and incorporated herein by
reference.
(18) Filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1994 (File
No. 0-14587) on November 10, 1994 and incorporated herein
by reference.
(19) Confidential treatment granted as to certain portions.
(20) Confidential treatment requested as to certain portions
which are indicated by an asterisk and filed separately
with the Securities and Exchange Commission with an
Application for Confidential Treatment pursuant to
Rule 24b-2 promulgated under the Securities Exchange Act
of 1934, as amended.
<PAGE> 1
EXHIBIT 10.60
AMENDED AND RESTATED
Addendum to Master Equipment Lease
Agreement No. 25391
This Amended and Restated Addendum is attached to and made a part of that
certain Master Lease Equipment Lease Agreement No. 25391 by and between Fleet
Credit Corporation (the "Lessor") and Genetics Institute, Inc. (the "Lessee"),
a Delaware Corporation, dated December 27, 1993 (the "Lease") and hereby
supersedes that certain Addendum to the Master Equipment Lease Agreement dated
December 27, 1993.
Whereas, the parties hereto desire to amend the Lease as follows:
Section 2 is amended by substituting "1%" for "5%" in the fifth line
thereof.
Section 2 is amended by substituting "1%" for "1 1/2%" in line six
thereof.
Section 3 is amended by adding "Upon reasonable notice to Lessee"
after the words "Lessor is owner" in line three thereof.
Section 5(d) is amended by deleting said section in its entirety and
replacing it with the following: "Lessee agrees to maintain the Equipment
free and clear from all claims, liens, attachments, encumbrances, security
interests and legal process of creditors of Lessee other than liens (i)
for fees, taxes, levies, imports, duties or other governmental charges of
any kind which are not yet delinquent or are being contested in good faith
by appropriate proceedings which suspend the collection thereof (provided,
however, such proceedings do not involve any substantial danger of the
sale, forfeiture or loss of the Equipment or any interest therein), (ii)
liens of mechanics, materialmen, laborers, employees or suppliers and
similar liens arising by operation of law incurred by Lessee in the
ordinary course of business for sums that are not yet delinquent or are
being contested in good faith by negotiations or appropriate proceedings
which suspend the collection thereof (provided, however, such contest does
not involve any substantial danger of the sale, forfeiture or loss of the
Equipment or any interest therein) and (iii) liens arising out of any
judgments or awards rendered against Lessee which have been adequately
bonded to protect Lessor's interests or with respect to which a stay of
execution has been obtained pending an appeal or a proceeding for review;"
Section 5 is amended by adding the following as substitution (i):
"Lessee will agree to maintain a minimum unencumbered and unrestricted
cash position of fifty million dollars
<PAGE> 2
($50,000,000.00 U.S.) at all times during the term of the
Lease. In the event of a breach of the foregoing, Lessee shall
within thirty days of any breach of the same, (i) cure the breach; or
(ii) pay Lessor any and all amounts due under the Lease (see attached
termination values), and any such payment shall be prior to the
payment of any amounts to any other party which the Lessee has
provided any similar covenants or agreements; or (iii) provide Lessor
with a first priority security interest in, cash or cash equivalent
collateral equal to all amounts then due under the Lease, which
collateral shall be acceptable to Lessor in all respects in Lessor's
sole discretion (Municipal Bonds, New York Stock Exchange Bonds and
American Stock Exchange Bonds with an S and P rating AA, or better, or
U.S. Treasury Bonds will not be discounted), and without in any way
whatsoever limiting the generality of the foregoing, any such
collateral shall be prior to Lessee's granting or pledging of any
collateral of any kind whatsoever to any other third party which the
Lessee has proved any similar covenants or agreements.
Section 6 is amended by adding the following to the end of said
section: "It is understood and agreed that Lessor shall give Lessee
prompt notice of any claim or liability hereby indemnified against and
the Lessee shall be entitled to control the defense thereof, so long
as Lessee is not in default of its obligations hereunder".
Section 7 is amended by adding the following to the end of said
section: "Notwithstanding anything to the contrary contained in this
Lease, Lessee shall not be obligated to reimburse Lessor for a Tax
Loss arising as a result of the occurrence of any one or more of the
following events: (i) the failure of Lessor to timely and properly
claim in its tax return any deductions permitted under the Modified
Accelerated Cost Recovery System (the "MACRS Deductions") for the
Equipment; (ii) the failure of Lessor to have sufficient taxable
income to realize the benefit of any MACRS Deductions that are
otherwise allowable to Lessor; (iii) a disqualifying disposition due
to the sale of the Equipment by Lessor when no Event of Default, as
defined in Section 8 below, has occurred".
Section 8(a) is amended by adding the words "and such failure shall
continue unremedied for a period of ten days; after the word "due".
Section 8(f) is amended by adding the words "which exceed an aggregate
outstanding balance of $200,000.00" after the word "mature".
Section 8 is amended by adding the following to the end of said
section: "Notwithstanding anything to the contrary
2
<PAGE> 3
contained in this Section 8 or in the Lease, Lessor expressly
acknowledges and agrees that if any or all of the common shares of
Lessee are acquired by American Home Products, Inc. ("AHP"), that the
Events of Default described in subparagraphs (d) and (g) of this
Section 8 shall be deemed to not have occurred and that such Events of
Default will not be implicated by or applicable to such an
acquisition".
Section 9 is amended by adding the words, ", during Lessee's normal
business hours," after the words "is located" in line four thereof.
Section 9 is amended by adding the words "unless the damage to
Lessee's property was caused by the gross negligence or willful
misconduct of Lessor or its Agent" after the word "possession" in line
five.
Section 9, third paragraph, line six, after the word "all" add the word
"reasonable".
Section 11 is amended by substituting the words "regular mail" with
the words "certified mail return receipt requested" in line one
thereof.
Section 13, paragraph two, line one, after the word "may" add the word
"reasonably".
Section 15, is amended by substituting the words "45 days" with
the words "60 days".
Section 15, line four, after the word "deems" add the word
"reasonably".
Section 16 is amended by adding the words "except to the extent
expressly assumed by such assignee" after the words "obligations
hereunder" in line four, paragraph one.
Section 16 is amended by adding the words "which consent shall not be
unreasonably withheld" after the word "Lessor" in line two of
paragraph two.
Section 19 is amended by deleting the last sentence of paragraph
two in its entirety.
Except as amended hereby, the Lease and any and all related documents shall
remain in full force and effect and are hereby ratified and affirmed. All
capitalized terms used herein and not defined herein shall have the meanings
set forth or referred to in the Lease. Except as specifically set forth
herein, all of the terms and conditions of the Lease shall remain in full force
and effect and are hereby ratified and affirmed. To the extent that the
provisions of this Amended and Restated Addendum conflict with
3
<PAGE> 4
any provisions contained in the Lease, the provisions of this Amended and
Restated Addendum shall control.
Dated as of: December 20, 1994
-----------------
Fleet Credit Corporation Genetics Institute, Inc.
By: /s/ Lisa D. Wardle By: /s/ Joseph Grimm
--------------------------- --------------------------
Name: Lisa D. Wardle Name: Joseph Grimm
------------------------- ------------------------
Title: Assistant Vice President Title: Vice President
------------------------ -----------------------
4
<PAGE> 1
Exhibit 10.61
EQUIPMENT LEASE AGREEMENT
THIS EQUIPMENT LEASE AGREEMENT is made as of the 23rd day of December,
1987, by and between MARYLAND NATIONAL LEASE CORPORATION ("Lessor") and GENETICS
INSTITUTE, INC. ("Lessee").
In consideration of the mutual covenants, terms and conditions
hereinafter contained, Lessor hereby agrees to lease to Lessee, and Lessee
hereby agrees to lease from Lessor, the property, together with all components,
parts, additions, accessions and attachments incorporated therein (all such
property hereinafter collectively referred to as the "Equipment") described in
the Interim Equipment Schedule(s), if any, and the Equipment Schedule(s) to be
executed pursuant hereto (all such schedules are hereinafter collectively
referred to as the "Equipment Schedule"), subject to the terms and conditions
set forth in the Equipment Schedule and also set forth herein.
This Lease is made upon the following terms and conditions:
1. TERM. The term of this Lease with respect to any item of the
Equipment shall consist of the term set forth in the Equipment Schedule relating
thereto; provided, however, that this Lease shall be effective from and after
the date of execution hereof.
2. RENT. Lessee covenants and agrees to pay to Lessor, as rent for
the Equipment, without any deduction or setoff and without prior notice or
demand, the aggregate amounts specified in the Equipment Schedule relating
thereto. This Lease is a net lease, and Lessee shall not be entitled to any
abatement of rent or other payments due hereunder or any reduction thereof under
any circumstances or for any reason whatsoever. Lessee hereby waives any and
all existing or future claims to any offset against the rent payments due
hereunder, and agrees to make the rent payments regardless of any offset or
claim which may be asserted by Lessee or on its behalf in connection with the
lease of the Equipment.
Installments of rent are to be paid in the manner and at the time
specified in the Equipment Schedule by mailing the same to Lessor at the address
specified in Section 22 hereof; and shall be effective upon receipt. Payments
may be applied by Lessor at any time against any obligation due and owing by
Lessee under this Lease (in Lessor's sole discretion) notwithstanding any
statement appearing on or referred to in any remittance from Lessee. In the
event proceedings under Federal bankruptcy laws or state
<PAGE> 2
insolvency laws are instituted by or against Lessee within ninety (90)
days after receipt of a payment, the payment shall be deemed applicable to the
unpaid obligation then due hereunder in inverse order of maturity.
Time is of the essence of this Lease. In the event that any rent or
other payment due hereunder shall not have been paid on the date on which it
becomes due and payable, Lessor may collect, and Lessee hereby agrees to pay, a
charge computed as one (1) percent per month of the amount in arrears for the
period such amount remains unpaid (or such lesser amount as may be permitted by
law).
3. LESSEE'S REPRESENTATIONS AND WARRANTIES. Lessee hereby represents
and warrants that:
(a) Lessee is a corporation duly organized and validly existing in
good standing under the laws of the state of its incorporation, and is
duly qualified and authorized to do business as a foreign corporation in good
standing in each state in which the Equipment is to be located.
(b) Lessee has the corporate power and authority to enter into and
perform its obligations hereunder; and the sale of those certain items of
equipment specified on the schedule attached to each Equipment Bill of Sale
and Assignment (collectively the "Bill of Sale") executed by Lessee, and the
execution, delivery and performance of this Lease, the Equipment Schedule, the
Bill of Sale, and all related instruments and documents, (i) have been duly
authorized by all necessary corporate action on the part of Lessee; (ii) do not
require any stockholder approval or approval or consent of any trustee or
holders of any indebtedness or obligations of Lessee except such as have been
duly obtained; and (iii) do not and will not contravene any law, governmental
rule, regulation or order now binding on Lessee, or the charter or by-laws or
Lessee, or contravene the provisions of, or constitute a default under, or
result in the creation of any lien or encumbrance upon the property of Lessee
under, any indenture, mortgage, contract or other agreement to which Lessee is
a party or by which it or its property is bound.
(c) Neither the execution and delivery by Lessee of this Lease, the
Equipment Schedule, the Bill of Sale, and all related instruments and
documents, nor the consummation of any of the transactions by Lessee
contemplated hereby or thereby, requires the consent or approval of, the giving
of notice to, the
-2-
<PAGE> 3
registration with, or the taking of any other action in respect of, any
Federal, state or foreign governmental authority or agency, except as provided
herein.
(d) This Lease, the Equipment Schedule, and all related instruments
and documents, when entered into, will constitute legal, valid and binding
obligations of Lessee enforceable against Lessee in accordance with the terms
thereof; and the Bill of Sale transfers to Lessor valid title to the
equipment described on the schedule attached thereto free and clear of any and
all encumbrances, liens, charges or defects. No filing or recordation must be
made, no notice must be given, and no other action must be taken with respect
to any state or local jurisdiction, or any person, in order to preserve to
Lessor all the rights transferred by the Bill of Sale.
(e) There are no pending actions or proceedings to which Lessee is
a party, and there are no other pending or threatened actions or proceedings
of which Lessee has knowledge, before any court, arbitrator or administrative
agency, and there are no final judgments of record against Lessee of which
Lessee has knowledge, which, either individually or in the aggregate,
would materially adversely affect the financial condition of Lessee, or the
ability of Lessee to perform its obligations hereunder. Further, Lessee is not
in default under any material obligation for the payment of borrowed money, for
the deferred purchase price of property or for the payment of any rent under
any lease agreement which, either individually or in the aggregate, would have
the same such effect.
(f) Under the laws of the Commonwealth of Massachusetts, the state in
which the Equipment is to be located, the Equipment consists solely of personal
property and when installed will consist solely of personal property.
(g) The financial statements of Lessee (copies of which have been
furnished to Lessor) have been prepared in accordance with generally accepted
accounting principles consistently applied ("GAAP"), and accurately and
completely present Lessee's financial condition and the results of its
operations as of the date of and for the period covered by such statements, and
since the date of such statements there has been no material adverse change in
such conditions or operations.
-3-
<PAGE> 4
(h) The address stated below the signature of Lessee is the chief
place of business and chief executive office of Lessee; and Lessee does not
conduct business under a trade, assumed or fictitious name.
4. COVENANTS OF LESSEE. Lessee covenants and agrees as follows:
(a) Lessee will furnish Lessor (i) within one hundred twenty (120)
days after the end of each fiscal year of Lessee, a balance sheet of Lessee as
at the end of such year, and the related earnings statement of Lessee for such
fiscal year, prepared in accordance with GAAP, all in reasonable detail and
certified by independent certified public accountants of recognized standing
selected by Lessee; and (ii) within sixty (60) days after the end of each
quarter of Lessee's fiscal year, a balance sheet of Lessee as at the end of
such quarter, and the related earnings statement of Lessee for such quarter,
prepared in accordance with GAAP; and (iii) within thirty (30) days after the
date on which they are filed, all regular periodic reports, forms, and other
filings required to be made by Lessee to the Securities and Exchange
Commission, if any.
(b) Lessee will promptly and duly execute and deliver to Lessor such
further documents, instruments, and assurances and take such further action as
Lessor may from time to time reasonably request in order to carry out the
intent and purpose of this Lease and to establish and protect the rights and
remedies created or intended to be created in favor of Lessor hereunder.
(c) Lessee shall at all times maintain its corporate existence except
as expressly permitted herein. Lessee shall not consolidate with, merge into,
or convey, transfer or lease substantially all of its assets as an entirety to
(such actions being referred to as an "Event"), any Person (which term, for the
purposes of this paragraph, means any individual, corporation, partnership,
joint venture, association, trust, unincorporated organization, or government
or any agency or political subdivision thereof), unless:
(i) such Person shall be an entity organized and existing under the
laws of the United States of America or any state or the District of Columbia,
and shall execute and deliver to Lessor, within sixty (60) days of such Event,
an agreement containing an effective assumption by such Person or the due and
punctual performance and observance of each covenant and condition of this
Lease to be performed or observed by Lessee; and
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(ii) such Person shall have a net worth in excess of Fifty
Million Dollars ($50,000,000.00)
(c) Lessee shall provide written notice to Lessor of the
commencement of proceedings under the Federal bankruptcy laws or other
insolvency laws (as now or hereafter in effect, involving Lessee as a debtor.
5. AUTHORIZATION AND CERTIFICATION. Prior to Lessee's acceptance and
use of the Equipment, Lessor shall receive the following, in form and substance
satisfactory to Lessor:
(a) Certificate of the Secretary or an Assistant Secretary of Lessee
certifying: (1) resolutions of the Board of Directors or validly authorized
Executive Committee of Lessee duly authorizing the sale and leasing of the
Equipment hereunder and the execution, delivery and performance of this Lease,
the Equipment Schedule, the Bill of Sale, and all related instruments and
documents; and (2) the incumbency and signature of the officers of Lessee
authorized to execute such documents.
(b) Evidence satisfactory to Lessor as to due compliance with the
insurance provisions of Section 12 hereof.
(c) An opinion of counsel for Lessee satisfactory to Lessor as to
each of the matters set forth in sub-parts (a) through (e) of Section 3 hereof
and as to such other matters as Lessor may reasonably request.
(d) Uniform Commercial Code financing statements as required by
Lessor.
(e) The Bill of Sale.
6. DELIVERY; INSPECTION AND ACCEPTANCE BY LESSEE. Upon tender of
delivery, Lessee will cause an inspection of the Equipment to be made and, if
the same is found to be in good order and in compliance with the provisions
of any applicable purchase order(s), Lessee shall accept delivery of the
same and shall execute and deliver to Lessor an Equipment Schedule setting
forth a complete description of the item of Equipment thus delivered and
accepted; whereupon, as between Lessor and Lessee, the same shall be deemed to
have been finally accepted by Lessee pursuant to this Lease and said Equipment
Schedule.
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<PAGE> 6
Lessor shall not be liable for loss or damage occasioned by any cause,
circumstance or event of whatsoever nature, including, but not limited to,
failure of or delay in delivery, delivery to wrong place, delivery of improper
equipment or property other than the Equipment, damage to the Equipment,
governmental regulations, strike, embargo or other cause, circumstance or
event, whether of like or unlike nature. All charges, expenses and taxes
incurred in connection with Lessor's purchase of the Equipment and the
shipment, delivery, installation and servicing of the Equipment by the
manufacturer or supplier thereof or by any other party shall be the
responsibility of Lessee and may, at the sole option of Lessor, be capitalized
or expensed, unless otherwise agreed to in writing by the parties.
In the event that Lessee shall, for reasonable cause, refuse to accept
delivery of any item of the Equipment, (i) Lessee will thereupon be assigned
all rights and shall assume all obligations as purchaser of the Equipment and
will indemnify and hold Lessor harmless from and against any and all claims of
the manufacturer, supplier or any other person in connection with the purchase
thereof; and (ii) Lessee shall have all rights as the purchaser of the
Equipment and be entitled to pursue any and all remedies which may be available
against the manufacturer, supplier or other person for any failure or breach in
connection with the manufacture, shipment and delivery of the Equipment.
7. IDENTIFICATION OF EQUIPMENT. Lessee will cause each item of the
Equipment, having a fair market value equal to or greater than Twenty
Thousand Dollars ($20,000.00), to be continually marked, in a plain and
distinct manner, with the name of Lessor followed by the words "Owner and
Lessor," or other appropriate words designated by Lessor on labels furnished by
Lessor, with appropriate changes thereof and additions thereto as from time to
time may be required in order to protect the title of Lessor to each item of
the Equipment and its rights under this Lease. Lessee will not place any item
of the Equipment in operation or exercise any control or dominion over the same
until such name and words shall have been so marked thereon and will replace
promptly any such name or words which may be removed, defaced or destroyed. In
any event, Lessee will not allow the name of any person, firm or association
other than that of Lessor to be placed on any item of the Equipment as a
designation that might be interpreted as a claim of ownership (provided that in
all events Lessee may place its name or logo on the Equipment).
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<PAGE> 7
8. USE AND MAINTENANCE. Lessee shall use the Equipment solely in the
conduct of its business and in a careful and proper manner consistent with the
requirements of all applicable insurance policies relating to the Equipment;
and shall not discontinue use of the Equipment during the term of this Lease.
Lessee will not change the location of any Equipment as specified in the
Equipment Schedule without the prior written consent of Lessor, which consent
shall not be unreasonably withheld. Lessee shall not attach or incorporate the
Equipment to or in any other item of equipment in such a manner that the
Equipment becomes or may be deemed to have become an accession to or a part of
such other item of equipment.
Lessee, at its own expense, will keep and maintain, or cause to be kept and
maintained, the Equipment in as good operating condition as when delivered to
Lessee hereunder, ordinary wear and tear resulting from proper use thereof
alone excepted, and will provide all maintenance and service and make all
repairs or replacements reasonably necessary for such purpose.
In addition, if any parts or accessories forming part of the Equipment
shall from time to time become worn out, lost, destroyed, damaged beyond
repair or otherwise permanently rendered unfit for use, Lessee, at its own
expense, will within a reasonable time replace such parts or accessories, or
cause the same to be replaced, by replacement parts or accessories which are
free and clear of all liens, encumbrances or rights of others and have a value
and utility at least equal to the parts or accessories replaced. All
equipment, accessories, parts and replacements for or which are added to or
become attached to the Equipment which are essential to the operation of the
Equipment or which cannot be detached from the Equipment without materially
interfering with the operation of the Equipment or adversely affecting the
value and utility which the Equipment would have had without the addition
thereof, shall immediately become the property of Lessor, and shall be deemed
incorporated in the Equipment and subject to the terms of this Lease as if
originally leased hereunder. Lessee shall not make any material alterations to
the Equipment without the prior written consent of Lessor, which consent shall
not be unreasonably withheld. No attachment or alteration to the Equipment
shall be made by or on behalf of Lessee which would increase the productivity
or capability of the Equipment so as to violate the provisions of Rev. Proc.
75-21, 1975-1 C.B. 715, or Rev. Proc. 79-48, 1979-2 C.B. 529 (as either or both
of those Revenue Procedures may hereafter be modified or superseded).
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<PAGE> 8
Upon reasonable advance notice, Lessor shall have the right to inspect
the Equipment and all maintenance records with respect thereto, if any, at any
reasonable time during normal business hours.
9. DISCLAIMER OR WARRANTIES. LESSOR, NOT BEING A SELLER (AS SUCH
TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS ENACTED IN THE STATE OF
MARYLAND), NOR A SELLER'S AGENT, HEREBY EXPRESSLY DISCLAIMS AND MAKES TO LESSEE
NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, OF MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE OR OTHERWISE, INCLUDING, BUT NOT LIMITED TO:
THE FITNESS FOR USE, DESIGN OR CONDITION OF THE EQUIPMENT; THE QUALITY OR
CAPACITY OF THE EQUIPMENT; THE WORKMANSHIP IN THE EQUIPMENT; THAT THE EQUIPMENT
WILL SATISFY THE REQUIREMENTS OF ANY LAW, RULE, SPECIFICATION OR CONTRACT
PERTAINING THERETO; AND ANY GUARANTY OR WARRANTY AGAINST PATENT INFRINGEMENT OR
LATENT DEFECTS, it being agreed that all such risks, as between Lessor and
Lessee, are to be borne by Lessee. Lessor is not responsible or liable for any
direct, indirect, incidental or consequential damage to or losses resulting
from the installation, operation or use of the Equipment or any products
manufactured thereby. All assignable warranties made by the manufacturer or
supplier to Lessor are hereby assigned to Lessee for and during the term of
this Lease and Lessee agrees to resolve all such claims directly with the
manufacturer or supplier. Provided that Lessee is not then in Default
hereunder, Lessor shall cooperate fully with Lessee with respect to the
resolution of such claims, in good faith and by appropriate proceedings at
Lessee's expense. Any such claim shall not affect in any manner the
unconditional obligation of Lessee to make rent payments hereunder.
10. FEES AND TAXES
(a) To the extent permitted by law, Lessee shall file any necessary
report and return for, shall pay promptly when due, shall otherwise be liable
to reimburse Lessor (on an after-tax basis) for, and agrees to indemnify and
hold Lessor harmless from:
(i) all title, recordation (other than those incurred in
connection with the initial filing of the Uniform Commercial Code financing
statements delivered to Lessor in connection with the closing of this
transaction), documentary stamp and other fees (including the reasonable fees
and expenses of counsel incurred in connection with the preparation and
attention to filing or recording of any waiver, Uniform Commercial Code
financing statement or other document in connection with this Lease or the
Equipment);
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<PAGE> 9
(ii) taxes (other than taxes calculated solely on the
basis of net income), including but not limited to sales, use and personal
property taxes; and
(iii) assessments and all other charges or withholdings
of any nature (together with any penalties, fines or interest thereon);
arising at any time upon or relating to the Equipment or this Lease or
with respect to the acquisition, ownership, use, operation, leasing, delivery,
return or other disposition of the Equipment, or upon the rentals payable
hereunder, whether the same be assessed to Lessor or Lessee.
(b) In the event that any report or return for, or property
listing in connection with, or any, fee, tax or assessment described in
sub-part (a) hereof is, by law, required to be filed by, assessed or billed
to, or paid by, Lessor, Lessee at its own expense will do any and all things
required to be done by Lessor (to the extent permitted by law) in connection
with the filing, levy, assessment, billing or payment of such report, return
or charge and is hereby authorized by Lessor to act for and on behalf of
Lessor in any and all respects, including (but not limited to), after
obtaining the prior written consent of Lessor (which shall not be
unreasonably withheld), the contest or protest, in good faith and by
appropriate proceedings, of the validity of any such levy or assessment, or
the amount thereof. Lessor agrees fully to cooperate with Lessee in any such
contest, and Lessee agrees promptly to indemnify Lessor for all reasonable
expenses incurred by Lessor in the course of such cooperation. A claim for
tax or other imposition shall be paid, subject to refund proceedings, if
failure to pay would adversely affect the title, property or rights of Lessor
hereunder. Provided that Lessee is not then in Default hereunder, if Lessor
shall obtain a refund of any such tax or imposition which has been paid (by
Lessee, or by Lessor and for which lessor has been reimbursed by Lessee),
Lessor shall promptly pay such refund to Lessee.
Lessee will cause all billings of such charges to Lessor to be made to
Lessor in care of Lessee and will, in preparing any report or return required
by law, show the ownership of the Equipment in Lessor, and shall send a copy of
any such report or return to Lessor.
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If Lessee fails to pay any such charges when due, except any levy or
assessment being contested in good faith and by appropriate proceedings as
above provided for a reasonable period of time, Lessor at its option may do so,
in which event the amount so paid (including any penalty or interest incurred
as a result of Lessee's failure), plus interest thereon at the rate set forth
in Section 21 hereof, shall be paid by Lessee to Lessor with the next periodic
payment of rent.
(c) The obligations of Lessee under this Section, which accrue
during the term of this Lease, shall survive the termination of this Lease.
11. INTENT; TITLE. It is the express intent of the parties that this
agreement constitute a true lease and in no event shall this agreement be
construed as a sale of the Equipment. Title to the Equipment shall at all
times remain in Lessor, and Lessee shall acquire no ownership, title, property,
right, equity, or interest in the Equipment other than its leasehold interest
solely as Lessee subject to all the terms and conditions hereof.
Notwithstanding the express intent of the parties, should a court of
competent jurisdiction determine that this agreement is not a true lease, but
rather one intended as security, then solely in that event and for the
expressly limited purposes thereof, Lessee shall be deemed to have hereby
granted Lessor a security interest in this Lease, the Equipment, and all
accessions thereto, substitutions and replacements therefor, and proceeds
(including insurance proceeds) thereof (but without the power of Lessee to
dispose of the Equipment); to secure the prompt payment and performance as and
when due of all obligations and indebtedness of Lessee (or any affiliate of
Lessee) to Lessor, now existing or hereafter created.
The parties intend and agree that the Equipment shall remain personal
property, notwithstanding the manner in which it may be affixed to any real
property. Lessee shall obtain and deliver to Lessor (to be recorded at
Lessee's expense), from each landlord, owner, mortgagee or any person having an
encumbrance or lien on or interest in the property where the Equipment is to be
located, waivers of any lien, encumbrance or interest which such person might
have or hereafter obtain or claim with respect to the Equipment. Lessee agrees
to maintain the Equipment free from all claims, liens and legal processes of
creditors of Lessee other than liens (a) for fees, taxes, levies, imports,
duties or other governmental charges of any kind which are not yet delinquent
or
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<PAGE> 11
are being contested in good faith by appropriate proceedings which
suspend the collection thereof (provided, however, that such proceedings do not
involve any substantial danger of the sale, forfeiture or loss of the Equipment
or any interest therein); (b) liens of mechanics, materialmen, laborers,
employees or suppliers and similar liens arising by operation of law incurred
by Lessee in the ordinary course of business for sums that are not yet
delinquent or are being contested in good faith by negotiations or by
appropriate proceedings which suspend the collection thereof (provided,
however, that such contest does not involve any substantial danger of the sale,
forfeiture or loss of the Equipment or any interest therein); and (c) liens
arising out of any judgments or awards against Lessee which have been
adequately bonded to protect Lessor's interests or with respect to which a stay
of execution has been obtained pending an appeal or a proceeding for review.
Lessee will defend, at its own expense, Lessor's title to the Equipment from
such claims, liens or legal processes. Lessee shall also notify Lessor
immediately upon receipt of notice of any lien, attachment or judicial
proceeding affecting the Equipment in whole or in part.
12. INSURANCE. Lessee shall keep the Equipment insured against loss
or damage due to fire and the risks normally included in extended coverage,
malicious mischief and vandalism, for not less than the greater of the full
replacement value or the Stipulated Loss Value (as defined in Section 13
hereof); and Lessee shall also carry public liability insurance, both personal
injury and property damage, covering the Equipment, with a single limit of not
less than Five Million Dollars ($5,000,000.00) per occurrence, or such greater
or lesser amount as Lessor may from time to time require on notice to Lessee.
All said insurance shall be in form and amount and with companies reasonably
satisfactory to Lessor. All insurance for loss or damage shall provide that
losses, if any, shall be payable to Lessor and Lessee, as their interests may
appear and Lessee shall utilize its best efforts to have all checks relating to
any such losses delivered promptly to Lessor. Lessor and any assignee of
Lessor shall be named as an additional insured with respect to all such
liability insurance. Lessee shall pay the premiums therefor and deliver to
Lessor evidence satisfactory to Lessor of such insurance coverage. Lessee
shall cause to be provided to Lessor, not less than fifteen (15) days prior to
the scheduled expiration or lapse of such insurance coverage, evidence
satisfactory to Lessor of renewal or replacement coverage. Each insurer shall
agree, by endorsement upon the policy or policies issued by it or by
independent instrument furnished to Lessor, that (a) it will give Lessor thirty
(30) days' prior written notice of the
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<PAGE> 12
effective date of any material alteration or cancellation of such
policy; and (b) insurance as to the interest of any named additional insured or
loss payee other than Lessee shall not be invalidated by any actions,
inactions, breach of warranty or conditions or negligence of Lessee with
respect to such policy or policies. The proceeds of such insurance payable as
a result of loss of or damage to the Equipment shall be applied as required by
the provisions of Section 13 hereof.
13. LOSS AND DAMAGE. Lessee hereby assumes and shall bear the entire
risk of direct and consequential loss and damage to the Equipment from any and
every cause whatsoever. Except as provided in this Section for discharge upon
payment of Stipulated Loss Value, no loss or damage to the Equipment or any
part thereof shall release or impair any obligations of Lessee under this
Lease, which shall continue in full force and effect and shall be absolute
during the term hereof. Lessee agrees that Lessor shall not incur any
liability to Lessee for any loss of business, loss of profits, expenses, or any
other damages resulting to Lessee by reason of any delay in delivery or any
delay caused by any non-performance, defective performance, or breakdown of the
Equipment, nor shall Lessor at any time be responsible for personal injury or
the loss or destruction of any other property resulting from the Equipment.
In the event of loss or damage of any kind whatever to any item of the
Equipment which does not constitute a Total Loss (as such term is hereinafter
defined), Lessee shall, at its sole cost and expense, promptly repair and
restore such item of the Equipment to the condition required by this Lease.
Provided that Lessee is not then in Default (as such term is hereinafter
defined) hereunder, upon receipt of evidence reasonably satisfactory to Lessor
of completion of such repairs or completion of the work for which payment is
sought in instances where Lessee is required to make progress payments, Lessor
will apply any insurance proceeds received by Lessor on account of such loss or
damage to the cost of such repairs.
Upon the occurrence of: (a) the actual or constructive total loss of
any items of the Equipment; or (b) the loss, theft or destruction of any item
of the Equipment or damage to any item of the Equipment to such extent as shall
make repair thereof uneconomical or shall render any item of the Equipment
permanently unit for normal use for any reason whatsoever; or (c) the
condemnation, confiscation, requisition, seizure, forfeiture or other taking of
title to or use of any item of the Equipment (as established to the reasonable
satisfaction of Lessor; any such
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<PAGE> 13
occurrence being herein referred to as a "Total Loss"), during the term
of this Lease, Lessee shall give prompt notice thereof to Lessor. Thereafter,
on the next date for the payment of rent, Lessee shall pay to Lessor the rent
which would have been due on that date plus the Stipulated Loss Value of the
item or items of the Equipment with respect to which the Total Loss has
occurred and any other sums due hereunder with respect to that Equipment (less
any insurance proceeds or condemnation award actually paid).
Upon making such payment in respect of any item of the Equipment, this
Lease and the obligation to make future rental payments shall terminate solely
with respect to the Equipment or items thereof so paid for and (to the extent
applicable) Lessee thereupon shall become entitled thereto as is where is
without warranty, express or implied, with respect to any matter whatsoever. In
furtherance thereof, Lessor shall deliver to Lessee a bill of sale transferring
and assigning to Lessee without recourse or warranty, except in respect of
Lessor's acts, all of Lessor's right, title and interest in and to the
Equipment. Lessor shall not be required to make and may specifically disclaim
any representation or warranty as to the condition of the Equipment or any
other matters.
As used in this Lease, "Stipulated Loss Value" shall mean the product
of the Total Invoice Cost (as designated on the appropriate Equipment Schedule)
of the item or items of Equipment and the applicable percentage factor set
forth on the Schedule of Stipulated Loss Values attached to the applicable
Equipment Schedule, as hereinafter provided:
(a) Stipulated Loss Value shall be determined as of the net
date on which a payment of rent is or would be due after a Total Loss or other
termination of this Lease, after payment of any rent due on such date, and the
applicable percentage factor shall be that which is set forth with respect to
such rent payment.
(b) After payment of the final payment of rent due under the
original term of this Lease, Stipulated Loss Value shall be determined as of
the date of termination of this Lease. If the Lease is renewed, Stipulated
Loss Value during the renewal term shall be calculated on the next date on
which a payment of rent is or would be due after a Total Loss or other
termination of such renewal term, after payment of any rent due on such date,
and the applicable percentage factor shall be the last percentage factor set
forth on the Schedule of Stipulated Loss Values.
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14. REDELIVERY.
(a) Upon the expiration or earlier termination of this Lease
(or of any renewal hereof, if applicable), Lessee shall (unless Lessee has
paid the Stipulated Loss Value with respect thereto pursuant to Section 13
hereof or has exercised its option to purchase in accordance with the terms
of Section 16 hereof), at it own expense, cause the Equipment to be returned
to Lessor within thirty (30) days in the same condition as when delivered to
Lessee hereunder, ordinary wear and tear resulting from proper use thereof
alone excepted free and clear of all liens, encumbrances or rights of others
whatsoever except liens or encumbrances resulting from claims against Lessor
not relating to the ownership of such Equipment, by delivery at such location
within the continental United States, Canada or Mexico, as Lessor shall specify
(b) Upon return, the Equipment (1) shall have been reassembled
at the location to which it was redelivered, as provided for in sub-part (a)
of this Section, at Lessee's expense, in good operating condition, and able
to perform all functions for which the Equipment was originally designed; and
(2) shall be complete with all blue prints, operating manuals, maintenance
manual and other technical documents necessary for the prolonged operation of
the Equipment.
(c) Upon return after the expiration of this Lease (or of any
renewal hereof, if applicable), the Equipment shall have a one hundred twenty
(120) day warranty furnished by Lessee at Lessee's expense (said warranty
will cover all parts and labor necessary to make repairs resulting from the
improper re-installation of the Equipment and will commence upon successful
re-installation and necessary test runs). Lessee will use its reasonable best
efforts to make available for a period of sixty (60) days following successful
re-installation and test runs, as required, any engineering and technical
personnel necessary for the training of personnel with respect to the
operation, maintenance, and repair of the Equipment (said engineering and
technical personnel will be made available by Lessee for an additional one
hundred twenty (120) day period for consultation regarding the operation of the
Equipment). Lessee will furnish to Lessor a listing of no less than three (3)
alternative suppliers of replacement parts and other materials necessary for
the operation of the Equipment. Any supplies, replacement parts or materials
available solely from Lessee or any subsidiary of Lessee which are necessary
for the continued operation of the Equipment shall be provided as and when
requested by Lessor or its purchaser
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<PAGE> 15
at then current market prices. It is acknowledged and agreed that the
provisions of this sub-part (c) shall not be applicable to return of the
Equipment after (1) the occurrence of a Default hereunder or (2) the rejection
of this Lease by Lessee in any bankruptcy proceeding in accordance with all
applicable requirements of Law.
(d) Lessee shall obtain and pay for a policy of transit insurance in an
amount equal to the replacement value of the Equipment and Lessor shall be
named as the loss payee on all such policies of insurance. In addition to
Lessor's other rights and remedies hereunder, if the Equipment is not returned
in a timely fashion, or if repairs are necessary to place the Equipment in the
condition required in this Section, Lessee shall continue to pay to Lessor rent
at the last prevailing lease rate hereunder for the period of delay in
redelivery, or for the period of time reasonably necessary to accomplish such
repairs together with the cost of such repairs, as applicable. The obligations
of Lessee under this Section, which accrue during the term of this Lease, shall
survive the termination of the Lease.
15. OPTION TO RENEW. Provided that Lessee is not then in Default, Lessee
shall have the option to renew this Lease, at the expiration of the term of
this Lease, with respect to all but not less than all of the Equipment, on the
terms and conditions of this Lease, for a negotiated renewal term at a
negotiated periodic rent based on the fair market rental value of such
Equipment determined at the time of renewal.
If Lessee desires to exercise this option it shall, at least one hundred
eighty (180) days before expiration of the term of this Lease, give Lessor
written notice of its intention to exercise this option to renew; and shall
engage in negotiations with Lessor to determine the periodic rent to be paid
during the renewal term. Not less than ninety (90) days before expiration of
the term of this Lease, Lessee shall give Lessor written notice of its election
to renew on the terms mutually agreed upon during negotiations.
If the parties are unable to agree on the fair market rental value of the
Equipment, then Lessor and Lessee shall at Lessee's expense obtain appraisal
values from three independent appraisers (one to be selected by Lessor, one by
Lessee, and the other by the two selected by Lessor and Lessee) and the average
fair market rental value as determined by such appraisers shall be binding on
the parties hereto.
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<PAGE> 16
16. OPTION TO PURCHASE. Provided that Lessee is not then in Default,
Lessee shall have the option to purchase, upon the expiration of the term of
this Lease, or of any subsequent renewal term, if applicable, all but not less
than all of the Equipment subject to this Lease upon the following terms and
conditions:
If Lessee desires to exercise this option it shall, at least one
hundred eighty (180) days before expiration of the term of this Lease, give
Lessor written notice of its intention to exercise this option to purchase and
shall engage in negotiations with Lessor to determine the Purchase Price for
the Equipment. Not less than ninety (90) days before expiration of the term of
this Lease, Lessee shall give Lessor written notice of its election to purchase
on the term mutually agreed upon during negotiations. Thereupon, at the
expiration of the term of this Lease, Lessee shall pay to Lessor in cash the
Purchase Price for the Equipment so purchased, determined as hereinafter
provided.
The Purchase Price of the Equipment shall be an amount equal to the
greater of (a) fifteen (15) percent of original Total Invoice Cost, or (b) its
then fair market value, together with all taxes and charges upon sale. For
purposes of this Section, "fair market value" shall be deemed to be an amount
equal to the sale price obtainable in an arms length transaction between a
willing and informed buyer (other than a buyer currently in possession) and a
willing and informed seller under no compulsion to sell. If the parties are
unable to agree on the fair market value of the Equipment, then Lessee shall
select a qualified independent appraiser and the fair market value determined
by such appraiser shall be binding on the parties.
Notwithstanding any election of Lessee to purchase, the provisions of
this Lease shall continue in full force and effect until the passage of
ownership of the Equipment upon the date of purchase. On the date of purchase,
Lessor shall deliver to Lessee a bill of sale transferring and assigning to
Lessee without recourse or warranty, except in respect of Lessor's acts, all of
Lessor's right, title and interest in and to the Equipment. Lessor shall not be
required to make and may specifically disclaim any representation or warranty
as to the condition of the Equipment or any other matters.
17. INDEMNITY.
(a) General. Lessee hereby assumes and agrees to indemnify, defend,
protect, save and keep harmless Lessor, its agents and employees, from and
against any and all losses,
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damages, injuries, claims, demands, and expenses, including legal expenses,
of whatsoever kind and nature (other than such as may directly and
proximately result from the gross negligence or wilful misconduct of or, its
agents or employees), arising on account of the ordering, acquisition,
delivery, installation or rejection of the ordering, acquisition, delivery,
installation or rejection of the Equipment, the possession, maintenance, use,
condition (including without limitation, latent and other defects and whether
or not discoverable by Lessor or Lessee, any claim in tort for strict
liability, and any claim for patent, trademark or copyright infringement) or
operation of any item of the Equipment, and by whomsoever used or operated,
during the term of this Lease with respect to that item of the Equipment, the
loss, damage, destruction, removal, return, surrender, sale or other
disposition of the Equipment, or any item thereof. It is understood and
agreed, however, that Lessor shall give Lessee prompt notice of any claim or
liability hereby indemnified against and that Lessee shall be entitled to
control the defense thereof, so long as Lessee is not in Default hereunder.
(b) TAX. (1) Lessee hereby represents and warrants that (w) it
believes that it is reasonable to estimate that the useful life of the
Equipment exceeds the lease term provided herein and in the Equipment Schedule
by the greater of one (1) year or twenty (20) percent of such estimated useful
life, and that said Equipment will have a value at the end of the original
lease term provided herein and in the Equipment Schedule of at least twenty
(20) percent of the Total Invoice Cost (as specified on the Equipment Schedule)
of the Equipment, without including in such value any increase or decrease for
inflation or deflation during the original lease term (all as evidenced by the
certificate of a qualified party to be provided at Lessee's expense to Lessor
prior to the commencement of the lease term); (x) the Equipment is, and will be
used by Lessee so as to remain, property eligible for depreciation deductions
under Section 167 of the Internal Revenue Code of 1986, as now or hereafter
amended (the "Code"), determined in accordance with the provisions of Section
168 of the Code, during the term of this Lease with respect thereto, and is
assigned to the class of property specified in the Equipment Schedule
pertaining thereto.
(2) If Lessor in computing its taxable income or liability for
tax, (x) shall either lose, or shall not have, or shall lose the right to
claim, or there shall be disallowed or recaptured, for Federal and/or state
income tax purposes, in whole or in part, the benefit of ACRS Deductions; or
(y) Lessor shall become liable for additional tax as a result of Lessee having
-17-
<PAGE> 18
added an attachment or made an alteration to the Equipment which would increase
the productivity or capability of the Equipment which would violate the
provisions of Rev. Proc. 75-21, 1975-1 C.B. 715, or Rev. Proc. 79-48, 1979-2
C.B. 529 (as either or both may hereafter be modified or superseded); or (z)
the statutory melded full-year marginal Federal tax rate for corporation with
a December 31 tax year-end is greater than forty (40) percent in 1987 or
thirty-four (34) percent in any year thereafter; hereinafter referred to as a
"Loss;" then Lessee shall pay Lessor the Tax Indemnification Payment as
additional rent. As used herein, "ACRS Deductions" shall mean the deductions
under Section 167 of the Code determined in accordance with the modified
Accelerated Cost Recovery System with respect to the Total Invoice Cost of any
item of the Equipment in accordance with the accelerated method set forth in
Section 168 of the Code as in effect on the date of this Lease for property
assigned to the class of property specified in the Equipment Schedule
pertaining thereto; and "Tax Indemnification Payment" shall mean such amount
as, after consideration of (i) all taxes required to be paid by Lessor in
respect of the receipt thereof under the laws of any governmental or taxing
authority in the United States, and (ii) the amount of any interest or penalty
which may be payable by Lessor in connection with the Loss, shall be required
to cause Lessor's after-tax net return (the "Net Return") to be equal to, but
greater than, the Net Return contemplated consistently with current tax laws as
of the date of this Lease. If the Loss results from clause (z) of this
sub-part (b)(2), the Tax Indemnification Payment shall not exceed an amount
calculated such that (A) the pre-tax internal rate of return in (i) the
originally specified rentals over the entire lease term, plus (ii) the Tax
Indemnification Payment, is not more than the sum of (B) the pre- tax internal
rate of return in the originally specified rentals over the entire lease term,
plus (C) two hundred fifty (250) basis points.
(3) Lessor shall be responsible for, and shall not be entitled to a
Tax Indemnification Payment by Lessee on account of, any Loss arising solely as
a direct result of the occurrence of any one or more of the following events:
(i) the failure of Lessor to timely and properly claim ACRS Deductions in the
tax return of Lessor other than as a result of changes in the Code or
applicable regulations unless in the reasonable opinion of Lessor's tax counsel
there is no basis for such claim; or (ii) the failure of Lessor to have
sufficient taxable income before application of the ACRS Deductions to offset
the full amount of such ACRS Deductions other than as a result of changes in
the Code or applicable regulations; or (iii) any event which by the terms
-18-
<PAGE> 19
of this Lease requires payment by Lessee of the Stipulated Loss Value if such
Stipulated Loss Value is thereafter actually paid by Lessee to Lessor, to the
extent that such payment reimburses Lessor for amounts otherwise payable by
Lessee pursuant to this sub-part (b); or (iv) a disqualifying disposition due
to sale of any item of the Equipment or this Lease by Lessor prior to a
Default.
(4) Lessor promptly shall notify Lessee in writing of such
Loss and Lessee shall pay to Lessor the Tax Indemnification Payment within
thirty (30) days of such notice. For purposes of this Section, a Loss shall
occur upon the earliest of (i) the happening of any event (such as disposition
or change in use of any item of the Equipment) which will cause such Loss; (ii)
the payment by Lessor to the Internal Revenue Service or State taxing authority
of the tax increase resulting from such Loss; (iii) the date on which the Loss
is realized by Lessor; or (iv) the adjustment of the tax return of Lessor to
reflect such Loss.
(c) As used in this Section and in Section 10 hereof, the term
"Lessor" shall mean and include Lessor and the consolidated Federal taxpayer
group of which Lessor is a member. The obligations of Lessee under this
Section, which accrue during the term of this Lease, shall survive the
termination of this Lease.
18. DEFAULT; REMEDIES. (a) Lessee shall be deemed to be in default
hereunder ("Default") if (1) Lessee refuses to accept delivery of the
Equipment; or (2) Lessee shall fail to make any payment of rent or any other
payment as and when due hereunder and such failure shall continue unremedied
for a period of ten (10) days after written notice thereof to Lessee by Lessor;
(3) Lessee shall fail to obtain and maintain the insurance required pursuant to
Section 12 hereof and such failure shall continue unremedied for a period of
five (5) days after written notice thereof to Lessee by Lessor; or (4) Lessee
shall fail to perform or observe any other covenant, condition or agreement to
be performed or observed by it hereunder and such failure shall continue
unremedied for a period of thirty (30) days after written notice thereof to
Lessee by Lessor; or (5) Lessee shall (A) be generally not paying its debts as
they become due, (B) file, or consent by answer or otherwise to the filing
against it, of a petition for relief or reorganization or an arrangement or any
other petition in bankruptcy or to take advantage of any bankruptcy or
insolvency law of any jurisdiction, (C) make an assignment for the benefit of
its creditors, (D) consent to the appointment of a custodian,
-19-
<PAGE> 20
receiver, trustee or other officer with similar powers of itself or of any
substantial part of its property; or (6) a court or governmental authority of
competent jurisdiction shall enter an order appointing, without the consent of
the Lessee a custodian, receiver, trustee or other officer with similar powers
with respect to the Lessee or any substantial part of its property, or
constituting an order for relief under any bankruptcy or insolvency law, or
approving a petition for the relief, reorganization or arrangement of Lessee or
any other petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction or ordering the dissolution,
winding up or liquidation of the Lessee or if any such petition shall be
filed against the Lessee and such petition shall not be dismissed within sixty
(60) days; or (7) Lessee shall make or permit any unauthorized assignment or
transfer of this Lease, the Equipment or any interest therein; or (8) with
respect to any guarantor or any other party liable for payment or payment is or
would have been due after the declaration of a Default), together with all
other sums due hereunder as of such next payment date with respect to such
Equipment, immediately due and payable with respect to any or all of the
Equipment (the parties also deem that such amount best reflects the damages
Lessor would sustain in the event of Lessee's bankruptcy or insolvency and this
Lease were not assumed); or (B) sue for and recover all rent and other payments
thereunder, then accrued or thereafter accruing, with respect to any or all of
the Equipment, discounted at the Prime Rate (as such term is hereinafter
defined); and/or
(2)(A) require Lessee to assemble any or all of the Equipment
at the location to which the Equipment was delivered or the location to which
such Equipment may have been moved to Lessee or such other location in
reasonable proximity to either of the foregoing as Lessor shall designate; or
to return promptly, at Lessee's expense, any or all of the Equipment to Lessor
at the location, in the condition and otherwise in accordance with all of the
terms of Section 14 hereof; and/or (B) take possession of and render unusable
by Lessee any or all of the Equipment, wherever it may be located, without any
court order or other process of law and without liability for any damages
occasioned by such taking of possession (any such taking of possession shall
constitute an automatic termination of this Lease as it applies to those items
taken without further notice, and such taking of possession shall not prohibit
Lessor from exercising its other remedies hereunder); and/or
-20-
<PAGE> 21
(3)(A) sell or otherwise dispose of any or all of the
Equipment, whether or not in Lessor's possession, in a commercially
reasonable manner at public or private sale (the parties agreeing that ten
(10) days prior written notice shall constitute adequate notice of such
sale), and apply the net proceeds of such sale, after deducting all costs of
such sale (including but not limited to costs of transportation, possession,
storage, refurbishing, advertising and brokers' fees), to the obligations of
Lessee hereunder with Lessee remaining liable for any deficiency and with any
excess being retained by Lessor; or (B) retain any Equipment the possession
of which is recovered by Lessor and credit the reasonable value thereof to
the obligations of Lessee hereunder with Lessee remaining liable for any
deficiency and with Lessor having no obligation to reimburse Lessee on
account of any excess of such reasonable value over such obligations; and/or
(3) terminate this Lease as to any or all of the Equipment;
and/or
(4) exercise any other right or remedy available to Lessor
at law or in equity.
Unless otherwise provided above, a termination hereunder shall occur
only upon written notice by Lessor to Lessee and only with respect to such
items of the Equipment as Lessor specifically elects to terminate in such
notice. Except as to such items of the Equipment with respect to which there
is a termination, this Lease shall remain in full force and effect and Lessee
shall be and remain liable for the full performance of all its obligations
hereunder.
In addition, Lessee shall be liable for any and all reasonable legal
fees and other costs and expenses incurred by reason of any Default or the
exercise of Lessor's remedies with respect thereto, including all costs and
expenses incurred in connection with the return of any Equipment in accordance
with the terms of Section 14 hereof or in placing such Equipment in the
condition required by said Section. Unless the content expressly requires
otherwise, no right or remedy referred to in this Section is intended to be
exclusive, but each shall be cumulative, and shall be in addition to any other
remedy referred to above or otherwise available at law or in equity and may be
exercised concurrently or separately from time to time.
-21-
<PAGE> 22
The failure of Lessor to exercise the rights granted hereunder upon any
Default by Lessee shall not constitute a waiver of any such right upon the
continuation or re-occurrence of any such Default. In no event shall the
execution of an Equipment Schedule constitute a waiver by Lessor of any
pre-existing Default in the performance of the terms and conditions hereof.
19. ASSIGNMENT BY LESSOR AND LESSEE. Without the prior written
consent of Lessor (or as expressly set forth in Section 4(c) hereof), Lessee
will not assign any of its rights hereunder, sublet the Equipment or otherwise
permit the Equipment to be operated or used by, or to come into or remain in
the possession of, anyone but Lessee. No assignment or sublease, whether
authorized in this Section or in violation of the terms hereof, shall relieve
Lessee of its obligations hereunder and Lessee shall remain primarily liable
hereunder. In the event that this Lease is assigned by Lessee or its trustee
in bankruptcy during the course of a pending bankruptcy of Lessee without
Lessor's consent, Lessee agrees on behalf of itself and its trustee that any
proceeds, profits or rentals received as a result of such assignment shall be
immediately paid over to Lessor as additional security for adequate assurance
of future performance by the assignee of Lessee or its trustee in bankruptcy.
Lessor may at any time assign any or all of its rights, obligations,
title and interest hereunder, to any other person with or without notice to
Lessee. If Lessee is given notice of any such assignment, Lessee shall
acknowledge receipt thereof in writing. In the event Lessor retains the
obligations of the lessor hereunder in any such assignment, Lessor's assignee
shall not be obligated to perform any duty, covenant or condition required to
be performed by the lessor under the terms of this Lease; and no breach or
default by Lessor hereunder or pursuant to any other agreement between Lessor
and Lessee, should there be one, shall excuse performance by Lessee of any
provision hereof; it being understood that in the event of a default or breach
by Lessor that Lessee shall pursue any rights on account thereof solely against
Lessor.
Subject always to the foregoing, this Lease inures to the benefit of,
and is binding upon, the successors and assigns of the parties hereto.
20. QUIET POSSESSION. Lessor hereby represents and warrants to Lessee
that Lessor has the full right and authority to enter into this Lease on the
terms herein stated, and that, conditioned upon Lessee performing all of the
covenants and conditions hereof,
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<PAGE> 23
as to claims of Lessor or persons claiming under Lessor, Lessee shall
peaceably and quietly hold, possess and use the Equipment during the term of
this Lease subject to the terms and provisions hereof.
21. LESSOR'S RIGHT TO PERFORM FOR LESSEE. If Lessee fails to perform
or comply with any of its agreements contained herein, Lessor, upon notice to
Lessee, shall have the right, but shall not be obligated, to effect such
performance or compliance, and the amount of any out of pocket expenses and
other reasonable expenses of Lessor incurred in connection with the performance
of or compliance with such agreement, together with interest thereon at the
Prime Rate on the date of payment by Lessor (or such lesser amount as may be
permitted by law), shall be payable by Lessee upon depend. As used herein,
"Prime Rate" shall mean the rate of interest from time to time announced by
Maryland National Bank, Baltimore, Maryland, as its prime rate, whether or not
such rate is otherwise published.
Lessee hereby irrevocably appoints Lessor as Lessee's attorney-in-fact
(which power shall be deemed coupled with an interest) to execute, endorse and
deliver any deed, conveyance, assignment or other instrument in writing as may
be required to vest in Lessor any right, title or power which by the terms
hereof are expressed to be conveyed to or conferred upon Lessor, including,
without limitation, Uniform Commercial Code financing statements (including
continuation statements, real property waivers, and documents and checks or
drafts relating to or received in payment for any loss or damage under the
policies of insurance required by the provisions of Section 12 hereof, but only
to the extent that the same relates to the Equipment.
22. NOTICE. All notices (excluding billings and communications in the
ordinary course of business) hereunder shall be in writing, sent by certified
mail, return receipt requested, addressed to the other party at its respective
address stated below the signature of such party or at such other address as
such party shall from time to time designate in writing to the other party; and
shall be effective from the date of mailing.
23. MISCELLANEOUS. This Lease, the Equipment Schedule and any final
commitment letter executed by the parties, constitute the entire agreement
between the parties with respect to the subject matter hereof and shall not be
amended or altered in any manner except by a document in writing executed by
both parties.
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<PAGE> 24
Any provision of this Lease which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. The representations, warranties and covenants of Lessee
herein shall be deemed to be continuing and to survive the closing hereunder.
Each execution by Lessee of an Equipment Schedule shall be deemed a
reaffirmation and warranty that there shall have been no material adverse
change in the business or financial condition of Lessee from the date of
execution hereof. The captions in this Lease are for convenience of reference
only and shall not define or limit any of the terms or provisions hereof.
24. MARYLAND LAW GOVERNS. This Lease shall not be effective unless
and until accepted by execution by an officer of Lessor at the address, in the
State of Maryland, as set forth below the signature of Lessor. This Lease and
the rights and obligations of the parties hereunder shall in all respects be
governed by, and construed in accordance with, the laws of the State of
Maryland, including all matters of construction, validity and performance,
regardless of the location of the Equipment. The parties agree that any action
or proceeding arising out of or relating to this Lease may be commenced in any
state or Federal court of competent jurisdiction in the State of Maryland and
each party agrees that a summons and complaint commencing an action or
proceeding in any such court shall be properly served and shall confer personal
jurisdiction if served personally or by certified mail to it at its address
designated pursuant hereto, or as otherwise provided under the laws of the
State of Maryland.
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<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
duly executed under seal as of the date and year first above set forth.
MARYLAND NATIONALEASE GENETICS INSTITUTE, INC.
CORPORATION Lessee
Lessor
By:/s/ Kenneth E. Lindholm (SEAL) By:/s/ Garen G. Bohlin (SEAL)
------------------------ ----------------------
Senior Vice President Senior Vice President
Kenneth E. Lindholm Finance & Administration
c/o Maryland National 87 Cambridge Park Drive
Leasing Corporation Cambridge, Massachusetts 02140
502 Washington Avenue
Towson, Maryland 21204
-25-
<PAGE> 1
EXHIBIT 10.65
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
18 December 1992
DATED DECEMBER 23, 1992
-----------------------
BRITISH TECHNOLOGY GROUP LIMITED
- and -
GENETICS INSTITUTE, INC.
_____________________
LICENSE AGREEMENT
_____________________
<PAGE> 2
INDEX
-----
<TABLE>
<CAPTION>
Clause Heading Page
------ ------- ----
<S> <C> <C>
1 Definitions 1
2 Commencement and Duration 6
3 Payments 6
4 The License 9
5 Development & Marketing 10
6 Royalties 13
7 Accounting for Royalties 14
8 Currency & Taxes 16
9 Verification 17
10 Exclusion of Liability/Indemnity 17
11 Patent Infringement 20
12 Termination 22
13 Rights on Termination 27
14 Miscellaneous 29
15 Notices 30
16 Law & Jurisdiction 31
Appendix A The Patents 32
</TABLE>
<PAGE> 3
THIS DEED is made the 23rd day of December 1992
BETWEEN
(1) BRITISH TECHNOLOGY GROUP LIMITED whose principal office is at
101 Newington Causeway London SE1 6BU ("BTG"), and (2) GENETICS
INSTITUTE, INC., a Delaware Corporation, having its principal
place of business at 87 Cambridge Park Drive, Cambridge,
Massachusetts 02140-2387, USA ("the Licensee"), both BTG and the
Licensee being referred to as "the Parties."
IT IS AGREED THAT:
1. DEFINITIONS
-----------
IN this Agreement the following terms shall have or shall be
deemed to have the following meanings:
"CHARGEABLE TRANSACTION" the use, sale, hiring or other
disposal of a Product, or the
rendering of a Service, by or on
behalf of the Licensee, a
Connected Person or a distributor
who is undertaking substantial
Product support or marketing.
"CONNECTED PERSON" any person, partnership, joint
venture, company or corporation
controlled by or which controls or
is under common control with the
Licensee. For purposes of this
definition, the word "control"
(including with correlative
meanings, the terms "controlling,"
"controlled by" and "under common
control with") shall mean direct
or indirect ownership of at least
fifty percent (50%) of the stock
or shares entitled to vote for the
election of directors or the
ability to direct the management
and policies of an entity. The
American Home Products Corporation
is acknowledged at the date of
this Agreement to be a "Connected
Person" with respect to the
Licensee.
-1-
<PAGE> 4
"DEDUCTIONS" normal and customary quantity and
trade discounts (but not
commission or cash discounts), and
provided that such items are
specifically shown in the invoice,
sales, use, excise, import or
Value Added taxes, customs duties,
delivery and insurance charges,
and credits made to the inventory
on account of rejection or return
of Product.
"THE EFFECTIVE DATE" the date of full execution of this
Agreement in all its counterparts.
"THE FIELD" human recombinant Factor IX
protein produced from cell
culture. The Field shall exclude
any product, therapy, treatment or
procedure in which living material
is administered or howsoever
brought into contact with the
recipient of the therapy,
treatment or procedure, or any
product made for such purpose.
The Field shall also exclude gene
therapy or transgenics, or the
production by gene therapy, or
transgenic animals or transgenic
plants, of recombinant Factor IX
protein.
"THE INDEX" The U.S. Wholesale price index.
"THE INSTITUTE" means the Chancellor, Masters and
Scholars of the University of
Oxford, and their agents.
"THE LICENSE" the license and sub-license
granted under Clause 4.1(i) and
(ii) of this Agreement.
"NET SELLING PRICE" the price of fully formulated
Product, in final form, packaged
for ultimate consumer use, and as
charged or invoiced by or on
behalf of the Licensee, Connected
Person or a distributor, properly
appointed by the Licensee or
Connected Person, who is
-2-
<PAGE> 5
undertaking substantial Product
support or marketing, to the final
purchaser or to a distributor who
is not undertaking substantial
Product support or marketing, such
a distributor being for example a
drug wholesaler, a pharmacist or a
group of pharmacists, a chain of
drug retailers or a hospital or
central purchasing department for
a group of hospitals, and the
price of Services (if any), such
Products and Services being the
subject of a Chargeable
Transaction, calculated as
follows:
(i) in the case of an arm's
length transaction, the
gross price as charged or
invoiced, less any
Deductions;
(ii) in the case of a
transaction not at arm's
length, the market price
of the transaction in the
country where the same is
effected or absent a
market price, then the
market price of the
transaction in the United
States less any
Deductions; provided that
the Licensee shall be
permitted to use
reasonable quantities of
Product for bona fide
pre-clinical and clinical
testing, and marketing
programmes designed to
increase the profitable
sales of only the Product,
for which the Licensee
receives no payment or
other consideration, and
such Product, although
deemed a Chargeable
Transaction under this
Agreement, shall be
-3-
<PAGE> 6
exempted from any royalty
payment to BTG.
"THE PATENTS" (i) the patents and
applications for patents,
including those specified
in Appendix A, and any
patent which may be
granted to BTG pursuant to
any such applications; and
(ii) any patents and
applications corresponding
to such patents and
applications which may be
granted to or made by BTG
in other countries; and
(iii) any re-issues or
extensions of such patents
and any divisions and
continuations of such
applications, and any like
protection such as
supplementary patent
extension certificates or
anything else of similar
effect, including without
limitation any market
exclusivity conferred on
BTG or the Licensee, in
any country, as a result
of regulatory or other
delays associated with
introducing the Product on
the market.
"PRODUCT" any product or process within the
Field, which product is made,
used, sold, hired out or otherwise
disposed of, in any country, and
which falls within the scope of a
Valid Claim of any of the Patents
or within the scope of any Valid
Claim mentioned in sub-paragraph
(iii) immediately above, or whose
manufacture, use, sale, hiring or
other disposal would, but for the
License granted herein, directly
-4-
<PAGE> 7
CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE
SUCH OMISSIONS.
or indirectly infringe a Valid
Claim of any of the Patents.
"SERVICE" any process, procedure or
treatment used, sold, provided or
howsoever rendered and which
process, procedure or treatment
could not, but for the rights
granted to the Licensee under this
Agreement, otherwise be rendered
by or on behalf of the Licensee,
Connected Person or a distributor
who is undertaking substantial
Product support or marketing.
"VALID CLAIM" a claim of an unexpired Patent or
patent application which has not
lapsed or been abandoned or
declared invalid or unenforceable
by a court or other body with
appropriate authority, or
administrative agency, from which
no appeal can be or is taken.
2. COMMENCEMENT & DURATION
-----------------------
2.1 THIS Agreement shall come into force on the Effective
Date and, unless earlier terminated in accordance with the
provisions of Clause 12, shall terminate on expiry of the
last Patent the subject of this Agreement or, if appropriate,
on termination of all rights defined under sub-paragraph
(iii) of the text for the definition of "the Patents."
Subject to this, the License shall continue in each country
until expiry of all the Patents in the country or, if
appropriate, all the aforementioned rights.
2.2 THE Licensee shall be responsible for obtaining any
requisite registration or governmental approval of this
Agreement in any country and shall expeditiously take all
necessary steps to obtain the same.
3. PAYMENTS
--------
3.1 IN consideration for the grant by BTG to the Licensee of
the License under Clause 4, the Licensee shall, inter alia,
make each of the following non-refundable payments to BTG:
(i) immediately upon the signing of this Agreement, the
sum of ********************************* U.S.
dollars ******************;
-5-
<PAGE> 8
CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE
SUCH OMISSIONS.
(ii) on the earlier of the Licensee's ****************
of an ************************************ for a
******* or the ****************** in ***********
******* by the *******, and *****************, the
sum of ******************** U.S. dollars **********
indexed as stated in 3.3;
(iii) on the earlier of the Licensee ********** the *****
*************************** or the **********
******* in ******************* by the *******, and
************* the sum of *********************
******** U.S. dollars ********** indexed as stated
in 3.3; however, upon the Licensee electing to pay
BTG an additional, indexed sum of ***************
************** dollars ********** by *************,
the Licensee shall be entitled to a ************
********* in which to **** its *************
*******************.
(iv) on the ******** of ************** for the *******
by the ********************************* or the
**** in ******, or the ****************************
in *****, or other *******************************
in ********************** under paragraph 12.4, the
sum of ********************* U.S. dollars
********** indexed as stated in 3.3; if, however,
such ******** should not occur before ********
***** then at such time the sum of ***********
******** U.S. dollars **********, index-linked at
that time in accordance with 3.3, shall be paid to
BTG and a further ******************************
U.S. dollars **********, also index-linked in
accordance with 3.3, shall be paid to BTG on the
earlier of ************* and *************, and a
further ****************************** U.S. dollars
**********, index-linked in accordance with 3.3,
shall be paid to BTG on the earlier of ************
**** and *************, it being acknowledged that
the total payment under this sub-paragraph shall
not exceed ********************* U.S. dollars
********** before indexation;
(v) within the time limits specified in Clause 7 for
payment of royalties, an annual minimum royalty of
******************** U.S. dollars **********,
indexed as stated in 3.3, in respect of each
calendar year commencing with **** and up to
termination of the Agreement; and
(vi) the royalties specified in Clause 6.
-6-
<PAGE> 9
CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION. ASTERISKS
DENOTE SUCH OMISSIONS.
3.2 ALTHOUGH the sums referred to in 3.1(i-v) hereof shall
not be refundable, such part of the annual minimum royalty
payable as equals the actual royalty shall be credited
against the amounts (if any) shown to be due in the two
royalty statements for the calendar year which were submitted
by the Licensee in accordance with Clause 7. If the actual
royalty payable to BTG for the calendar year exceeds the
annual minimum royalty after indexation, then only the
difference shall be paid over to BTG. The provisions of this
clause shall operate only if there remain in any calendar
year royalties to be paid to BTG following credits allowed
under 6.1, which credits shall be first made.
3.3 EACH of the sums in 3.1(ii), (iii), (iv), and (v) shall,
with effect from the Effective Date, be increased in
proportion to the increase (if any) in the Index between the
Effective Date and the Index published immediately prior to
the relevant payment date, provided that in ascertaining any
increase due to a rise in the Index, the Licensee shall be
allowed to cap the year on year increase in the Index to
******************** in any year in which the Index rises by
greater than ******************** when compared to the
preceding year's Index. In the event of a fall in the Index,
the sums shall be paid to BTG without adjustment in the year
of the fall.
3.4 WHEN making any payment under this Agreement the
Licensee shall be responsible for all Value Added and other
Taxes required to be paid as a direct consequence of the
transfer of payment. For the avoidance of doubt, the
Licensee is not responsible for BTG corporate income tax
associated with this income.
4. THE LICENSE
-----------
4.1 AS of the Effective Date, BTG grants to the Licensee the
following License:
(i) a non-exclusive sub-license under United States
Patent 4,994,371 to manufacture or have made for it
Products (as defined) and to use, sell or otherwise
dispose of, anywhere in the world, Products made in
the United States;
(ii) a non-exclusive license under the other Patents to
manufacture or have made for it Products and to
use, sell or otherwise dispose of, anywhere in the
world, Products made in the countries covered by
the aforesaid other Patents.
-7-
<PAGE> 10
Notwithstanding that the aforesaid licenses are expressed to
be non-exclusive, BTG hereby agrees that, subject to the
Licensee fulfilling the milestones in 5.3, and making the
payments as set out in 12.5, BTG shall not enter into any
other license under the Patents and covering the Field
(hereby "Restriction") other than a non-exclusive license
and/or sub-license pursuant to rights granted to or reserved
to Pharmaceutical Proteins Limited or BTG. Pharmaceutical
Proteins Limited, to the Licensee's acknowledgment, has been
and continues to be a non-exclusive licensee and a
sub-licensee under the Patents without restriction as to any
field.
4.2 THE License is granted for the purpose of developing,
making, using, selling and otherwise disposing of Product
during the life of this Agreement and, except as is otherwise
provided herein, the License shall terminate with termination
of this Agreement.
4.3 Provided that the restriction is still in force the
Licensee shall have the right to grant sublicenses to make,
use, and sell Products in particular territories to wholly
owned subsidiaries of the Licensee and, for Japan, to
Yamanouchi, Inc. (a 50% owned subsidiary). The Licensee
shall promptly notify BTG of such sublicenses, and such
sublicenses shall not relieve GI of its obligations,
including royalty obligations, under this Agreement.
Sublicenses granted prior to termination of the Restriction
may remain in force.
5. DEVELOPMENT & MARKETING
-----------------------
5.1 THE Licensee shall use commercially reasonable endeavors
to develop Products and to achieve the milestones set forth
below in 5.3, and to obtain all clearances, licenses and
registrations necessary to enable as soon as practicable the
marketing and use of Products in the countries covered by the
Patents.
5.2 WITHIN thirty (30) days of the Effective Date, the
Licensee shall provide BTG with a plan for development and
sale of Products. Such plan shall be or shall encompass the
plan approved by an officer or manager of the Licensee who is
delegated by the Licensee's Board of Directors to approve
such plans. The Licensee shall, at six months intervals
thereafter, provide BTG with written reports of progress
under the plan during the preceding six months, and if
required by BTG, such reports, including sales projections,
-8-
<PAGE> 11
CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION. ASTERISKS
DENOTE SUCH OMISSIONS.
shall be discussed in meetings with BTG, to be held, upon
reasonable prior notice, at a mutually agreed time and place.
5.3 The following shall be milestones under this Agreement:
(i) ********** of the ******************************
*********** for a *************, or its **********
in ***********, to be **** on or before
*****************. Such ********** to be a
**************** or its **********, as
characterized by the ******************
******************** or other *********************
****;
(ii) ********** of the *********************************
*****, or its ********** in ***********, to be ****
on or before *************; however, if the
Licensee elects to make a second payment of ***
************************** dollars ********** in
addition to the payment of an identical amount
(before indexation) under Clause 3(iii), then
********** of the ********* or its ********** need
not be **** before *************;
(iii) ********* of a Product by ***************** or upon
payment to BTG of a separate sum of ************
******** dollars ********** for an extension of ***
*********, by *****************.
The above-mentioned milestones shall be conditions for the
purposes of the applicability or continuation of the
Restriction mentioned in Clause 4.1 of the Agreement, and the
sole and exclusive remedy for failure to meet the
aforementioned milestones shall be termination of the
Restriction only. In the operation of this clause, BTG shall
act reasonably at all times, taking into consideration the
efforts of the Licensee to meet the milestones.
5.4 BTG shall treat all of the Licensee's plans and reports
as confidential and shall disclose these only to those
persons, including its affiliates, employees, and auditors,
whether internal or external, to whom it deems it reasonably
necessary to for the purposes of this Agreement or for the
purposes of clarification of the terms of this Agreement. If
disclosure to any other agent or consultant should become
necessary, then BTG shall obtain the prior written consent of
the Licensee to the disclosure, and the Licensee agrees not
to unreasonably withhold its consent. Further, BTG agrees to
ensure that the person to whom such disclosure is made shall
likewise hold it in confidence.
-9-
<PAGE> 12
5.5 THE Licensee shall promote the sale of Products of good
merchantable quality and shall use its best endeavors, within
the terms of the License, to develop and meet the market
demand therefor.
5.6 THE Licensee shall advise BTG forthwith upon the first
manufacture of Product in each country the subject of the
License.
5.7 THE Licensee shall cooperate fully with BTG in pursuing
and securing any extension of, or restoration of, Patent term
or other protection under regulations, directives and laws
governing the development of and protection of rights
relating to Patents or Products. BTG shall bear any
reasonable external costs associated therewith and shall
alone designate the Patent to be extended or restored, when a
choice has to be made, and a Patent extension or restoration
of Patent term which is secured by or on behalf of BTG shall
form the subject of the License and this Agreement in all its
terms, so that the License and this Agreement shall survive
until expiry of such term, and the Licensee shall continue to
pay royalties and all other payments, and to honor all its
other obligations, until expiry of such term. For the
avoidance of doubt, the parties shall bear their own internal
costs of performance under this paragraph.
5.8 BTG hereby agrees to use reasonable endeavors, where
appropriate, to keep the Licensee informed of relevant Patent
matters within its control, particularly pertaining to the
scope of the claims of the Patents which have not yet issued.
6. ROYALTIES
---------
6.1 THE Licensee shall pay to BTG, in respect of Products
and Services the subject of Chargeable Transactions, and as
provided in Clause 14.2, on Products sold and Services
rendered after termination, a royalty on the Net Selling
Price as set forth in the following schedule:
-10-
<PAGE> 13
CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION. ASTERISKS
DENOTE SUCH OMISSIONS.
<TABLE>
<CAPTION>
TOTAL ANNUAL FACTOR IX SALES PERCENT
<S> <C>
(******* international activity units)
Up to ***** ***
Between ***** and ***** ***, on
additional sales
over and above
************
international
activity units
>***** *** on all sales*
</TABLE>
*Once this royalty rate becomes effective, it shall, subject
as is stated below, operate retroactively on all Products the
subject of Chargeable Transactions in that calendar year.
Accordingly, if the Licensee anticipates that this royalty
rate may be achieved in any calendar year as a result of
sales in excess of *********** international activity units,
it shall give notice of this fact to BTG in the first
accounting period in that calendar year and pay royalty to
BTG at ******************. If, however, the Licensee fails
to achieve the said royalty rate in that year, then in
addition to royalties due to BTG in respect of sales in the
second accounting period, the Licensee shall pay to BTG the
additional **************** royalty on appropriate sales
representing the difference between ****************** and
*****************, together with interest, accruing from day
to day, at the rate mentioned in 7.3. In no circumstances
shall BTG be liable to repay any royalties paid to it at ****
************ prior to the effective royalty rate of *****
************ being triggered as a result of sales in excess
of *********** international activity units; however, the
difference of **************** shall be credited by BTG
against royalties due in subsequent accounting periods, and
when payment of royalties cease, there shall be no further
credit or payment owing by BTG to the Licensee, and no other
benefit to or right of BTG under this Agreement shall be
affected by any set off of amounts which the Licensee has not
been able to so credit.
6.2 EXCEPT as is otherwise provided or implied, royalty
shall be payable once in respect of the same Product or
Service, as the case may be.
-11-
<PAGE> 14
6.3 THE Licensee shall, at the request of BTG, provide
annual forecasts of the amount of royalties likely to be
payable under this Agreement.
7. ACCOUNTING FOR ROYALTIES
------------------------
7.1 The Licensee shall:
(i) keep true and detailed accounts and records of all
royalties and other sums due under this Agreement;
(ii) within thirty (30) days after the last day of June
and December in each calendar year, deliver to BTG a
statement of all royalties and other sums due for the six
month period ending on such date, showing separately the
Chargeable Transactions in each country, in a manner in
which the information regarding manufacture of Products for
each country is separate from use, sales or other disposal
of Products. If no royalties are due to BTG, the statement
shall state that that is the case and give reasons.
Statements shall be duly certified to be correct by an
officer of the Licensee;
(iii) send with the above statement the amount shown to
be due; and
(iv) immediately and without demand send to BTG the
difference between amounts already paid and the correct
amount shown to be due and payable as a result of any
verification under Clause 9.
7.2 ON termination or expiration of this Agreement, a
statement shall be delivered to BTG within sixty (60) days of
termination or expiration and shall include details of:
(i) royalties on all Products and Services which have
been the subject of Chargeable Transactions since the end of
the last six (6) month accounting period; and
(ii) an inventory of all outstanding Products not yet
disposed of and if it is the Licensee's intention to enter
into Chargeable Transactions in respect of these Products,
also of any Services to be committed in connection
therewith. Thereafter the Licensee shall render statements
up to completion of all Chargeable Transactions with respect
to outstanding Products and Services.
-12-
<PAGE> 15
CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION. ASTERISKS
DENOTE SUCH OMISSIONS.
7.3 IF the Licensee is late in payment of the royalties and
other sums due under this Agreement, the amount due shall
bear interest, accruing from day to day, at the rate per
annum of ***************** above the Prime Rate published in
the WALL STREET JOURNAL, effective from the last day of the
aforesaid period until payment of such amount is made to BTG.
In the absence of written agreement by BTG to late payment,
this provision shall in no sense be construed as a waiver of
BTG's rights under other provisions of this Agreement to do
or obtain any action or thing in respect of late payment.
8. CURRENCY AND TAXES
------------------
8.1 ALL payments shall be made in United States dollars by
means of electronic transfer to the bank nominated by BTG
from time to time. Whenever for the purpose of calculating
royalties, conversion from any foreign currency shall be
required, such conversion shall be at the rate of exchange
published in the WALL STREET JOURNAL on the date immediately
preceding the applicable payment date.
8.2 PAYMENTS shall be made without deduction, other than
such amount as the Licensee is required to deduct or withhold
by law. In regard to any such deduction, the Licensee shall
use all reasonable endeavors to assist BTG to claim recovery
or exemption under any double taxation or similar agreement.
Evidence as to the payment of such tax or sum withheld shall,
on request, be given by the Licensee to BTG.
9. VERIFICATION
------------
THE Licensee shall permit any authorized representative
appointed by BTG, and reasonably acceptable to the Licensee,
upon reasonable notice, and during normal business hours, and
in respect of not more than one request (which may involve
multiple visits) in any six-month accounting period, access
to the premises of the Licensee and access to the accounts,
records and relevant documentation of the Licensee, and shall
provide such information and explanations as the
representative shall require to verify the statements
referred to in 7.1 and to satisfy BTG that the royalty and
other payment provisions of this Agreement are being complied
with. The representative shall also be permitted to take
copies and extracts of relevant documents. If the
verification discloses an underpayment to BTG of more than
10% of the amount due, the Licensee shall promptly, within
thirty (30) days of being notified the fees and costs of the
representative and the reasonable costs incurred by BTG in
respect of the verification, reimburse BTG for the same. The
access and inspection shall be limited to that which is
-13-
<PAGE> 16
required to verify the royalty and other payments, and any
and all information and documents shall be considered to be
confidential information which may be disclosed to only those
persons to whom disclosure is necessary for BTG's purposes as
contemplated by this Agreement, including without limitation
for the purpose of enforcement of any rights by BTG in
respect of payment.
10. EXCLUSION OF LIABILITY/INDEMNITY
--------------------------------
10.1 AS of the Effective Date, BTG represents and warrants
that it owns the right, title and interest in and to the
Patents of Appendix A, except US Patent No. 4,994,371 (the
"`371 Patent"); that it is the exclusive licensee under the
`371 Patent; and that the exclusive license to the `371
Patent is granted under an agreement dated 16 January 1989 by
and between Washington Research Foundation and BTG, as
subsequently amended ("the Foundation Agreement"); that BTG
has the right under the Foundation Agreement to convey to the
Licensee a sub-license of the scope set forth in this
Agreement; that other than the prior grant of a non-exclusive
license to Pharmaceutical Proteins Limited under the Patents,
which license does not prevent the grant by BTG of the
License under Clause 4 of this Agreement, BTG has not granted
any other party a license to the Patents covering the Field;
and that BTG shall not knowingly breach its obligations under
the Foundation Agreement.
10.2 OTHER than as is set forth in 10.1, no representation,
condition or warranty whatsoever is made or given by or on
behalf of BTG. Any implied representations, conditions and
warranties (in each case) to the effect, inter alia, that:
(i) any of the Patents is valid or enforceable; or
(ii) any manufacture, use, sale or other disposal,
reproduction or adaptation of Products or use of a
process under the Patents will not infringe any
patent or other intellectual property not vested in
BTG and not licensed hereof; or
(iii) BTG has any obligation to bring or prosecute
actions or suits against third parties for
infringement;
are hereby expressly excluded.
10.3 BTG shall be under no liability whatsoever to the
Licensee, whether in negligence or otherwise, for any
expense, loss, damage or injury of any kind, including loss
-14-
<PAGE> 17
of profit or consequential damage, sustained by the Licensee
or any third party, arising or incurred in connection with
the manufacture, use, sale or other disposal of Products or
deriving directly or indirectly out of the provision or use
of the Patents, or otherwise arising out of the grant of any
rights hereunder, or the provision of any information in
connection herewith.
10.4 THE Licensee shall indemnify and hold BTG harmless from
and against all claims, demands, actions, liabilities and
damages, and any costs and expenses incurred by BTG in the
defence of any action, including attorneys' fees, in
connection with the manufacture, use, sale or other disposal
of Products, or the provision or use of the Patents, by or on
behalf of the Licensee under this License Agreement, or
otherwise arising out of the grant of any rights hereunder or
the provision of any information in connection herewith, such
indemnity to include but not be limited to any damage, loss
or liability with respect to death or injury to any person
and damage to any property arising from the possession, use
or operation of the Patents by the Licensee or its customers,
or users of the Product.
10.5 THE Licensee shall indemnify, hold harmless and defend
the Washington Research Foundation, and the University of
Washington, their officers, employees and agents, against any
and all claims, suits, losses, damage, costs, fees,
(including attorneys' fees) and expenses resulting from or
arising out of the manufacture, use, sale or other disposal
by or on behalf of the Licensee of Products covered by United
States Patent 4,994,371, including but not limited to any
damage, loss or liability with respect to death or injury to
any person and damage to any property arising from the
possession, use or operation of the aforesaid Patent by the
Licensee or its customers or users of the Product.
10.6 The Licensee shall maintain in force, during the
currency of this Agreement and for as long as is reasonably
necessary, product liability insurance in amounts customarily
and generally available to U.S. biotechnology companies, in
respect of the manufacture of Products and their use and
supply. If BTG so directs, the Licensee shall arrange for
BTG's and/or Washington Research Foundation's interest to be
noted on any insurance policies and to have such person(s)
stated as loss payee(s).
11. PATENT INFRINGEMENT
-------------------
11.1 THE parties shall, within a reasonable time after
perceiving an infringement of the Patents by a third party,
-15-
<PAGE> 18
report to each other in writing, providing in such report
details and evidence of the character, and the place and
date, of such infringement, which has come to its notice, and
any other pertinent information relating to the infringement.
11.2 BTG shall have the exclusive right, at its cost and
expense, to deal in any manner whatsoever with any
infringement other than one relating solely to the Licensee's
Field of operation. BTG shall use reasonable endeavors to
keep the Licensee informed of its actions and, at its sole
discretion, may provide the Licensee with such documents
and/or papers relating to litigation which it is willing to
share with the Licensee.
11.3 WITH respect to an infringement solely in the
Licensee's Field:
(i) the Licensee shall, subject as is mentioned below,
have the first right, at its cost and expense, to
deal with the infringement, including by
commencing, completing and settling suit against
the infringer. Should BTG be required as a
necessary party in order for the Licensee to have
standing and/or obtain jurisdiction, BTG agrees,
at the Licensee's cost, to commence suit on behalf
of the Licensee and at Licensee's direction. Any
settlement reached with an infringer shall be
consistent with the scope and terms of this
Agreement and the rights herein accorded the
Licensee. As an exception allowed under this
Agreement, the Licensee may settle a sub-license
with an infringer at rates no lower than in this
Agreement provided that the sub-license (a) is
personal to the infringer and non-transferable;
(b) binds the infringer to terms and conditions
equivalent to those contained in this Agreement;
(c) allows BTG and its representatives rights of
audit in respect of income generated thereunder;
and (d) contains provisions for termination
equivalent to those set forth in Clause 12 and
also providing for termination of the sub-license
contemporaneously with termination of this
Agreement between the Parties. The Licensee must,
if it is to be deemed hereby to have exercised its
first rights, file suit against the infringer no
later than three (3) months after first documented
notice of actual or potential infringement or, if
within the above specified time period the
Licensee is in serious negotiations for reaching a
settlement between the infringer and the Licensee,
-16-
<PAGE> 19
CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION. ASTERISKS
DENOTE SUCH OMISSIONS.
no later than three (3) months after such serious
negotiations have broken down.
(ii) BTG shall, at its option (except where required to
obtain jurisdiction), be joined as a party to
every suit against a third party infringer
involving assertion or defense of the Patents. If
the Patent in question is that owned by Washington
Research Foundation (hereinafter "WRF"), BTG, at
its option (except where required to obtain
jurisdiction), shall join WRF or cause WRF to be
joined as party to the suit. The Licensee shall
bear all of BTG's and/or WRF's costs associated
with the joinder of BTG and/or WRF to any
infringement suit and the defense of Patents,
including without limitation BTG's and WRF's
attorneys' costs. The Licensee acknowledges and
agrees that BTG's attorneys and, in the case of
WRF's Patent, BTG's and WRF's attorneys shall be
the final arbiters as to conduct of litigation in
matters relating to validity of the Patents.
(iii) the parties' litigation costs shall be a first
charge against all recovery from the infringer as
a result of a court or tribunal award of costs,
fees and/or damages to the Licensee and/or BTG
and/or WRF, or as a result of reaching settlement.
Thereafter, any remaining amounts received from
the infringer shall be split as follows:
*** to the Licensee; and
*** to BTG.
(iv) if the Licensee has not exercised or been deemed
to have exercised its first rights as above
stated, BTG shall have the right, at its own cost
and expense, to deal with the infringement as it
alone thinks fit, including by bringing suit
against or settling a license with the infringer.
If the Restriction in 4.1 is operating on BTG at
the time of settlement of a license with the
infringer, then at the date and time of such
settlement, the Restriction shall be deemed
dissolved and BTG shall be free to grant
additional licenses or sub-licenses in the Field.
BTG's litigation costs shall be a first charge
against all recovery from the infringer as a
result of a court or tribunal award of costs, fees
and/or damages to BTG and/or WRF and/or the
-17-
<PAGE> 20
CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION. ASTERISKS
DENOTE SUCH OMISSIONS.
Licensee or as a result of reaching settlement.
Thereafter, any remaining amounts recovered from
the infringer shall be split as follows:
*** to BTG; and
*** to the Licensee.
(v) each party shall use all reasonable endeavors to
provide the other party with information and
assistance necessary to conduct suit or settle
litigation or infringement with the infringer.
12. TERMINATION
-----------
12.1 THE Licensee may, at any time, terminate this Agreement
or the License in respect of any country, by giving not less
than six months' notice to that effect and, except as is
otherwise provided in 12.2, upon payment to BTG of an amount
equivalent to the next full payment which would be due to BTG
under Clause 3 of the Agreement, were the Agreement not to
terminate.
12.2 IN the following three instances, the Licensee shall
not be bound to pay BTG the aforesaid next payment mentioned
in 12.1 or, in the case of (iii) below, a part thereof;
however the Licensee shall not be absolved from payment of
all other sums which have accrued for payment to BTG up to
the effective date of termination:
(i) if the Licensee reasonably demonstrates that it
can not reasonably develop a commercially viable
Product for prophylactic use; or
(ii) if the Licensee reasonably demonstrates that
circumstances beyond its control prevent
continuation of development of a Product; or
(iii) if any of the following Patents is held invalid
and/or unenforceable by a court from an unappealed
or unappealable decision, or if any of the
following pending applications (otherwise included
as Patents in this Agreement) do not ultimately
result in granted patents, in which case the
payment next due to BTG as above stated shall be
reduced in accordance with the formula:
-18-
<PAGE> 21
CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION. ASTERISKS
DENOTE SUCH OMISSIONS.
P -((P / 14) x N) = X
where P is equal to the payment next due to BTG
under 12.1, and N is equal to the number of
patents or patent applications of the aforesaid
fourteen which have been held to be invalid and/or
unenforceable or not resulted in issued or granted
patents, and X is the new payment due to BTG on a
termination falling within 12.1, in substitution
of the "next full payment" mentioned therein.
APPLICABLE PATENTS AND APPLICATIONS:
EPO 107278 for Factor IX Gene Clone covering Austria,
Belgium, France, Germany, Italy, Luxembourg,
Netherlands, Sweden and Switzerland; Japanese
application 83/502561 for Factor IX Gene Clone; United
Kingdom Patent 2125409 for Factor IX Gene Clone;
Australian Patent 560686 for Factor IX Gene Clone;
Canadian Patent 1214125 for Factor IX Gene Clone;
United States Patent 4994371 for Factor IX Gene Clone;
12.3 BTG may, in its sole discretion, terminate this
Agreement, by seven days' written notice to the Licensee,
upon the happening of any of the following events:
(i) if any royalties or other sums payable remain
unpaid for sixty (60) days after the due date;
(ii) if, in the United Kingdom, the Licensee has a
Receiver or an Administrative Receiver or
Administrator appointed of the whole, or any part,
of its undertaking or assets, or in any other
country has an officer appointed to perform a
function analogous to that of a Receiver,
Administrative Receiver or Administrator;
(iii) if an order is made, or a resolution passed, for
winding-up or administering the Licensee, unless
such order or resolution is part of a scheme of
solvent reconstruction of the Licensee;
(iv) if control of the Licensee shall be acquired by
any person, or group of Connected Persons other
than American Home Products Corporation, not
having control of the Licensee at the Effective
Date, and such change in control *****************
the *********** and ********* of ******** or
****************************** under this
Agreement or the ***************** to *** under
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<PAGE> 22
CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION. ASTERISKS
DENOTE SUCH OMISSIONS.
this Agreement, or ************************
********************. For the purposes hereof,
"control" shall mean the power, directly or
indirectly, to direct or cause the direction of
the management and policies of an entity, whether
through the ownership of voting securities, by
contract or otherwise.
(v) if the Licensee is in breach of any other material
term of this Agreement, and such breach remains
unremedied during the sixty (60) days after the
date of written notice to the Licensee specifying
the breach and requesting remedy thereof;
12.4 Subject to the proviso below, unless the Restriction
operating on BTG under 4.1 has already been terminated in
accordance with other provisions of this Agreement,
termination of the Restriction (on a Territory basis) shall
be BTG's sole remedy for failure by the Licensee to **** an
*** or ***, or other ***********************, in a Designated
Country (defined below) corresponding to each Territory, by,
in the case of *** or other *************************, and in
the case of *** or other *************************
<TABLE>
<CAPTION>
Territory Designated Country
------------- ------------------
<S> <C>
************* ****************
************* ****************
****************
****************
************* ****************
</TABLE>
Provided that, if at each of the aforesaid ***** the Licensee
cannot demonstrate a serious intent to **** the appropriate
*********** in any aforesaid Designated Country, then BTG
shall have the right to also terminate the license in respect
of the corresponding Territory by thirty (30) days' written
notice to the Licensee.
12.5 BTG may also, at its sole discretion, terminate the
Restriction operating on BTG if the Licensee is not meeting
the following annual minimum royalty payments out of actual
earned income from sales of Product:
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<PAGE> 23
CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION. ASTERISKS
DENOTE SUCH OMISSIONS.
If Product is being sold in the United States:
<TABLE>
<CAPTION>
YEAR Annual Minimum Royalty Payment
---- ------------------------------
from actual earned income
-------------------------
<S> <C>
Year 1 of sales **********
Year 2 of sales **********
Year 3 of sales **********
Year 4 of sales and each **********
subsequent year thereafter
</TABLE>
If Product is not being sold in the United States:
<TABLE>
<CAPTION>
YEAR Annual Minimum Royalty Payment
---- ------------------------------
from actual earned income
-------------------------
<S> <C>
Year 1 of sales **********
Year 2 of sales **********
Year 3 of sales **********
Year 4 of sales and each **********
subsequent year thereafter
</TABLE>
13. RIGHTS ON TERMINATION
---------------------
13.1 TERMINATION of this Agreement or of the License in
respect of any country shall be without prejudice to the
rights of either party against the other which may have
accrued up to the date of termination.
13.2 ON termination of this Agreement for whatever cause,
the Licensee shall have the option to sell or dispose of
Products made or in the process of being made under this
Agreement, provided that upon such sales or disposals it
shall pay BTG the royalties thereon in accordance with the
terms of Clauses 6 and 7. The royalty in relation to
Services shall encompass both (i) Services committed prior to
termination and (ii) Services to be committed after
termination.
13.3 Other than as is otherwise expressly provided,
termination of this Agreement for any reason shall not bring
to an end the obligations of the Licensee in respect of the
accounting for, payment of and verification of royalties
under Clauses 6, 7, 8, 9 and 13.2, until the settlement of
all claims of BTG. Neither shall termination affect the
survival of those rights and obligations of either party
which are necessary for the complete fulfillment and
discharge of the terms of this Agreement.
-21-
<PAGE> 24
CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION. ASTERISKS
DENOTE SUCH OMISSIONS.
13.4 Upon termination of this Agreement for whatever reason,
BTG shall, at its exclusive option and for further
consideration mentioned herein, be entitled to a conveyance,
by assignment or exclusive license at its election, in such
country or countries of the Patents, to all of the Licensee's
rights, title and interest in:
(i) the pre-clinical and clinical data and
information, including IND and PLA dossiers and
their equivalents submitted to the FDA or other
regulatory authorities pursuant to the objectives
of this Agreement; and
(ii) any Orphan Drug status or designation (or its
equivalent or other status or designation
conferring monopoly or like rights in any country)
applicable to the Product and granted to the
Licensee by the FDA or other regulatory authority;
and
(iii) all correspondence to and from regulatory
authorities; and
(iv) all other relevant information pertaining to the
development, and to registration, manufacture and
sale, of Product pursuant to the purposes of this
Agreement (all such items collectively being
referred to as "the Materials").
A conveyance by assignment shall be subject to a retention by
the Licensee of the right to use the Materials in connection
with its own business, but no license to use the Patents
shall hereby be implied. In return for the aforesaid
conveyance to BTG, revenues generated by BTG from using or
licensing the Materials to make, use or sell Products shall
be ********************************* before any deductions,
except withholding tax on the payments, until the Licensee
has recovered from BTG all of the license fees and payments
made by it to BTG prior to termination of this Agreement or,
if earlier, until cessation of revenues to BTG from licensing
the Materials. BTG alone shall apportion the revenues
received from licensing a package of technology which
includes the Materials so as to arrive at an apportionment of
revenues relating solely to the Materials, such revenues
being the only revenues the Parties hereby intend to share.
Further, if in order to commercialize the Materials in the
Field, it would be necessary for BTG to obtain a license
under patents or other intellectual property rights of the
Licensee, then the Licensee agrees to enter into bona fide
discussions with BTG for the grant to BTG of a
-22-
<PAGE> 25
use such rights in the countries covered by the Patents and
to grant sub-licenses, all limited to the Field.
14. MISCELLANEOUS
-------------
14.1 THE Licensee shall legibly mark the Products, or if
this is not practicable, then any associated packaging or
literature, in a manner consistent with the laws and
practices prevailing in the country of marketing.
14.2 The Licensee shall have the right to assign, charge or
dispose of all of its rights or obligations under this
Agreement and the License to American Home Products
Corporation ("AHPC") provided that AHPC agrees, in writing,
to be bound by the terms and conditions of this Agreement
prior to the assignment, charge or disposal. Other than
that, the Licensee shall not assign, charge or dispose of any
of its rights or obligations under this Agreement or the
License without the previous written consent of BTG, except
on a disposal of the entire assets or business of the
Licensee.
14.3 THE failure by either party to exercise or enforce any
rights under this Agreement shall not be deemed to be a
waiver of any such rights, nor shall any single or partial
exercise of any right, power, or privilege, or further
exercise thereof, operate so as to bar the exercise or
enforcement thereof at any later time.
14.4 THE waiver by either party of any breach of any of the
terms of this Agreement by the other shall not be deemed to
be a waiver of any other breach of the Agreement.
14.5 IF any part or provision of this Agreement is
prohibited, or rendered void or unenforceable under law, the
validity or enforceability of the Agreement as a whole or of
any other part of this Agreement shall not be affected;
however if this results in a material alteration to the terms
and conditions of this Agreement, the parties will
renegotiate the terms and conditions thereof to resolve any
inequities.
14.6 THE rights and remedies provided in this Agreement are
cumulative and not exclusive of any rights or remedies
provided by law or in equity.
14.7 THIS Agreement shall be binding upon and enure to the
benefit of the successors, permitted assignees and personal
representatives of the parties.
-23-
<PAGE> 26
15. NOTICES
-------
15.1 ANY notice authorized or required to be given under
this Agreement by either party to the other party, shall be
in writing, and shall be deemed to be duly given if sent by
recorded delivery or registered post addressed to:
(i) in the case of BTG, its principal office mentioned
at the head of this Agreement; and
(ii) in the case of the Licensee, its principal office
mentioned at the head of this Agreement;
or at such other address from time to time agreed by the
parties by notification by one to the other.
15.2 ANY notice, if sent by post, shall be deemed to have
been served seven (7) days after posting.
16. LAW & JURISDICTION
------------------
THIS Agreement is to be read and construed in accordance
with, and governed by, English law and the Licensee agrees to
submit to the non-exclusive jurisdiction of the English
courts. In the event that any provision of this Agreement is
contrary to English law, such provision shall be modified to
a provision which is consistent with English law and which is
consistent with the intention of the parties.
-24-
<PAGE> 27
APPENDIX "A"
------------
THE PATENTS
-----------
<TABLE>
<CAPTION>
+---------------+--------------+-----------+----------+-------------+
| | APPLICATION | PATENT | | |
| | NUMBER | NUMBER | DATE | TITLE |
+---------------+--------------+-----------+----------+-------------+
<S> <C> <C> <C> <C>
| Austria | | EPO107278 | 03/08/83 | Factor IX |
| | | | | Gene Clone |
+---------------+--------------+-----------+----------+-------------+
| Belgium | | " | " | " |
+---------------+--------------+-----------+----------+-------------+
| France | | " | " | " |
+---------------+--------------+-----------+----------+-------------+
| Germany | | " | " | " |
+---------------+--------------+-----------+----------+-------------+
| Italy | | " | " | " |
+---------------+--------------+-----------+----------+-------------+
| Luxembourg | | " | " | " |
+---------------+--------------+-----------+----------+-------------+
| Netherlands | | " | " | " |
+---------------+--------------+-----------+----------+-------------+
| Sweden | | " | " | " |
+---------------+--------------+-----------+----------+-------------+
| Switzerland | | " | " | " |
+---------------+--------------+-----------+----------+-------------+
| Japan | 83/502561 | | " | " |
+---------------+--------------+-----------+----------+-------------+
| EPC | 88116366.1 | | " | " |
| (Austria, | | | | |
| Belgium, | | | | |
| France, | | | | |
| Germany, | | | | |
| Italy, | | | | |
| Luxembourg, | | | | |
| Netherlands, | | | | |
| Sweden, | | | | |
| Switzerland, | | | | |
| UK) | | | | |
+---------------+--------------+-----------+----------+-------------+
| UK | | 2125409 | 03/08/83 | " |
+---------------+--------------+-----------+----------+-------------+
| Australia | | 560686 | 02/08/83 | " |
+---------------+--------------+-----------+----------+-------------+
| Canada | | 1214125 | 18/11/86 | " |
+---------------+--------------+-----------+----------+-------------+
| USA | | 4994371 | 19/02/91 | " |
+---------------+--------------+-----------+----------+-------------+
</TABLE>
-25-
<PAGE> 28
CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION. ASTERISKS
DENOTE SUCH OMISSIONS.
<TABLE>
<CAPTION>
+---------------+------------+--------------+-----------+-----------+
| | APPLICATION| PATENT | | |
| TERRITORY | NUMBER | NUMBER | DATE | TITLE |
+---------------+------------+--------------+-----------+-----------+
<S> <C> <C> <C> <C>
| Austria | | EP0195592 | 12/03/86 | Factor IX |
| | | | | Protein |
+---------------+------------+--------------+-----------+-----------+
| France | | " | " | " |
+---------------+------------+--------------+-----------+-----------+
| Germany | | " | " | " |
+---------------+------------+--------------+-----------+-----------+
| Italy | | " | " | " |
+---------------+------------+--------------+-----------+-----------+
| Sweden | | " | " | " |
+---------------+------------+--------------+-----------+-----------+
| Switzerland | | " | " | " |
+---------------+------------+--------------+-----------+-----------+
| UK | | " | " | " |
+---------------+------------+--------------+-----------+-----------+
| EPC | 91200265.6 | | 12/03/86 | " |
| (Austria, | | | | |
| France, | | | | |
| Germany, | | | | |
| Italy, | | | | |
| Sweden, | | | | |
| Switzerland, | | | | |
| UK) | | | | |
+---------------+------------+--------------+-----------+-----------+
| Japan | 86/056745 | | 14/03/86 | " |
+---------------+------------+--------------+-----------+-----------+
| USA | 839215 | | 13/03/86 | " |
+---------------+------------+--------------+-----------+-----------+
| USA | ****** | | ******** | " |
+---------------+------------+--------------+-----------+-----------+
| USA | 764073 | | 23/09/91 | " |
+---------------+------------+--------------+-----------+-----------+
</TABLE>
-26-
<PAGE> 29
IN WITNESS whereof this document has been executed as a deed
the day and year first above written.
GENETICS INSTITUTE
WITNESS
/s/ Jack Morgan By:/s/ L. Patrick Gage
- -------------------------- ----------------------------
L. Patrick Gage
Executive Vice President
BRITISH TECHNOLOGY GROUP
WITNESS
/s/ Elizabeth J. Segal By:/s/ Derek J. Schafer
- -------------------------- ----------------------------
Derek J. Schafer
Executive Director
WITNESS
- -------------------------- By:----------------------------
other authorized signatory
The COMMON SEAL of BRITISH )
TECHNOLOGY GROUP LIMITED )
was affixed as a Deed and )
authenticated by: )
----------------------------
----------------------------
-27-
<PAGE> 1
EXHIBIT 10.66
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
PARTNERSHIP AGREEMENT
of
IL-12 PARTNERS
between
AHP IL-12 CORPORATION
and
GI DRUG DESIGN, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1. Affiliate(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2. AHP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3. AHP Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4. Annual Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5. Assignment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.6. Basic Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.7. Business Deadlock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8. Capital Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.9. Carrying Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.10. Cash Available for Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.11. Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.12. Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.13. Continuing Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.14. Development Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.15. Discontinuing Partner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.16. Excess Negative Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.17. Excluded Field . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.18. Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.19. Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.20. Gene Therapy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.21. GI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.22. GI Development Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.23. GI Distribution Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.24. GI Know-How . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.25. GI Patent Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
1.26. GI Sales Territory . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.27. GI Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.28. Governance Agreement . . . . . . . . . . . . . . . . . . . . . . . . 11
1.29. Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.30. IL-12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.31. IND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.32. Internal Revenue Service . . . . . . . . . . . . . . . . . . . . . . 12
1.33. License Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.34. Licensed Field . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.35. Licensed Products . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.36. Major Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.37. Marketing Organization . . . . . . . . . . . . . . . . . . . . . . . 12
1.38. Net Profits and Net Losses . . . . . . . . . . . . . . . . . . . . . 12
1.39. Operating Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.40. Other Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.41. Parent Company Agreement . . . . . . . . . . . . . . . . . . . . . . 14
1.42. Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.43. Partnership Settlement Agreement. . . . . . . . . . . . . . . . . . . 14
1.44. Percentage Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.45. PLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.46. Preventative Vaccine Adjuvant Licensed Product . . . . . . . . . . . 14
1.47. Project Director . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.48. Project Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.49. Requisite Majority . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.50. Roche . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.51. Roche Cross-License . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.52. Roche Know-How . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.53. Roche Patent Rights . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
1.54. Sales Territory . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.55. Section 704(c) Assets . . . . . . . . . . . . . . . . . . . . . . . . 15
1.56. Sole Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.57. Steering Committee . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.58. Sublicensee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.59. Territory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.60. Therapeutic Area . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.61. Therapeutic Vaccine Adjuvant Licensed Product . . . . . . . . . . . . 16
1.62. Vaccine Adjuvant . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.63. Wistar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.64. Wistar Know-How . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.65. Wistar License . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.66. Wistar Patent Rights . . . . . . . . . . . . . . . . . . . . . . . . 17
1.67. Wyeth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.68. Wyeth Development Agreement . . . . . . . . . . . . . . . . . . . . . 17
1.69. Wyeth Distribution Agreement . . . . . . . . . . . . . . . . . . . . 17
1.70. Wyeth Sales Territory . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE II. FORMATION OF THE PARTNERSHIP . . . . . . . . . . . . . . . . . 18
2.1. Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.2. Name of Partnership . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.3. Business of Partnership . . . . . . . . . . . . . . . . . . . . . . . 18
2.4. Place of Business of Partnership . . . . . . . . . . . . . . . . . . . 18
2.5. Duration of Partnership . . . . . . . . . . . . . . . . . . . . . . . 19
2.6. Title to Partnership Property . . . . . . . . . . . . . . . . . . . . 19
2.7. Partition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.8. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.9. No Individual Authority . . . . . . . . . . . . . . . . . . . . . . . 20
2.10. Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
2.11. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE III. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . 21
3.1. Representations of AHP Sub . . . . . . . . . . . . . . . . . . . . . . 21
3.2. Representations of GI Sub . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE IV. MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.1. Steering Committee . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.2. Authority of the Steering Committee . . . . . . . . . . . . . . . . . 26
4.3. Project Team and Directors . . . . . . . . . . . . . . . . . . . . . . 30
4.4. Annual Budgets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.5. Accounting and Internal Controls . . . . . . . . . . . . . . . . . . . 33
4.6. Access to Books and Records . . . . . . . . . . . . . . . . . . . . . 38
4.7. Consultation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.8. Business Deadlock . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.9. Global Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE V. DEVELOPMENT AND MARKETING ACTIVITIES . . . . . . . . . . . . . 43
5.1. License of Technology . . . . . . . . . . . . . . . . . . . . . . . . 43
5.2. Development and Commercialization Strategy . . . . . . . . . . . . . . 43
5.3. Regulatory Activities . . . . . . . . . . . . . . . . . . . . . . . . 50
5.4. Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.5. Formulation, Filling and Finishing . . . . . . . . . . . . . . . . . . 51
5.6. Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.7. Wyeth Preventative Vaccine Adjuvant Collaborative
Rights and Option . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE VI. CAPITAL CONTRIBUTIONS,
PROFITS AND LOSSES AND DISTRIBUTIONS . . . . . . . . . . . . 55
6.1. Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . 57
6.2. General Allocations of Net Profits and Net Losses . . . . . . . . . . 57
6.3. Certain Royalty Payments . . . . . . . . . . . . . . . . . . . . . . . 59
6.4. Carrying Value Different from Tax Basis . . . . . . . . . . . . . . . 59
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C>
6.5. Allocations on Liquidation . . . . . . . . . . . . . . . . . . . . . . 60
6.6. Allocations Upon Transfer or Admittance of New Partner . . . . . . . . 61
6.7. Distributions of Cash Available for Distribution . . . . . . . . . . . 61
6.8. Distributions Upon Transfer or Admittance of New Partner . . . . . . . 62
ARTICLE VII. CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . . 62
7.1. Treatment of Confidential Information . . . . . . . . . . . . . . . . 62
7.2. Release from Restrictions . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE VIII. RESTRICTIONS ON TRANSFER . . . . . . . . . . . . . . . . . . 64
8.1. Transfer of Partnership Interest . . . . . . . . . . . . . . . . . . . 64
8.2. Termination of Partnership . . . . . . . . . . . . . . . . . . . . . . 65
8.3. Buy-Sell Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 66
8.4. Effect of Buy-Sell Proceedings . . . . . . . . . . . . . . . . . . . . 67
8.5. Appointment of Attorney-in-Fact . . . . . . . . . . . . . . . . . . . 69
ARTICLE IX. DISSOLUTION AND TERMINATION . . . . . . . . . . . . . . . . . 70
9.1. Events of Dissolution . . . . . . . . . . . . . . . . . . . . . . . . 70
9.2. Distributions Upon Liquidation . . . . . . . . . . . . . . . . . . . . 71
9.3. Appointment of Attorney-in-Fact . . . . . . . . . . . . . . . . . . . 72
ARTICLE X. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . 73
10.1. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
10.2. Roche and Wistar Rights . . . . . . . . . . . . . . . . . . . . . . . 75
10.3. Other Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.4. Additional Powers . . . . . . . . . . . . . . . . . . . . . . . . . . 77
10.5. Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
10.6. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
10.7. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
10.8. Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.9. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.10. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
</TABLE>
v
<PAGE> 7
<TABLE>
<S> <C>
10.11. Export . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
10.12. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 81
10.13. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
10.14. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
10.15. Compliance with Applicable Law . . . . . . . . . . . . . . . . . . . 82
10.16. Equitable Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 82
10.17. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . 82
10.18. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
</TABLE>
<TABLE>
<CAPTION>
SCHEDULES
<S> <C>
Schedule A - IL-12 Patent Rights
Schedule B - Annual Budget
EXHIBITS
Exhibit A - Assignment Agreement
Exhibit B - GI Development Agreement
Exhibit C - License Agreement
Exhibit D - Parent Company Agreement
Exhibit E - Wyeth Development Agreement
</TABLE>
vi
<PAGE> 8
PARTNERSHIP AGREEMENT
---------------------
AGREEMENT effective as of July 1, 1994 between AHP IL-12 CORPORATION,
a Nevada corporation having its principal place of business at Five Giralda
Farms, Madison, New Jersey 07940 (hereinafter referred to as "AHP Sub") and
being a wholly-owned subsidiary of AMERICAN HOME PRODUCTS CORPORATION, a
Delaware corporation having its principal place of business at Five Giralda
Farms, Madison, New Jersey 07940 (hereinafter referred to as "AHP"), and GI
DRUG DESIGN, INC., a Delaware corporation having its principal place of
business at 87 CambridgePark Drive, Cambridge, Massachusetts 02140 (hereinafter
referred to as "GI Sub") and being a wholly-owned subsidiary of GENETICS
INSTITUTE, INC., a Delaware corporation having its principal place of business
at 87 CambridgePark Drive, Cambridge, Massachusetts 02140 (hereinafter referred
to as "GI"), pursuant to which IL-12 PARTNERS, a general partnership under the
laws of the State of Delaware (the "Partnership"), is hereby formed.
INTRODUCTION
------------
1. GI has research and development facilities and experienced
scientists, clinicians, engineers, technical associates and assistants and
other personnel which enable it to conduct research and development activities
in the area of biotechnology and the application thereof to the development,
production and manufacture, registration and marketing of biotechnology-based
pharmaceutical products.
1
<PAGE> 9
2. AHP, through Wyeth (as defined below), is engaged in the research,
development, production and manufacturing, registration and marketing of
pharmaceutical products.
3. GI, in collaboration with Wistar (as defined below), has
identified, isolated, purified and cloned IL-12 (as defined below) and has
filed patent applications relating thereto in various countries.
4. GI has exclusively licensed its patent rights and know-how
rights relating to IL-12 to GI Sub under the License Agreement (as defined
below).
5. AHP Sub and GI Sub desire to form the Partnership to provide for
the development and commercialization of IL-12 in the Territory (as defined
below) and GI Sub desires to assign its interest in the License Agreement to
the Partnership.
In consideration of the mutual covenants and promises contained in
this Agreement and other good and valuable consideration, AHP Sub and GI Sub
agree as follows:
ARTICLE I. DEFINITIONS
----------------------
As used in this Agreement, the following terms, whether used in the
singular or the plural, shall have the following meanings:
1.1. "Affiliate(s)" of a party shall mean any corporation, company,
--------------
partnership, joint venture, firm and/or entity which controls, is controlled
by, or is under common control with a party except that, for purposes of the
Basic Agreements (but not the Roche Cross-License or the Wistar License) a
Partner to this Agreement, or any corporation or other business entity
controlled by such Partner, shall be deemed not to be an "Affiliate" of the
2
<PAGE> 10
CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
other Partner. For purposes of this Section 1.1, "control" shall mean the
direct or indirect ownership of at least fifty percent (50%) of voting or
income interest in such corporation or other business entity, or such other
relationship as, in fact, constitutes actual control.
1.2. "AHP" means American Home Products Corporation, a Delaware
-----
corporation and the sole stockholder of AHP Sub.
1.3. "AHP Sub" means AHP IL-12 Corporation, a Nevada corporation
---------
and wholly-owned subsidiary of AHP.
1.4. "Annual Budget" is defined in Section 4.4 of this Agreement.
---------------
1.5. "Assignment Agreement" means the Assignment and Assumption
----------------------
Agreement in the form of Exhibit A to this Agreement to be entered into among
GI, GI Sub and the Partnership.
1.6. "Basic Agreements" means this Agreement, the Assignment
------------------
Agreement, the GI Development Agreement, the GI Distribution Agreement, the
License Agreement, the Parent Company Agreement, the Wyeth Development
Agreement and the Wyeth Distribution Agreement, collectively.
1.7. "Business Deadlock" means the inability of the Steering
-------------------
Committee, acting in good faith, to obtain a Requisite Majority for any Major
Decision, which inability continues for a period of at least ****** **********
from the time the Major Decision at issue is first considered by the Steering
Committee after having been initially presented to the Steering Committee for
action.
1.8. "Capital Account" means a separate account maintained for each
-----------------
Partner and adjusted in accordance with Regulations under Section 704 of the
Code. To the extent consistent with
3
<PAGE> 11
such Regulations, the adjustments to such accounts shall include the following:
(a) There shall be credited to each Partner's Capital Account the amount
of any cash actually contributed by such Partner to the capital of the
Partnership, the fair market value of any property contributed by such Partner
to the capital of the Partnership (net of any liabilities secured by such
property that the Partnership is considered to assume or take subject to
under Code Section 752) and such Partner's share of the Net Profits of the
Partnership and of any items in the nature of income or gain separately
allocated to the Partners; and there shall be charged against each Partner's
Capital Account the amount of all cash distributions to such Partner, the fair
market value of any property distributed to such Partner by the Partnership
(net of any liability secured by such property that the Partner is considered
to assume or take subject to under Code Section 752) and such Partner's share
of the Net Losses of the Partnership and of any items in the nature of losses
or deductions separately allocated to the Partners. For purposes of making
these adjustments, (i) the initial Carrying Value of the License Agreement
contributed by GI Sub pursuant to Section 6.1 of this Agreement shall be
determined by the Partners and recorded on the books of the Partnership and
(ii) the rights received by a Sole Partner or a Continuing Partner to
indications in a Therapeutic Area under Sections 5.2(c) or 5.2(d) of this
Agreement shall be treated as having been distributed to such Partner at an
agreed-upon fair market value of zero, and thereafter, unless and until the
Partnership reacquires such rights (which reacquisition shall
4
<PAGE> 12
be treated as a purchase of such rights), the funding and exploitation of such
rights shall not be considered a Partnership activity reflected in Capital
Accounts.
(b) If the Partnership at any time distributes any of its
assets in-kind to any Partner, the Capital Account of each Partner shall be
adjusted to account for that Partner's allocable share of the Net Profits or
Net Losses that would have been realized by the Partnership had it sold the
assets that were distributed at their respective fair market values immediately
prior to their distribution.
(c) In the event any interest in the Partnership is
transferred in accordance with the terms of this Agreement, the transferee
shall succeed to the Capital Account of the transferor to the extent it relates
to the transferred interest.
1.9. "Carrying Value" means, with respect to any asset, the asset's
----------------
adjusted basis for United States federal income tax purposes, except as
follows:
(a) the initial Carrying Value of any asset contributed (or
deemed contributed upon a termination of the Partnership for federal income tax
purposes pursuant to Section 708(b)(l)(B) of the Code) to the Partnership shall
be such asset's gross fair market value at the time of such contribution (the
initial Carrying Value of the License Agreement contributed by GI Sub pursuant
to Section 6.1 of this Agreement shall be determined by the Partners and
recorded on the books of the Partnership);
(b) the Carrying Values of all Partnership assets shall be
adjusted to equal their respective gross fair market
5
<PAGE> 13
values upon an election by the Partnership pursuant to United States Treasury
Regulation Section 1.704-1(b)(2)(iv)(f) to adjust the Partners' Capital
Accounts;
(c) if the adjusted basis of any asset acquired by the
Partnership is determined by reference to the adjusted basis of any other asset
of the Partnership, the Carrying Value of the acquired asset shall be
determined by reference to the Carrying Value of the other asset rather than
its adjusted basis; and
(d) if the Carrying Value of an asset has been determined
pursuant to clause (a), (b) or (c) of this Section 1.9, such Carrying Value
shall thereafter be adjusted in the same manner as would the asset's adjusted
basis for United States federal income tax purposes except that depreciation
deductions shall be computed in accordance with Section 1.38(a) of this
Agreement.
1.10. "Cash Available for Distribution" means, with respect to any
---------------------------------
fiscal period, the excess of all cash receipts of the Partnership from
operations and from any and all other sources, including any proceeds from
sales, financing or refinancing and any amounts released from reserves, but
excluding capital contributions to the Partnership, over the sum of the
following amounts (except to the extent paid from capital contributions):
(a) cash disbursements for all items which are customarily
considered to be operating expenses including, without limitation, all payments
made to any party pursuant to any of the Basic Agreements in accordance with
the Annual Budget for that fiscal period;
6
<PAGE> 14
(b) payments of interest, principal and premium under any
indebtedness of the Partnership;
(c) payments made for capital construction, acquisitions,
alterations or improvements in accordance with the Annual Budget for that
fiscal period; and
(d) any cash disbursements in excess of those referred to
in clause (a) above and any payments in excess of those referred to in clause
(c) above ratified by the Steering Committee and reasonable amounts set aside
as reserves by the Steering Committee for working capital, contingent
liabilities, replacements or for any of the expenditures described in clauses
(a), (b) and (c) above, or as otherwise deemed reasonable by the Steering
Committee to meet the current or anticipated needs of the Partnership.
1.11. "CODE" means the United States Internal Revenue Code of 1986, as
amended.
1.12. "Confidential Information" means (a) all proprietary information and
--------------------------
materials, patentable or otherwise, of a party which is disclosed by or on
behalf of such party to the other party, including, without limitation, DNA
sequences, vectors, cells, substances, formulations, techniques, methodology,
equipment, data, reports, know-how, preclinical and clinical trials and the
results thereof, sources of supply, patent positioning and business plans,
including any negative developments, and (b) any other information designated
by the disclosing party to the other party as confidential or proprietary,
whether or not related to making, using or selling Licensed Products.
7
<PAGE> 15
CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
1.13. "Continuing Partner" is defined in Section 5.2(d) of this
---------------------
Agreement.
1.14. "Development Cost" means (a) ***************** and
------------------
**************** attributable to ** ********, as determined in accordance
with generally accepted cost accounting practices in the country of the
activity, plus (b) ***** ******* ***** of such ***** **** and ****************,
plus (c) any *********** ***** permitted to be incurred under Section ****** of
this Agreement and (d) ********** ************* *****.
1.15. "Discontinuing Partner" is defined in Section 5.2(d) of this
-----------------------
Agreement.
1.16. "Excess Negative Balance" for a Partner means the excess, if any,
-------------------------
of (a) the negative balance in a Partner's Capital Account after reducing
such balance by the net adjustments, allocations and distributions described
in United States Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) and
(6) which, as of the end of the Partnership's taxable year are reasonably
expected to be made to such Partner, over (b) the sum of (i) the amount, if
any, which the Partner is required to restore to the Partnership upon
liquidation of such Partner's interest in the Partnership (or which is so
treated pursuant to United States Treasury Regulations under Code Section
704) and (ii) that portion of any indebtedness of the Partnership (other than
any Partnership liability to the extent that the liability is nonrecourse for
purposes of United States Treasury Regulation Section 1.1001-2) with respect
to which the Partner bears the economic risk of loss that such indebtedness
would not be repaid out of the Partnership's assets if all of the Partnership's
8
<PAGE> 16
assets were sold at their respective Carrying Values as of the end of the
fiscal year or other period and the proceeds from the sales were used to pay
the Partnership's liabilities. For purposes of clause (ii) above, the amounts
computed pursuant to clause (i) above for each Partner shall be considered to
be proceeds from the sale of the assets of the Partnership to the extent such
amounts would be available to satisfy (directly or indirectly) the indebtedness
specified in clause (ii) above.
1.17. "Excluded Field" is defined in Section 1.34 of this Agreement.
----------------
1.18. "Executive Officers" means the executive officer of AHP in charge
--------------------
of pharmaceutical operations of Wyeth and the chief executive officer of GI.
1.19. "Filings" means a consent, approval, order or authorization of,
---------
or registration, qualification, designation, declaration, filing, clearance,
exemption or notification with or by a governmental authority.
1.20. "Gene Therapy" means the genetic modification of human somatic
--------------
cells by the introduction of exogenous DNA or RNA into those somatic cells
for the purpose of expressing IL-12 in vivo for the treatment or prevention
of disease or genetic defect.
1.21. "GI" means Genetics Institute, Inc., a Delaware corporation and
----
the sole stockholder of GI Sub.
1.22. "GI Development Agreement" means the GI Research and Development
--------------------------
Agreement in the form of Exhibit B to this Agreement to be entered into
between GI and/or a GI Affiliate and the Partnership.
9
<PAGE> 17
1.23. "GI Distribution Agreement" means the Distribution Agreement to
---------------------------
be entered into between GI and/or a GI Affiliate and the Partnership pursuant
to Section 5.6 of this Agreement.
1.24. "GI Know-How" means all information, patentable or otherwise, of
-------------
GI, developed, applied or acquired by GI (other than information licensed to
GI pursuant to the terms of Section 6.1 of the License Agreement) as of and
during the term of the License Agreement in connection with the invention or
development of IL-12, relating to the identification, characterization, use
or production of IL-12 which is reasonably useful or necessary or is required
to develop, use, register, manufacture, formulate, fill and finish,
distribute and/or sell Licensed Products including, without limitation,
scientific discoveries, developments, preclinical data, clinical data, and
marketing approvals and regulatory filings and records related thereto. "GI
Know-How" shall not include Roche's interest in the information or know-how
licensed to GI under the Roche Cross- License and Wistar's interest in the
information or know-how licensed to GI and its affiliates under the Wistar
License.
1.25. "GI Patent Rights" means, with respect to IL-12 or any Licensed
------------------
Products, all patents and patent applications (which for all purposes of this
Agreement shall be deemed to include certificates of invention and
applications for certificates of invention and priority rights) developed,
applied or acquired by GI (other than those licensed to GI pursuant to the
terms of Section 6.1 of the License Agreement) as of and during the term of
the License Agreement (including any reissues, extensions or other
governmental acts which effectively extend the period of
10
<PAGE> 18
exclusivity by the patent holder, substitutions, confirmations, registrations,
revalidations, additions, continuations, continuations-in-part, or divisions of
or to any of the foregoing) which are reasonably useful or necessary or are
required to develop, use, register, manufacture, formulate, fill and finish,
distribute and/or sell Licensed Products. "GI Patent Rights" shall not include
Roche's interest in the patents and patent applications licensed to GI under
the Roche Cross-License and Wistar's interest in the patents and patent
applications licensed to GI and its affiliates under the Wistar License.
1.26. "GI Sales Territory" means Canada, Mexico and the United States
--------------------
(including its territories and possessions).
1.27. "GI Sub" means GI Drug Design, Inc., a Delaware corporation and
--------
wholly-owned subsidiary of GI.
1.28. "Governance Agreement" means the Governance Agreement among AHP,
----------------------
GI and Holdings dated January 16, 1992.
1.29. "Holdings" means AHP Biotech Holdings, Inc., a Delaware
----------
corporation.
1.30. "IL-12" means: (a) the proteins, peptides or polypeptides,
-------
referred to as NKSF, CLMF or IL-12, which are described or claimed in the GI
and/or Roche patent applications set forth on Schedule A to this Agreement
(the "Protein"); (b) the subunits of the Protein or combination of such
subunits to form the Protein; (c) the polynucleotides ("PNs") which encode
the Protein, the subunits of the Protein and/or subsequences thereof; (d) any
modified form of the Protein; or (e) naturally occurring allotypic variant or
mutant forms of the Protein or of the PNs.
11
<PAGE> 19
1.31. "IND" means an Investigational New Drug application or its
-----
equivalent or any corresponding foreign filing.
1.32. "Internal Revenue Service" means the United States Internal
--------------------------
Revenue Service.
1.33. "License Agreement" means the License Agreement in the form of
-------------------
Exhibit C to this Agreement to be assigned to the Partnership by GI Sub.
1.34. "Licensed Field" means the prevention or treatment of disease in
----------------
humans through the use of Licensed Products, including, without limitation,
Gene Therapy and Vaccine Adjuvant uses and applications thereof. The
Licensed Field shall exclude all diagnostic, research reagent and animal
health uses and applications thereof (the "Excluded Field").
1.35. "Licensed Products" means IL-12 and any and all formulations,
-------------------
mixtures or compositions thereof (including those containing more than one
active ingredient) which, or the use, making or manufacturing of which, is
covered by a Valid Claim of any of the GI Patent Rights, Roche Patent Rights
or Wistar Patent Rights and/or embodies any GI Know-How, Roche Know-How or
Wistar Know-How.
1.36. "Major Decision" is defined in Section 4.2(b) of this Agreement.
----------------
1.37. "Marketing Organization" means either GI or Wyeth or their
------------------------
designated Affiliates as the context requires.
1.38. "Net Profits" and "Net Losses" mean the taxable income or loss,
------------------------------
as the case may be, for a period (or from a transaction) as determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss or deduction required to
12
<PAGE> 20
be separately stated pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss) computed with the following adjustments:
(a) Items of gain, loss and deduction shall be computed based upon the
Carrying Values of the Partnership's assets rather than upon the assets'
adjusted bases for United States federal income tax purposes, and, in
particular, the amount of any deductions for depreciation or amortization
with respect to an asset for a period shall equal such asset's Carrying Value
multiplied by a fraction the numerator of which shall be the amount of
depreciation or amortization with respect to such asset allowable for federal
income tax purposes for such period and the denominator of which shall be
such asset's adjusted basis (it being understood that this provision shall
not supersede the provision in Section 4.5(b) of this Agreement providing for
election under Code Section 754);
(b) Any tax-exempt income received by the Partnership shall be
included as an item of gross income;
(c) The amount of any adjustments to the Carrying Values of any
assets of the Partnership pursuant to Code Section 743 shall not be taken
into account (it being understood that this provision shall not supersede the
provision in Section 4.5(b) of this Agreement providing for election under
Code Section 754); and
(d) Any expenditure of the Partnership described in Code Section
705(a)(2)(B) (including any expenditures treated as being described in
Section 705(a)(2)(B) pursuant to United States
13
<PAGE> 21
Treasury Regulations under Code Section 704(b)) shall be treated as a
deductible expense.
1.39. "Operating Plan" is defined in Section 4.4 of this Agreement.
----------------
1.40. "Other Partner" is defined in Section 5.2(c) of this Agreement.
---------------
1.41. "Parent Company Agreement" means the Parent Company Agreement in
--------------------------
the form of Exhibit D to this Agreement to be entered into among AHP, GI and
Holdings.
1.42. "Partner" means either AHP Sub or GI Sub; "PARTNERS" means AHP
---------
Sub and GI Sub.
1.43. "Partnership Settlement Agreement" is defined in Section 4.5(c) of
----------------------------------
this Agreement.
1.44. "Percentage Shares" is defined in Section 6.1(b) of this Agreement.
-------------------
1.45. "PLA" means a Product License Application or its equivalent or
-----
any corresponding foreign product license application.
1.46. "Preventative Vaccine Adjuvant Licensed Product" means a Licensed
------------------------------------------------
Product which is used or intended for use as a Vaccine Adjuvant to prevent
contraction of a disease.
1.47. "Project Director" means the project director selected by either
------------------
AHP Sub or GI Sub as set forth in Section 4.3 of this Agreement.
1.48. "Project Team" means the project team as set forth in Section 4.3
--------------
of this Agreement.
1.49. "Requisite Majority" means at least a majority of the members
--------------------
of the entire Steering Committee, provided that such
14
<PAGE> 22
majority always shall include at least one member who is a designee of AHP Sub
and at least one member who is a designee of GI Sub.
1.50. "Roche" means Hoffmann-La Roche Inc., a New Jersey corporation
-------
and/or F. Hoffmann-La Roche Ltd., a Swiss corporation.
1.51. "Roche Cross-License" between GI and Roche dated as of July 7,
---------------------
1994, implementing the Heads of Agreement, as amended, dated as of May 4, 1992.
1.52. "Roche Know-How" means Roche's interest in all
----------------
information, patentable or otherwise, acquired by non-exclusive license, with
limited rights to sublicense, by GI under the Roche Cross-License.
1.53. "Roche Patent Rights" means Roche's interest in all patents and
---------------------
patent applications acquired by non- exclusive license, with limited rights
to sublicense, by GI under the Roche Cross-License.
1.54. "Sales Territory" means either the GI Sales Territory or the Wyeth
-----------------
Sales Territory as the context requires.
1.55. "Section 704(c) Assets" is defined in Section 6.3 of this Agreement.
-----------------------
1.56. "Sole Partner" is defined in Section 5.2(c) of this Agreement.
--------------
1.57. "Steering Committee" means the steering committee as set forth in
--------------------
Section 4.1 of this Agreement.
1.58. "Sublicensee" means a third party which is not an Affiliate of a
-------------
party and to whom such party has granted a sublicense to develop, use,
register, formulate, fill and finish,
15
<PAGE> 23
CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
distribute and/or sell Licensed Products. Without limiting the generality of
the foregoing, a Sublicensee shall be deemed to include any third party who is
granted a sublicense hereunder by a party pursuant to the terms of the outcome
or settlement of any infringement or threatened infringement action.
1.59. "Territory" means all countries throughout the world except Japan.
-----------
1.60. "Therapeutic Area" means a distinct class of diseases or
------------------
indications, such as, but not limited to, the following areas: *******;
******; ********* *********; ********** and ******; ********; *********; ***;
************; ************ ***** *******; **********; **********; ********;
*********; ***** *******; or ******. For purposes of this definition, any
use of IL-12 in the Gene Therapy or Vaccine Adjuvant fields shall be
considered a separate Therapeutic Area even if such use involves one of the
foregoing classes of diseases or indications.
1.61. "Therapeutic Vaccine Adjuvant Licensed Product" means a Licensed
-----------------------------------------------
Product which is used or intended for use as a Vaccine Adjuvant to treat or
cure active or latent disease. A Licensed Product which is purposefully
developed as both a Preventative Vaccine Adjuvant Licensed Product and a
Therapeutic Vaccine Adjuvant Licensed Product shall be deemed a Therapeutic
Vaccine Adjuvant Licensed Product for purposes of this Agreement.
1.62. "Vaccine Adjuvant" means the use of IL-12 in combination with an
------------------
immunogen (e.g., viral proteins, parasite proteins or miscellaneous antigens)
or polynucleotides encoding an immunogen to enhance, suppress or otherwise
modulate the immune system in response to disease or the threat of disease,
16
<PAGE> 24
whether in vivo or ex vivo. For purposes of this Section 1.55, "combination"
------- -------
shall mean use in conjunction with, simultaneously with (combined or
uncombined) or sequentially with an immunogen.
1.63. "Wistar" means The Wistar Institute of Anatomy and Biology, a
------
Pennsylvania nonprofit corporation.
1.64. "Wistar Know-How" means Wistar's interest in all information,
---------------
patentable or otherwise, acquired by license by GI and its affiliates under
the Wistar License.
1.65. "Wistar License" means the License Agreement between GI and
--------------
Wistar dated June 30, 1992, as amended from time to time.
1.66. "Wistar Patent Rights" means Wistar's interest in all patents
--------------------
and patent applications acquired by license by GI and its affiliates under
the Wistar License.
1.67. "Wyeth" means the Wyeth-Ayerst Laboratories division of AHP.
-----
1.68. "Wyeth Development Agreement" means the Wyeth Research and
---------------------------
Development Agreement in the form of Exhibit E to this Agreement to be
entered into between AHP, acting through Wyeth, and/or a Wyeth Affiliate
and the Partnership.
1.69. "Wyeth Distribution Agreement" means the Distribution Agreement
----------------------------
to be entered into between AHP, acting through Wyeth, and/or a Wyeth
Affiliate and the Partnership pursuant to Section 5.6 of this Agreement.
1.70. "Wyeth Sales Territory" means all countries throughout the
---------------------
world other than Canada, Japan, Mexico and the United States (including its
territories and possessions).
17
<PAGE> 25
ARTICLE II. FORMATION OF THE PARTNERSHIP
-----------------------------------------
2.1. FORMATION. AHP Sub and GI Sub do hereby form the Partnership as a
general partnership under the laws of the State of Delaware for the purpose
set forth herein and upon the terms and conditions set forth in this
Agreement. The rights and obligations of the Partners and the administration
and termination of the Partnership shall be governed by the laws of the State
of Delaware.
2.2. NAME OF PARTNERSHIP. The name of the Partnership shall be "IL-12
Partners," or such other name as the Partners may from time to time
determine, under which all business of the Partnership shall be conducted.
The Steering Committee shall cause to be filed on behalf of the Partnership,
in connection with the name under which the Partnership conducts its
business, such partnership or doing business, assumed or fictitious name
certificate or certificates as may from time to time be required by law.
2.3. BUSINESS OF PARTNERSHIP. The business of the Partnership shall be
to develop, use, register, formulate, fill and finish, distribute and sell
Licensed Products in the Territory in the Licensed Field, upon the terms and
conditions set forth in this Agreement. The business of the Partnership
shall not be extended beyond the matters described in this Agreement without
the consent of the Partners.
2.4. PLACE OF BUSINESS OF PARTNERSHIP. The principal place of Business
of Partnership. The principal place of business of the Partnership shall be
located at 87 CambridgePark Drive, Cambridge, Massachusetts 02140. The
Partners may, at any time and from time to time, change the
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location of the Partnership's principal place of business and may establish
such additional place or places of business of the Partnership as they may from
time to time determine.
2.5. DURATION OF PARTNERSHIP. The term of this Agreement shall
commence on the date hereof and continue until dissolution and termination of
the Partnership or December 31, 2094, whichever occurs first.
2.6. TITLE OF PARTNERSHIP PROPERTY. All property owned by the
Partnership, whether real or personal, tangible or intangible, shall be
deemed to be owned by the Partnership as an entity, and no Partner,
individually, shall have any sole ownership of such property but both Partners
shall have joint beneficial ownership of such property through the Partnership.
The Partnership may hold any of its assets in its own name or, alternatively,
if required by applicable law, in the name of one Partner, in which case the
other Partner shall have equal beneficial ownership of such property, or in the
name of its nominee, which nominee may be one or more individuals,
partnerships, trusts or other entities.
2.7. PARTITION. The Partners hereby agree that no Partner, nor any
successor-in-interest to any Partner, shall have the right while this
Agreement remains in effect to have the property of the Partnership
partitioned, or to file a complaint or institute any proceeding at law or in
equity to have the property of the Partnership partitioned, and each Partner,
on behalf of itself, its successors and assigns, hereby waives any such right
regardless of whether the property is registered in the name of one Partner.
It is the intention of the Partners that during the
19
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term of this Agreement, the rights of the Partners and their
successors-in-interest, as among themselves, shall be governed by the terms of
this Agreement, and that the right of any Partner or successor-in-interest to
assign, transfer, sell or otherwise dispose of its interest in the
Partnership's properties shall be subject to the limitations and restrictions
of this Agreement.
2.8. FISCAL YEAR. The fiscal year of the Partnership shall end on
December 31 of each calendar year.
2.9. NO INDIVIDUAL AUTHORITY. Neither Partner, acting alone, shall
have any authority to act for, or to undertake or assume any obligation,
debt, duty or responsibility on behalf of, the other Partner or the
Partnership except as expressly provided in this Agreement.
2.10. EXCULPATION. The Partners shall perform their duties under this
Agreement with ordinary prudence and in a manner characteristic of
businesspersons in similar circumstances. Neither Partner shall have any
liability whatsoever to the Partnership or to the other Partner to the
extent such liability is caused by any act or by the failure to do any act
undertaken or failed to be undertaken by such Partner in its capacity as a
Partner (but not to the extent such liability is caused by such Partner in its
capacity as a Sole Partner or Continuing Partner or in its capacity as a party
to any of the Basic Agreements) if (a) the loss suffered by the Partnership
arises out of a reasonable mistake in judgment of the Partner, (b) the Partner,
in good faith, determined that the action or lack of action giving rise to the
loss was in the best interest of the Partnership or (c) the action or lack of
action giving rise to
20
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the loss was based on the advice of counsel; provided, however, that such
exculpation from liability shall not apply to any liability for loss caused by
any act or by the failure to do any act which arises out of the gross
negligence or willful misconduct of the Partner.
2.11. INDEMNIFICATION. The Partnership shall
indemnify and hold harmless each Partner, and each employee, agent or associate
of each Partner, against any and all claims, actions, demands, costs, expenses
(including reasonable attorneys' fees) and legal proceedings related to the
performance or nonperformance of any act concerning the activities of the
Partnership, if, and only if, the Partner, or employee, agent or associate,
against whom the claim is made or legal proceeding is brought is entitled to
exculpation under the provisions of Section 2.10 of this Agreement.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
--------------------------------------------
3.1. REPRESENTATIONS OF AHP SUB. AHP Sub hereby represents and
warrants to GI Sub as follows:
(a) ORGANIZATION AND STANDING. AHP is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. AHP Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada.
Each of AHP and AHP Sub has full corporate power and authority to conduct its
business as presently conducted and as proposed to be conducted by it. Each
of AHP and AHP Sub has full corporate power and authority to
21
<PAGE> 29
enter into and perform the Basic Agreements and to carry out the transactions
contemplated by the Basic Agreements.
(b) AUTHORITY FOR AGREEMENT. The execution, delivery and
performance by AHP (either acting itself or through Wyeth) and AHP Sub of the
Basic Agreements have been duly authorized by all necessary corporate action,
and the Basic Agreements have been or will be duly executed and delivered by
AHP (either acting itself or through Wyeth) and AHP Sub. The Basic Agreements
constitute or will constitute the valid and binding obligations of AHP (either
acting itself or through Wyeth) and AHP Sub enforceable in accordance with
their terms, subject as to enforcement of remedies to applicable bankruptcy,
insolvency, reorganization or similar laws affecting generally the enforcement
of creditors' rights and subject to a court's discretionary authority with
respect to the granting of a decree ordering specific performance or other
equitable remedies. The execution of and performance of the transactions
contemplated by the Basic Agreements and compliance with their provisions by
AHP (either acting itself or through Wyeth) and AHP Sub will not violate any
provision of law and will not conflict with or result in any breach of any of
the terms, conditions or provisions of, or constitute a default under, the
charter documents or by-laws of AHP or AHP Sub or any indenture, lease, a
greement or other instrument to which AHP (either directly or through Wyeth)
or AHP Sub is a party or by which they or any of their respective properties
are bound, or any decree, judgment, order, statute, rule or regulation
applicable to AHP (either directly or through Wyeth) or AHP Sub.
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(c) GOVERNMENTAL CONSENTS. No Filings with or by any government
authority are required on the part of AHP (either directly or through Wyeth)
or AHP Sub in connection with the execution and delivery of the Basic
Agreements or the transactions contemplated by the Basic Agreements, except
for (i) such Filings as shall have been made prior to and shall be effective
as of the date hereof and (ii) regulatory approvals relating to the testing,
production or marketing of any Licensed Product.
(d) LITIGATION. There is no action, suit, proceeding or
investigation pending, or, to the best of AHP Sub's knowledge, any basis
therefor or threat thereof, against AHP (either directly or through Wyeth) or
AHP Sub which questions the validity of the Basic Agreements or the right of
AHP (either acting itself or through Wyeth) or AHP Sub to enter into the Basic
Agreements, or which is likely to result, either individually or in the
aggregate, in the inability of AHP (either acting directly or through Wyeth)
or AHP Sub to perform the transactions contemplated by the Basic Agreements.
(e) BROKERS. No agent, broker, investment banker, person or firm
acting on behalf of AHP (either directly or through Wyeth) AHP Sub or any of
their Affiliates is, or will be, entitled to any broker or finder's fee or
any other commission or similar fee, directly or indirectly, in connection
with any of the transactions contemplated by the Basic Agreements.
3.2. REPRESENTATIONS OF GI SUB. GI Sub hereby represents and
warrants to AHP Sub as follows:
23
<PAGE> 31
(a) ORGANIZATION AND STANDING. Each of GI and GI Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power and authority to conduct its
business as presently conducted and as proposed to be conducted by it. Each of
GI and GI Sub has full corporate power and authority to enter into and perform
the Basic Agreements and to carry out the transactions contemplated by the
Basic Agreements.
(b) AUTHORITY FOR AGREEMENT. The execution, delivery and performance
by GI and GI Sub of the Basic Agreements have been duly authorized by all
necessary corporate action, and the Basic Agreements have been or will be duly
executed and delivered by GI and GI Sub. The Basic Agreements constitute or
will constitute the valid and binding obligations of GI and GI Sub enforceable
in accordance with their terms, subject as to enforcement of remedies to
applicable bankruptcy, insolvency, reorganization or similar laws affecting
generally the enforcement of creditors' rights and subject to a court's
discretionary authority with respect to the granting of a decree ordering
specific performance or other equitable remedies. The execution of and
performance of the transactions contemplated by the Basic Agreements and
compliance with their provisions by GI and GI Sub will not violate any
provision of law and will not conflict with or result in any breach of any
of the terms, conditions or provisions of, or constitute a default under, the
charter documents or by-laws of GI or GI Sub, or any indenture, lease,
agreement or other instrument to which GI or GI Sub is a party or by which
they or any of their respective properties are
24
<PAGE> 32
bound, or any decree, judgment, order, statute, rule or regulation applicable
to GI or GI Sub.
(c) GOVERNMENTAL CONSENTS. No Filings with or by any governmental
authority are required on the part of GI or GI Sub in connection with the
execution and delivery of the Basic Agreements or the transactions
contemplated by the Basic Agreements, except for (i) such Filings as shall
have been made prior to and shall be effective as of the date hereof and
(ii) regulatory approvals relating to the testing, production or marketing
of any Licensed Product.
(d) LITIGATION. There is no action, suit, proceeding or
investigation pending, or, to the best of GI Sub's knowledge, any basis
therefor or threat thereof, against GI or GI Sub which questions the validity
of the Basic Agreements or the right of GI or GI Sub to enter into the Basic
Agreements, or which is likely to result, either individually or in the
aggregate, in the inability of GI or GI Sub to perform the transactions
contemplated by the Basic Agreements.
(e) BROKERS. No agent, broker, investment banker, person or firm
acting on behalf of GI, GI Sub or any of their Affiliates is, or will be,
entitled to any broker or finder's fee or any other commission or similar fee,
directly or indirectly, in connection with any of the transactions
contemplated by the Basic Agreements.
ARTICLE IV. MANAGEMENT
-----------------------
4.1. STEERING COMMITTEE. The Partnership shall be managed by a Steering
Committee composed of eight (8) members, four (4)
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CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
of whom shall be designated by AHP Sub in its discretion and four (4) of whom
shall be designated by GI Sub in its discretion. The members initially
designated by AHP Sub are *****************, **************************,
*********************, and ********************** and the members initially
designated by GI Sub are *******************, ************,
**********************, and **************** There shall be a Chairman of the
Steering Committee who shall be appointed for a one-year term, provided that
the term of the Chairman first appointed under this Agreement shall expire on
December 31, 1995. The Chairman shall be alternately designated by the
Partners, with the first such designation being made by GI Sub. The number of
members comprising the Steering Committee may not be increased or decreased
without the written consent of each Partner. If any member of the Steering
Committee dies, resigns or becomes incapacitated, the Partner which designated
such member shall designate his successor (whose term shall commence
immediately), and any Partner may withdraw the designation of any of its
members of the Steering Committee and designate a replacement (whose term shall
commence immediately) at any time by giving notice of the withdrawal and
replacement to the other Partner.
4.2. AUTHORITY OF THE STEERING COMMITTEE.
(a) The overall business of the Partnership shall be managed
by the Steering Committee with the objective of reaching consensus. Subject
to the provisions of paragraph (b) below, all acts of management of the
Partnership shall be taken by the Steering Committee or by agents duly
authorized in writing by the Steering Committee. No individual Partner shall
purport to act
26
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as an agent of the Partnership unless, and then only to the extent, authorized
to do so by the Steering Committee.
(b) All Major Decisions of the Partnership shall be made by the
Steering Committee acting by Requisite Majority. As used in this Agreement,
the term "Major Decisions" shall mean:
(i) approval of Annual Budgets and subsequent revisions to such
Annual Budgets;
(ii) approval of strategic plans and the implementation thereof;
(iii) approval of product and clinical development plans;
(iv) approval of product registration and labelling plans;
(v) approval of formulation, filling and finishing plans and budgets
therefor;
(vi) approval of material services to be purchased by the joint
venture from AHP, GI or their respective Affiliates or from
third parties;
(vii) direction of negotiations regarding commercial transactions,
including, but not limited to, transactions with AHP, GI or
their respective Affiliates;
(viii) approval of the timing and amount of the contribution by the
Partners of capital to the Partnership and, taking into
consideration such factors as the capital requirements of the
Partnership and a preference for current
27
<PAGE> 35
distributions, the distribution of Cash Available for
Distribution to the Partners;
(ix) appointment or removal of independent public accountants and
legal counsel and approval of services to be purchased from
such third parties;
(x) commencement, prosecution, defense or settlement of any
litigation or arbitration or potential litigation
or arbitration;
(xi) incurrence of debt and/or equity financing from third parties;
(xii) purchase, acquisition or formation of another entity or business;
(xiii) creation of liens, mortgages, pledges or other forms of
encumbrances upon any of the assets of the Partnership;
(xiv) sale, lease, transfer or exchange of significant parts of the
business or assets of the Partnership;
(xv) approval of material cash disbursements, payments and amounts
to be set aside as reserves;
(xvi) any agreement by the Partnership to extend the statute of
limitations for the assessment of any tax liability;
(xvii) a decision by the Partnership (or by a Partner or any of
its Affiliates on behalf of the Partnership) to license-in
or acquire patent or know-how rights related to IL-12, the
cost of
28
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which, in whole or in part, shall be paid by the
Partnership;
(xviii) a decision by the Partnership to initiate or to fund
infringement litigation pursuant to Section 6.3 of the
License Agreement;
(xix) a decision by the Partnership to develop and/or commercialize
a particular Licensed Product in either the Gene Therapy or
Vaccine Adjuvant field through the Partnership (it being
understood that not all research and development conducted by
the Partnership shall necessarily constitute such a decision
and that the Steering Committee shall document when and which
particular Licensed Products have been selected for
development and/or commercialization through the Partnership);
(xx) a decision whether to enter into an agreement with a third
party commercial collaborator with respect to a Licensed
Product for a particular Gene Therapy or Vaccine Adjuvant use;
(xxi) any other matter which might substantially affect the
financial condition, operations or business of the Partnership;
and
(xxii) any matter reasonably designated as a "Major Decision" by
either Partner.
(c) Anything to the contrary notwithstanding, the foregoing right
of the Partners to participate in Major Decisions shall be
subject to (i) the rights of GI set forth in Section 5.2(b)
of this Agreement, Section 2.1(b) of the GI Development
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CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
Agreement and Sections 5.1, 5.3, 6.2, 6.3, 7.1, 7.3, 8.2 and 8.4 of the License
Agreement, (ii) the rights of GI or a GI Affiliate to be set forth in the GI
Distribution Agreement to be entered into pursuant to Section 5.6 and (iii) the
rights of Wyeth or a Wyeth Affiliate to be set forth in the Wyeth Distribution
Agreement to be entered into pursuant to Section 5.6 of this Agreement.
Further, the foregoing right of the Partners to participate in Major Decisions
shall be subject to the provisions of Section 4.8 of this Agreement.
(d) The Chairman of the Steering Committee shall preside at all
meetings of the Steering Committee, shall appoint a member for keeping
minutes and shall perform such other duties and possess such other powers
as the Steering Committee may from time to time determine.
4.3. PROJECT TEAM AND DIRECTORS.
(a) Except as provided in paragraph (c) below, subject to the
overall direction of the Steering Committee, the day-to-day operations of the
Partnership shall be managed by an evolving Project Team whose members shall
be designated by the Partners, in their discretion, in roughly equal numbers.
The membership of the Project Team shall vary from time to time based on the
then-current development and commercialization needs of the Partnership. In
addition, each of the Partners shall at all times have designated a Project
Director and the Project Directors shall work together to coordinate the
activities of the Project Team. The Project Director initially designated by
AHP Sub is ********************** and the Project Director initially
designated by GI Sub is **************** Within 30 days of the
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<PAGE> 38
execution of this Agreement, the Partners, with the assistance of the Project
Directors, shall establish the initial membership of the Project Team.
(b) All decisions of the Project Team shall be made with the
objective of reaching consensus. The responsibilities of the Project Team
shall include, but not be limited to, (i) preparation of a research strategy
and global development plan as soon as possible, (ii) preparation of a
registration and position strategy document prior to the initiation of the
first Phase III clinical trial conducted in the Territory and (iii) the
preparation of the Operating Plans and Annual Budgets contemplated by Section
4.4 of this Agreement. The Project Team shall also be responsible for
(w) the development and submission to the Steering Committee of proposals
relating to the Major Decisions described in Sections 4.2(b)(i)-(viii) and
(xvii), (x) review of all laboratory, preclinical, clinical, production and
other scientific data relating to IL-12 submitted to the Partnership, (y)
planning and coordination of all preclinical and clinical trials and
preparation of analyses of the data generated thereby for distribution to the
Marketing Organizations and (z) coordinating review of publications by the
Partners. The Project Team shall report to the Steering Committee at such
regular intervals as the Steering Committee shall determine in order to
maximize coordination between the Marketing Organizations.
(c) In the event that the Partnership shall decide to develop
and/or commercialize a Licensed Product for a particular Gene Therapy or
Vaccine Adjuvant use through the Partnership as described in Section
4.2(b)(xix) of this Agreement, a separate
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CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
project team shall be established for such Licensed Product at the time of such
determination. The structure and responsibilities of each such project team
shall be determined by the Steering Committee at such time.
4.4. Annual Budgets. The Partners hereby agree that attached hereto as
Schedule B is the operating expenditure budget for the period from the date of
this Agreement through December 31, 1994. The Steering Committee shall cause
to be prepared by the Project Team an annual operating plan ("Operating Plan")
for each full fiscal year of the Partnership which shall include an analysis
of all strategic development and marketing plans of the Partnership for such
fiscal year. In addition, the Steering Committee shall cause to be prepared
by the Project Team an annual budget (the "Annual Budget") for each full
fiscal year of the Partnership, commencing with the fiscal year ending
December 31, 1995, on or before 60 days prior to the commencement of such
fiscal year. The Annual Budget shall be reviewed by the Steering Committee
and shall not be effective until approved by a Requisite Majority of the
Steering Committee. In the event that a Requisite Majority shall fail to
approve an Annual Budget prior to the commencement of any fiscal year, the
Partnership shall, unless an affirmative vote to the contrary is taken by a
Requisite Majority, maintain (for a period of no more than **************
****** from the commencement of such fiscal year) a level of operations and
expenditures equivalent to that called for in the prior operating expenditure
budget or Annual Budget. The Annual Budget shall set forth in reasonable
detail (a) a schedule of activities expected to be performed or sponsored by
the
32
<PAGE> 40
CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
Partnership and the anticipated cost of each such activity, (b) a projected
profit and loss statement for the fiscal year on a quarterly basis, (c) a
projected balance sheet as of the end of each fiscal year, (d) a schedule of
projected cash flow, including a schedule of sources and applications of funds
for each fiscal year and (e) any other information any member of the Steering
Committee may reasonably request. Anything to the contrary notwithstanding,
the Partners agree to fund the development of IL-12 in the *********, *** and
******** Therapeutic Areas through the completion of the ***** ********
******** ***** in each such Therapeutic Area.
4.5. ACCOUNTING AND INTERNAL CONTROLS.
(a) The Partnership shall conduct its business at all times in
accordance with the highest standards of business ethics. The Partnership
shall maintain, for internal accounting control purposes, the Partnership's
accounts in accordance with generally accepted accounting principles in the
United States consistently applied, and the Partnership shall also maintain,
for Capital Account and United States tax purposes, a separate set of the
Partnership's accounts in accordance with applicable United States tax laws and
regulations. The Partnership specifically shall:
(i) maintain full and accurate books, records and accounts
which shall, in reasonable detail, accurately and fairly reflect all
transactions of the Partnership and shall be fully accessible to both Partners;
33
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(ii) devise and maintain a system of
internal accounting controls
sufficient to provide reasonable
assurances that (a) transactions are
executed in accordance with general
or specific authorizations and (b)
transactions are recorded as
necessary to permit preparation of
financial statements in conformity
with generally accepted accounting
principles, to permit preparation of
all tax returns and to maintain
accountability for assets;
(iii) submit monthly financial statements
to the Partners; and
(iv) appoint, and retain at all times, a
firm of independent public
accountants for the purpose of
reviewing the Partnership's
accounting systems, financial
statements and tax returns. The
first such firm shall be Arthur
Andersen & Co.
(b) The Partnership books shall be kept by GI Sub on behalf of the
Partnership on the accrual method of accounting, or on such other method of
accounting as the Partners may from time to time determine, and shall be
closed and balanced at the end of each fiscal year. The Partnership shall
make an election under Section 754 with respect to the acquisition by AHP Sub
of its interest in the Partnership and all other tax elections shall be made as
directed by the Steering Committee from time to time. For income tax purposes,
the Partnership shall treat its acquisition of interests in patents from GI Sub
as a transaction not involving the acquisition of assets constituting a trade
or
34
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business or a substantial portion thereof within the meaning of Code Section
197(e)(4). The Steering Committee shall cause the preparation and filing of
all required national and local Partnership income tax returns. GI Sub shall
be reimbursed quarterly by the Partnership for Development Costs of accounting
staff utilized by GI Sub and its Affiliates (including out-of-pocket costs for
independent public accountants to the extent authorized by the Steering
Committee pursuant to Section 4.2(b)(ix) of this Agreement) in maintaining
books and records, filing tax returns and otherwise performing accounting
activities on behalf of the Partnership.
(c) GI Sub shall initially be the tax matters partner for the
Partnership pursuant to Sections 6221-6231 of the Code. The authority of GI
Sub shall be limited by Section 4.2 of this Agreement and as follows:
(i) Because the terms of any settlement agreement between
the Internal Revenue Service and GI Sub ("Partnership
Settlement Agreement") entered into under Code Section
6224(c)(1) may prejudice AHP Sub's ability to reach a
settlement with the Internal Revenue Service on matters
resolved by the Partnership Settlement Agreement, GI Sub
shall not enter into any Partnership Settlement Agreement
with respect to the Partnership which binds AHP Sub
and shall not enter into any Partnership Settlement
Agreement with respect to the Partnership without the prior
written consent
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of AHP Sub, which consent shall not be unreasonably
withheld or delayed.
(ii) Because under Code Section 6227(b),
a tax matters partner can file an
administrative adjustment request on
behalf of the Partnership, and
because such request may, at the
discretion of the Internal Revenue
Service, result in a decision
binding the entire Partnership
without a partnership proceeding at
which any Partner has the right to
participate, GI Sub shall not file a
Code Section 6227(b) administrative
adjustment request with respect to
the Partnership without the prior
written consent of AHP Sub, which
consent shall not be unreasonably
withheld or delayed. The foregoing
shall not be construed to limit the
ability of any Partner, including GI
Sub, to file an administrative
adjustment request on its own behalf
pursuant to Code Section 6227(c).
(iii) The Partners agree that it is in the
best interests of the Partnership to
pursue a coordinated course of
action when appealing adjustments
relating to the Partnership proposed
by the Internal Revenue Service. In
recognition of the foregoing, GI Sub
may not, without the prior written
consent of AHP Sub, which consent
shall not be unreasonably withheld
or delayed, file a petition for
judicial review of an
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administrative adjustment request under Code Section
6228, or a petition for judicial review of a final
partnership administrative judgment under Code
Section 6226 relating to the Partnership.
(iv) GI Sub shall give prompt notice to
AHP Sub of (i) the receipt by GI Sub
of written notice that the Internal
Revenue Service or any state or
local taxing authority intends to
examine Partnership income tax
returns for any year; (ii) receipt
by GI Sub of written notice of the
beginning of an administrative
proceeding at the partnership level
relating to the Partnership under
Code Section 6223; (iii) receipt by
GI Sub of written notice of the
final partnership administrative
adjustment relating to the
Partnership pursuant to the
proceeding under Code Section 6223;
and (iv) receipt by GI Sub from the
Internal Revenue Service of any
request for waiver of any applicable
statute of limitations with respect
to any taxable year of the
Partnership.
(v) Because Code Section 6226(a) permits
only the tax matters partner to file
for judicial review of a final
partnership administrative
adjustment during the first ninety
(90) days after receipt of notice of
same, and because Code Section
6226(b) permits any other partner
only sixty (60) days after the tax
matters partner's ninety (90) days
has expired in which to initiate
such judicial review, GI Sub
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shall promptly notify AHP Sub if it does not intend
to file for judicial review with respect to the
Partnership, and such notice shall not be later than
ninety (90) days after receipt of notice of the final
partnership administrative adjustment.
(d) Neither Partner (nor its Affiliates) shall be responsible
for or have any liability with respect to, and such Partner (and its
Affiliates) shall be indemnified and held harmless by the other Partner from
and against, any tax or levy imposed on the other Partner's (or
its Affiliates') income, profits or gains or loss relating to such other
Partner's participation in the Partnership or such other Partner's (or its
Affiliates) activities under any of the Basic Agreements, whether such tax or
levy is imposed under the laws or regulations of the United States or of any
other country or by any other body having the power to tax.
4.6. ACCESS TO BOOKS AND RECORDS. The Partnership shall permit each
of AHP Sub and GI Sub or any authorized representative thereof to
visit and inspect the properties of the Partnership, including its
corporate and financial records, during normal business hours following
reasonable notice and as often as may be reasonably requested.
4.7. CONSULTATION. AHP and GI shall agree to make their
respective corporate officers or other key employees reasonably available
for managerial assistance and consultation in accordance with the terms of the
Parent Company Agreement.
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CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
4.8. BUSINESS DEADLOCK.
(a) It is the intent of the Partners that all Major Decisions to
be made by the Steering Committee shall be made by a Requisite Majority.
Notwithstanding the foregoing, the Partners recognize that bona fide
disputes as to business matters may arise in the conduct of the Partnership's
business, which disputes may impair the ability of the Partnership
to effectively carry on its business. In the event of the occurrence
of a Business Deadlock, either Partner may have the Major Decision
causing the Business Deadlock referred to the Executive Officers for resolution
by negotiation. A Partner desiring to so refer a Major Decision shall provide
a written notice to the other Partner indicating the particular Major Decision
it desires to have referred to the Executive Officers and stating the fact that
it desires to have such Major Decision resolved by negotiation of the Executive
Officers. The Executive Officers shall negotiate in a diligent and good faith
manner in an effort to reach a mutually satisfactory resolution within
**************** after the written notice is received by the other Partner.
Each Executive Officer shall have the right to engage the services of any
number of independent experts in the field in question (the individuals so
engaged by each Executive Officer to be reasonably acceptable to the other
Executive Officer in terms of independence and expertise) to assist the
Executive Officer in making a joint determination in the best interest of the
Partnership, and each Executive Officer shall be obligated to consider in good
faith the analyses and opinions of any such independent experts engaged by
either of them in making a
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determination. Such resolution, if any, of the Business Deadlock shall be
final and binding on the Partners, and the Partners shall instruct the members
of the Steering Committee designated by them to approve such resolution.
(b) In the event that the Executive Officers
are unable to resolve one of the following matters within ********** *********
of its referral to them, GI Sub shall have the right to make the final
determination with respect to such issue:
(i) whether or not to ******** ************ ******* in a *** ****
*** or *********** ****;
(ii) whether or not to **** an *** or******** ******** ******
for a ******** **********;
(iii) whether or not to **** to ***** ** ******** ****** for a
******** **********;
(iv) whether or not to **** to ***** *** ******** ****** for a
******** **********;
(v) approval of budgets for the achievement of (i) - (iv),
above; and
(vi) unless the Partnership shall have previously
decided to ******* and/or ************* a
******** ******* for a ********** ****
******* or ******* ******** *** ******* the
*********** as described in Section
*********** of this Agreement, whether or not
and on what terms to pursue a specific
business opportunity with a third party or
Wyeth for the *********** and/or
***************** of a ********** ********
******* in ****** the **** ******* or
********************** (such decision
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to be reasonably determined by GI Sub, after
consultation with AHP Sub, to be in the best interest
of the Partnership).
(c) The tie-breaking rights of GI Sub set
forth in Section 4.8(b)(vi) of this Agreement shall not
apply to the following circumstances:
(i) GI recommends to the Steering Committee, pursuant to
Section *** of this Agreement, that the Partnership enter
into an agreement to ******* and/or ************* a
*********** ******* **************** ******* with a
third party without ********* rights for the
Partnership to *********** in the *********** and
***************** of the resulting *********** *******
******** ******** *******. In such an event, a deadlock
of the Steering Committee can only be overridden by
consensus of the Executive Officers.
(ii) GI recommends to the Steering
Committee, pursuant to Section ****** of this Agreement, that
the Partnership enter into an agreement to ******* and/or
************ ************ with * ****** ***** ***** all
******** ******** ******** ******** ********. In such an
event, a deadlock of the Steering Committee can only be
overridden by consensus of the Executive Officers.
Upon approval of an *********
********, GI shall, pursuant to GI Development Agreement,
first *****
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to ***** such rights on commercially reasonable and
fair terms on behalf of the Partnership as provided
for in Section ****** of this Agreement, it being
understood that the Partners shall be free to discuss
the terms of such an ***** prior to the approval of
the ********* ********.
(d) In the event that the Executive
Officers are unable to resolve a matter within ******************** of its
referral to them and the matter involves regulatory filings or local country
marketing or promotional activities, the Partner affiliated with the Marketing
Organization having marketing rights in the Sales Territory involved shall have
the right to make the final determination with respect to such issue.
Notwithstanding the foregoing, the Partners recognize the need to coordinate
their regulatory and promotional activities and agree to use good faith efforts
not to take any actions that would seriously conflict with the registration or
promotional strategy of the other Marketing Organization. In the event the
Executive Officers are unable to resolve any other matter within ******
********* of its referral to them, the Partners shall continue to discuss such
matter in good faith until a determination is made.
(e) Pursuant to the terms of the Parent
Company Agreement, AHP and Holdings shall agree not to exercise any of their
rights set forth in Sections 3.05 and 3.07 of the Governance Agreement that
would prevent or interfere with the exercise by GI Sub of its tie-breaking
rights set forth in this Section 4.8.
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4.9. GLOBAL STRATEGY. The Partners acknowledge that it is in their
interest to adopt strategies which harmonize clinical and regulatory
strategies throughout the Territory, and that notwithstanding their
rights set forth in Section 4.8 of this Agreement with respect to certain Major
Decisions, they shall use reasonable and diligent efforts to strive for good
communication so that there is an appropriate environment for consensus
decision making and for reaching a Requisite Majority. GI Sub further agrees
to use commercially reasonable and diligent efforts to work with GI-Yamanouchi,
Inc., GI's Japanese joint venture with Yamanouchi Pharmaceutical Co., Ltd. and
IL-12 licensee in Japan, and enlist its cooperation in the formulation of a
global strategy for development and commercialization of IL-12.
ARTICLE V. DEVELOPMENT AND MARKETING ACTIVITIES
------------------------------------------------
5.1. LICENSE OF TECHNOLOGY. Upon execution of this Agreement,
GI Sub shall assign its interest in the License Agreement to the Partnership
pursuant to the Assignment Agreement. In accordance therewith, the
Partnership shall become the Licensee under the License Agreement and shall
assume and be responsible for all of the obligations of GI Sub set forth in the
License Agreement and for all of the obligations imposed on the Partnership
under the Assignment Agreement.
5.2. DEVELOPMENT AND COMMERCIALIZATION STRATEGY.
(a) Subject to the provisions of paragraph (b) below
relating to the development and commercialization of IL-12 in the
Gene Therapy and Vaccine Adjuvant fields, the Partnership shall
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establish the overall strategy for the development and commercialization of
Licensed Products in the Territory in the Licensed Field. It is the intention
of the Partners that all research, pre-clinical, clinical, regulatory and other
product development activities (other than bulk Licensed Product manufacturing
process development activities which shall be the sole responsibility and
expense of GI under the License Agreement and other than Phase IV clinical
trials which shall be the sole responsibility and expense of the Marketing
Organizations in their respective Sales Territories) shall be purchased by the
Partnership from the Partners or their Affiliates to the extent practicable.
Simultaneous with the execution of this Agreement, the Partnership shall enter
into (i) the GI Development Agreement with GI and (ii) the Wyeth Development
Agreement with AHP, acting through Wyeth, pursuant to which each of GI and
Wyeth shall conduct those product development activities requested by the
Partnership as provided therein. With respect to all product development
activities required by the Partnership, the Partnership shall take into
consideration the extent to which the Partners or their Affiliates offer
special expertise that can advance the development of IL-12 in contracting for
their services. Each of AHP Sub and GI Sub agrees and, pursuant to the Parent
Company Agreement, each of AHP and GI agrees to make their services available
to the Partnership to the extent reasonably requested by the Partnership. All
product development activities purchased by the Partnership from the Partners
or their Affiliates shall be purchased at such Partner's or Affiliate's
Development Cost. In connection with all such product
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development activities, the Partners and their Affiliates shall have the right
to subcontract with third parties for services to the extent they would
generally seek third party assistance in connection with the development of
their other pharmaceutical products. For example, such assistance may include
subcontracts for research collaborations, preclinical and clinical
investigations, toxicology studies and clinical monitoring. In the event the
Partnership determines that the Partners and their Affiliates are unable to
provide certain product development services, the Partnership shall have the
right to purchase such services from unrelated third parties.
(b) The Partners anticipate that the Partnership, subject to
Section 5.7, will enter into collaborations with third parties
(including Wyeth) to access vaccine and/or gene therapy products or
technologies in order to develop and/or commercialize IL-12 in the Gene Therapy
and Vaccine Adjuvant fields. The Partners also anticipate that the Partnership
may conduct research in the use of IL-12 in the Gene Therapy and Vaccine
Adjuvant fields whether or not a development decision pursuant to Section
4.2(b)(xix) has been made. It is also anticipated that such third parties
(including Wyeth) will receive significant marketing rights as part of such
transactions. Pursuant to the GI Development Agreement, unless the
Partnership shall otherwise decide to develop and/or commercialize a particular
Licensed Product through the Partnership as described in Section 4.2(b)(xix) of
this Agreement, GI shall manage the research, development and commercialization
of IL-12 in the Gene Therapy and Vaccine Adjuvant fields and shall keep the
Steering Committee
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informed of its activities in these fields. Further, GI Sub shall obtain prior
approval of any commercialization collaborations in these fields to be entered
into by or on behalf of the Partnership in accordance with Section 4.2(b)(xix)
of this Agreement. With respect to commercialization collaborations involving
Therapeutic Vaccine Adjuvant Licensed Products, GI Sub shall use reasonable
efforts to ****** ****** for the Partnership to *********** in the ***********
and ***************** of the
********************************************************. Each Partner
acknowledges that, in connection with any third party research, development
and/or commercialization collaborations, the Partnership may need to agree to
reasonable restrictions on use and access by operating management and employees
of a Partner and its Affiliates with respect to certain confidential
information of such third party collaborators in the Gene Therapy and Vaccine
Adjuvant fields. Pursuant to the terms of the Parent Company Agreement, with
respect to such development and/or commercialization collaborations, AHP shall
waive its rights of first refusal under Section 3.07 of the Governance
Agreement with respect to such proposed development and/or commercialization
collaborations. In accordance with the terms of the GI Development Agreement,
in the event the Partnership enters into such a development and/or
commercialization collaboration in either the Gene Therapy or Vaccine Adjuvant
field, *********** ************* of any revenue, royalties, fees or
consideration payable by such third party shall be paid directly to GI (and not
through the Partnership unless no other payment mechanism is reasonably
achievable) and the balance shall be paid to the
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Partnership. Notwithstanding the foregoing, in the event that the Partnership
shall have conducted any research and/or development in the Vaccine Adjuvant
field, any revenue, royalties, fees or other consideration payable by such
third party in respect of a commercialization collaboration in such field shall
be distributed as follows: (i) first, to the extent available, to the
Partnership in an amount equal to up to *** ********************** of the
Development Costs incurred by the Partnership in conducting such research
and/or development in such field; (ii) second, to the extent available,
directly to GI (and not through the Partnership unless no other payment
mechanism is reasonably achievable) in an amount equal to up to
************************* of such revenue, royalties, fees or other
consideration; and (iii) the balance, if any, to the Partnership.
(c) In the event that the Partnership
decides not to proceed with development of a Licensed Product in a particular
Therapeutic Area, a Partner (the "Sole Partner") may elect to continue
development of all Licensed Products in such Therapeutic Area by giving notice
of its decision to continue such development to the other Partner (the "Other
Partner"). In the event of any such notification by a Sole Partner, if the
Other Partner declines to fund or otherwise participate in such product
development activities through the Partnership, the Sole Partner shall acquire
all rights for the Therapeutic Area, subject to the notification and buyback
provisions set forth below, and the Partnership, at no additional cost to the
Sole Partner, shall enter into such agreements and licenses with the Sole
Partner as
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are reasonably necessary to achieve such result. The Sole Partner shall keep
the Other Partner informed on a timely basis of progress in the development of
IL-12 in such Therapeutic Area, including, without limitation, providing
reasonable advance notice of the initiation of Phase III clinical trials and
the filing of a PLA. At any point prior to the filing of a PLA in such
Therapeutic Area, the Other Partner may cause the Partnership to reacquire
rights for such Therapeutic Area. In such event, the Partnership shall
reimburse the Sole Partner for **** of its product development costs not funded
by the Partnership if the rights are reacquired before initiation of
**************** in such Therapeutic Area and for **** of its product
development costs not funded by the Partnership if the rights are reacquired
after the initiation of **************** in such Therapeutic Area.
(d) In the event that one of the Partners disagrees with a
decision of the Partnership made through the tie-breaking procedure
set forth in Section 4.8 of this Agreement to proceed with development
of a Licensed Product in a particular Therapeutic Area (the
"Discontinuing Partner"), such Discontinuing Partner may give ********** notice
of its decision to discontinue funding further development in that Therapeutic
Area (other than the *********, *** or ******** Therapeutic Areas during the
period in which they are required to be funded by the Partners pursuant to the
last sentence of Section 4.4 of this Agreement). During such ********* period,
the Discontinuing Partner providing such notice shall fulfill all of its
obligations for on-going and previously approved activities for
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such Therapeutic Area with the understanding that ******* ************* and
******** shall not *************** the ***** of ******** in the prior *********
period. In the event of any such notification by a Discontinuing Partner, the
continuing partner (the "Continuing Partner") shall acquire all rights for the
Therapeutic Area, subject to the notification and buyback provisions set forth
below, and the Partnership, at no additional cost to the Continuing Partner,
shall enter into such agreements and licenses with the Continuing Partner as
are reasonably necessary to achieve such result. The Continuing Partner shall
keep the Discontinuing Partner informed on a timely basis of progress in the
development of IL-12 in such Therapeutic Area, including, without limitation,
providing reasonable advance notice of the initiation of Phase III clinical
trials or the filing of a PLA. At any point prior to the filing of a PLA in
such Therapeutic Area, the Discontinuing Partner may cause the Partnership to
reacquire rights for such Therapeutic Area. In such event, the Partnership
shall reimburse the Continuing Partner for **** of its product development
costs not funded by the Partnership if the rights are reacquired before
initiation of **************** in such Therapeutic Area and for **** of its
product development costs not funded by the Partnership if the rights are
reacquired after the initiation of **************** in such Therapeutic Area.
(e) Pursuant to the terms of the Parent Company Agreement, AHP
and Holdings shall agree not to exercise any of their rights set forth in
Sections 3.05 and 3.07 of the Governance Agreement that would interfere with
GI Sub's ability
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to exercise the rights granted to it under either paragraph (c) or (d) above.
5.3 REGULATORY ACTIVITIES. To the extent permitted by law,
Licensed Products shall be registered, and PLAs shall be filed, in each
Sales Territory in the name of the Marketing Organization for such Sales
Territory. All costs of filing for investigation of Licensed Products or for
regulatory approval of Licensed Products (other than the costs of Phase IV
clinical trials which shall be paid for by the Marketing Organizations in their
respective Sales Territories) shall be paid for by the Partnership under the GI
Development Agreement and Wyeth Development Agreement. In addition, to the
extent permitted by law, the labels for Licensed Products shall contain the
name of the Marketing Organization for that Sales Territory and the name of the
manufacturer of the bulk Licensed Products. Notwithstanding the foregoing, in
the case of Licensed Products developed by a third party in the Gene Therapy or
Vaccine Adjuvant fields, these matters shall be governed by the terms of the
agreement with such third party, provided that GI Sub shall use reasonable
efforts to make all such costs the responsibility of the third party and not
the Partnership.
5.4. SUPPLY. Pursuant to the terms of the License Agreement,
GI shall have the right and obligation to be the exclusive manufacturer
and supplier of the Partnership's requirements for all bulk protein
Licensed Products for all research, preclinical, clinical and commercial
purposes and GI shall be solely responsible for the development of,
and the *****
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********** with developing, a commercial scale production process for bulk
Licensed Products.
5.5 FORMULATION, FILLING AND FINISHING. The Partnership
shall determine whether GI (on the terms set forth in the License
Agreement), the Partnership, an Affiliate of AHP or a third party will
formulate, fill and finish (including packaging) Licensed Products for clinical
and commercial purposes and shall choose the most efficient and cost effective
alternative.
5.6. MARKETING. On or before *************, the Partnership
shall enter into (a) the GI Distribution Agreement with GI or a GI
Affiliate and (b) the Wyeth Distribution Agreement with AHP, acting through
Wyeth, or a Wyeth Affiliate pursuant to which each Marketing Organization shall
be granted the exclusive right to market and sell Licensed Products (other than
in the Gene Therapy and Vaccine Adjuvant fields) in its respective Sales
Territory. Such agreements shall contain customary and reasonable terms,
including without limitation, supply and delivery terms, warranties and
diligence obligations. The GI Distribution Agreement and the Wyeth
Distribution Agreement shall be substantially similar, provided that the GI
Distribution Agreement shall contain a provision providing that in the event GI
or the applicable GI Affiliate determines that ********** ***** ****** is
required in *** ****************** to maximize its return on its investment,
*****, or the ********** ***************, shall have the ***** ********
***************** ******************** to enter into a **********************
with ** or **************** on commercially reasonable terms. It is understood
that all compensation for any such ************
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activity shall be paid by ** and not by ***************. Under their
agreements with the Partnership, each Marketing Organization shall purchase
Licensed Products from the Partnership at a price equal to *** of their
respective Net Sales (as such term is defined in the License Agreement) and
shall fund and diligently perform the following activities in its Sales
Territory:
(a) own, hold and maintain Licensed Product marketing
authorizations and trademarks;
(b) establish suggested list prices and discounting policy,
and negotiate reimbursement terms and pricing where
applicable with government authorities;
(c) conduct market research, pre- and post-launch symposia
and educational and promotional activities; and
(d) register, distribute, sell and market Licensed Products
(including booking sales and establishing, training,
managing and funding of a sales force effort).
5.7 WYETH PREVENTATIVE VACCINE ADJUVANT COLLABORATIVE
RIGHTS AND OPTION.
(a) In the event the Steering Committee or the Executive
Officers determine by consensus that it is in the best interest of
the Partnership to offer a single third party exclusive rights to IL-12 for
all Preventative Vaccine Adjuvant Licensed Products, then the Partnership shall
first offer such rights to Wyeth, including, without limitation, terms relating
to financial obligations, due diligence, technology and resource commitments.
Wyeth shall have **************** from the receipt of such offer to enter into
such agreement. If Wyeth fails to
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enter into such agreement during said *************** period, the Partnership
shall be free to enter into the proposed agreement with any single party on
terms which are substantially the same as those offered to Wyeth. If the
Partnership desires to enter into such an agreement with a single third party,
but is unable to do so except on terms that are materially more favorable to
such third party than the terms offered to Wyeth, then the Partnership shall
not enter into an agreement with the third party unless it first offers such
terms to Wyeth. Wyeth shall have **************** from receipt of such
additional offer to enter into an agreement under such terms.
(b) In the event that the Partnership
determines, ******************************************** of GI Sub ******** to
****************** of **************, that it should enter into an agreement
with a third party other than Wyeth (which is not covered by paragraph (a)
above) to develop and/or commercialize a Preventative Vaccine Adjuvant Licensed
Product for any particular indications or proprietary vaccines or vaccine
technology, the Partnership shall not enter into such agreement unless it has
complied, to the extent applicable, with the following:
(i) If, during the term of the
Partnership, a non-exclusive
development and/or commercialization
agreement is offered to a third
party with respect to any
Preventative Vaccine Adjuvant
Licensed Product, the Partnership
shall also offer Wyeth the
opportunity to enter into a
non-exclusive agreement on terms
which are not materially
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different or materially less favorable than those
offered to the third party, including, without
limitation, due diligence, technology and resource
commitments. Upon delivery of such offer to Wyeth,
the Partnership shall be free to enter into similar
agreements with one or more third parties.
(ii) If, on or before March 31, 1995, an
exclusive agreement is offered to a
third party with respect to
particular indications or
proprietary vaccines or vaccine
technology, then the Partnership
shall make the exclusivity of such
agreement subject to the following
co- exclusivity option of Wyeth. On
or before entering into such
agreement, the Partnership shall
offer Wyeth the right to enter into
an agreement with the Partnership to
develop and commercialize
Preventative Vaccine Adjuvant
Licensed Product(s) in such fields
on a co- exclusive basis on terms
which other than exclusivity are not
materially different or materially
less favorable than those offered to
the third party, including, without
limitation, terms relating to due
diligence, technology and resource
commitments. Wyeth shall have
****** ********* from the receipt of
such offer to enter into such
agreement, it being understood that
such offer shall not be made to
Wyeth prior to the Partnership
determination,
***********************
******************* of GI Sub
******** to *******
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********** of **************, to enter into the
agreement with the third party. If Wyeth fails to
exercise such option during said ***************
period, the initial agreement with a third party
shall no longer be subject to the co-exclusivity
rights of Wyeth; provided that such agreement is on
substantially the same terms as such agreement
offered or entered into with such third party.
(c) This Section 5.7 is expressly for the
benefit of AHP acting through Wyeth.
ARTICLE VI. CAPITAL CONTRIBUTIONS,
------------------------------------
PROFITS AND LOSSES AND DISTRIBUTIONS
------------------------------------
6.1. CAPITAL CONTRIBUTIONS.
(a) Upon execution of this Agreement, GI Sub shall assign
its interest in the License Agreement to the capital of the Partnership
pursuant to the Assignment Agreement and each of AHP Sub and GI Sub
shall contribute ************ in cash to the capital of the Partnership. The
value of the License Agreement assigned to the Partnership by GI Sub shall be
determined by the Partners and recorded on the books of the Partnership. The
aggregate amount of the foregoing cash capital contributions is intended to
fund the capital requirements of the Partnership from July 1, 1994 through
December 31, 1994.
(b) On or before the first day of each fiscal quarter, or at
such other times as the Steering Committee shall determine, AHP Sub
and GI Sub shall contribute to the Partnership an amount
equal to their respective percentage shares ("Percentage Shares")
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of the Partnership's capital requirements for the following fiscal quarter as
shown in the applicable Annual Budget, as such Annual Budget may be adjusted
from time to time. For purposes of this Agreement, the Percentage Share of AHP
Sub shall be equal to the value of the cash contributed by it pursuant to
paragraph (a) above divided by the value of all contributions made by AHP Sub
and GI Sub pursuant to paragraph (a) above and the Percentage Share of GI Sub
shall be equal to the value of the License Agreement and cash contributed by it
pursuant to paragraph (a) above divided by the value of all contributions made
by AHP Sub and GI Sub pursuant to paragraph (a) above.
(c) In the event that either Partner shall fail to contribute
capital to the Partnership when required to do so, (i) such Partner
shall remain so obligated and (ii) the other Partner shall have the right
to contribute such required capital to the Partnership plus any capital
required to pay any interest, penalty or premium that may be assessed against
the Partnership because of such Partner's failure to make its required capital
contribution. In addition to any other remedies that the Partnership and the
other Partner may have, the Partnership may, at the direction of the other
Partner, offset the amount of the capital contribution that the Partner failed
to contribute against any payments otherwise to be made to such Partner under
this Agreement or under any other Basic Agreement. Any payments that are
offset shall be distributed to the Partner that did not fail to make its
capital contribution.
(d) Except as provided in this Section 6.1, neither Partner nor
any of its Affiliates shall be obligated to make
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contributions to the capital of the Partnership, lend any funds or otherwise
advance or contribute any additional funds to the Partnership.
(e) No interest shall accrue on any contributions to
the capital of the Partnership, and no Partner shall have the right
to withdraw or to be repaid any capital contributed by it or to receive
any other payment in respect of its interest in the Partnership, including
without limitation as a result of its withdrawal from the Partnership, except
as specifically provided in this Agreement.
6.2. GENERAL ALLOCATIONS OF NET PROFITS AND NET LOSSES.
(a) Except as provided in paragraphs (b), (c) and (d) below,
the Net Profits and Net Losses of the Partnership for any year
shall be allocated in accordance with Percentage Shares.
(b) In the event that (i) the portion of any revenue,
royalties, fees or other consideration payable directly to GI pursuant
to Section 5.2(b) of this Agreement must be paid to the Partnership and then to
GI and (ii) the Partnership is required to treat such payment to GI as a
distribution to GI Sub rather than as a deduction for income tax purposes, the
income attributable to such revenue, royalties, fees or other consideration
shall be allocated to GI Sub.
(c) Notwithstanding the provisions of paragraph (a) above, if,
during any year, a Partner unexpectedly receives any adjustment, allocation
or distribution described in United States Treasury Regulation
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), and, as a result of such
adjustment, allocation or distribution, such Partner's Capital Account has
an Excess Negative Balance,
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then items of gross income (computed with the adjustments set forth in clauses
(a), (b) and (c) of Section 1.38 of this Agreement) for such year (and, if
necessary, subsequent years) shall first be allocated to such Partner in an
amount equal to such Partner's Excess Negative Balance.
(d) Notwithstanding any other provisions of this Agreement
to the contrary, in the event that the Partnership incurs any nonrecourse
indebtedness, (i) all nonrecourse deductions (within the meaning of United
States Treasury Regulation Section 1.704-2(b)(1)) shall be allocated to
the Partners in proportion to their respective Percentage Shares, (ii) all
partner nonrecourse deductions (within the meaning of United States Treasury
Regulation Section 1.704-2(i)(2)) shall be allocated to the Partner that bears
the economic risk of loss associated with the partner nonrecourse debt that
gave rise to such deductions, (iii) each Partner's Excess Negative Balance
shall be computed by treating its "share of minimum gain" (within the meaning
of United States Treasury Regulation Section 1.704-2(g)(1)) and its "share of
Partner non-recourse debt minimum gain" (within the meaning of United States
Treasury Regulation Section 1.704-2(i)(5)) as amounts the Partner is obligated
to contribute to the Partnership upon liquidation of its interest in the
Partnership, and (iv) in the event of any decrease in the Partnership's
"minimum gain" (within the meaning of United States Treasury Regulation Section
1.704-2(b)(2)) or in its "partner nonrecourse debt minimum gain" (within the
meaning of United States Treasury Regulation Section 1.704-2(i)(3)), items of
gross income or gain shall be specially allocated to the
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Partners in accordance with the "minimum gain chargeback" provisions of United
States Treasury Regulation Sections 1.704-2(f) and 1.704-2(i)(4)).
6.3. CERTAIN ROYALTY PAYMENTS. In the computation of Net
Profits and Net Losses, royalties paid to GI Sub pursuant to the
Assignment Agreement shall be treated as an item of Partnership expense. In
the event that the Partnership is required to treat such payments as a
distribution rather than a deduction for income tax purposes, then, solely for
income tax purposes and not for purposes of adjusting Capital Account balances,
Partnership gross income shall be allocated to GI Sub so that on a cumulative
basis the allocations of gross income to GI Sub under this section are equal to
the aggregate royalty payments which the Partnership was required to treat as
distributions.
6.4. CARRYING VALUE DIFFERENT FROM TAX BASIS. When the Carrying
Value of a Partnership asset is different from its adjusted tax basis
for income tax purposes, then, solely for federal, state and local income
tax purposes and not for purposes of computing Capital Accounts, income,
gain, loss, deduction and credit with respect to such assets ("Section 704(c)
Assets") shall be allocated among the Partners to take this difference into
account in accordance with the principles of Code Section 704(c), as set forth
herein and in the regulations thereunder and under Code Section 704(b). The
calculation and allocations eliminating the differences between Carrying Value
and adjusted tax basis of the Section 704(c) Assets shall be made under the
traditional method described in United States Treasury Regulation Section
1.704-3. Notwithstanding the foregoing, it is understood
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that the provisions of this Section 6.4 shall not supersede the provision in
Section 4.5(b) of this Agreement providing for election under Code Section 754.
6.5. ALLOCATIONS ON LIQUIDATION. Notwithstanding any other
provision of this Article VI to the contrary, in the taxable year in
which there is a liquidation of the Partnership under Article IX of this
Agreement, the Capital Accounts of the Partners shall be brought to the amount
of the liquidating distributions to be made to them under Section 6.7(b) of
this Agreement by allocations of items of gross income, deduction and loss
(computed with the adjustments set forth in clauses (a), (b) and (c) of Section
1.38 of this Agreement) and, if necessary, by guaranteed payments (within the
meaning of Code Section 707(c)) credited to the Capital Account of a Partner
whose Capital Account is less than the amount to be distributed to it and
debited from the Capital Account of a Partner whose Capital Account is greater
than the amounts to be distributed to it. Such credits and debits shall be
made to and against the Capital Accounts of the Partners in proportion to the
deficit or excess of each Capital Account under or over the amount to be
distributed to each Partner in liquidation of the Partnership. The amount of
the debit shall not be taken into account in computing Net Profit or Net Loss
but shall be specially allocated as a tax deduction to the Partner whose
Capital Account is debited. Notwithstanding the foregoing, it is understood
that the provisions of this Section 6.5 shall not supersede the provision in
Section 4.5(b) of this Agreement providing for election under Code Section 754.
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6.6. ALLOCATIONS UPON TRANSFER OR ADMITTANCE OF NEW PARTNER.
Unless otherwise agreed, in the event that a Partner or a permitted
transferee acquires an interest in the Partnership either by transfer
from another Partner or by permitted transfer pursuant to Section 8.1 of this
Agreement from an existing Partner, respectively, an equal portion of the Net
Profits or Net Losses of the Partnership for the fiscal year in which such
acquisition occurs shall be allocated to each day of such year, and the Net
Profits and Net Losses so allocated to the portion of such year prior to the
date of the acquisition of the interest in the Partnership by the Partner or
the permitted transferee shall be allocated among the Partners without giving
effect to such acquisition, and the Net Profits and Net Losses so allocated to
the portion of such year from and after the date of the acquisition of such
interest, and all subsequent fiscal years, shall be allocated among the then
Partners by giving effect to such acquisition.
6.7. DISTRIBUTIONS OF CASH AVAILABLE FOR DISTRIBUTION.
(a) Cash Available for Distribution shall be distributed
to and among the Partners in accordance with their Percentage Shares at such
times and in such amounts as shall be determined by the Steering Committee.
(b) Notwithstanding the provisions of paragraph (a) above,
upon liquidation of the Partnership, except as otherwise provided in
Section 8.2 of this Agreement, the net proceeds of the liquidation shall
be distributed to and among the Partners, first, in such amounts so that
the total cumulative distributions to each Partner under paragraph (a) above
and this paragraph (b)
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are equal to such Partner's total cumulative capital contributions and, then,
in accordance with the Partners' Percentage Shares.
6.8. DISTRIBUTIONS UPON TRANSFER OR ADMITTANCE OF NEW PARTNER.
Unless otherwise agreed, in the event that a Partner or a permitted
transferee acquires an interest in the Partnership either by transfer
from another Partner or by permitted transfer from an existing Partner pursuant
to Section 8.1 of this Agreement, respectively, an equal portion of the Cash
Available for Distribution of the Partnership for the fiscal year in which such
acquisition occurs shall be allocated to each day of such year, and the Cash
Available for Distribution so allocated to the portion of such year prior to
the date of the acquisition of the interest in the Partnership by the Partner
or the permitted transferee shall be distributed among the Partners without
giving effect to such acquisition, and the Cash Available for Distribution so
allocated to the portion of such year from and after the date of the
acquisition of such interest and all subsequent fiscal years, shall be
distributed among the then Partners by giving effect to such acquisition.
ARTICLE VII. CONFIDENTIAL INFORMATION
--------------------------------------
7.1. TREATMENT OF CONFIDENTIAL INFORMATION. Each Partner hereto
shall maintain the Confidential Information of the Partnership and the
other Partner and its Affiliates in confidence, and shall not disclose,
divulge or otherwise communicate such Confidential Information to others, or
use it for any purpose, except as otherwise permitted or provided under,
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or as is reasonably necessary to carry out, the terms of this Agreement or the
Basic Agreements and hereby agrees to exercise every reasonable precaution to
prevent and restrain the unauthorized disclosure of such Confidential
Information by any of its directors, officers, employees, consultants,
subcontractors, sublicensees or agents. This provision shall survive for a
period of five (5) years after the expiration or termination of this Agreement.
7.2. RELEASE FROM RESTRICTIONS.
(a) The provisions of Section 7.1 shall not apply to
any Confidential Information disclosed pursuant to the Basic Agreements
or otherwise which:
(i) was known or used by the receiving
Partner or its Affiliates prior to
its date of disclosure to the
receiving Partner, as evidenced by
the prior written records of the
receiving Partner or its Affiliates;
or
(ii) either before or after the date of
the disclosure to the receiving
Partner is lawfully disclosed
without restriction to the receiving
Partner or its Affiliates by an
independent, unaffiliated third
party rightfully in possession of
the Confidential Information (but
only to the extent of the rights
received from such third party); or
(iii) either before or after the date of
the disclosure to the receiving
Partner becomes published or
generally known to the public
through no fault or
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omission on the part of the receiving Partner or its
Affiliates; or
(iv) is required to be disclosed by the
receiving Partner or its Affiliates
to comply with applicable laws, to
defend or prosecute litigation or to
comply with governmental
regulations, provided that the
receiving Partner provides prior
written notice of such disclosure to
the other Partner and takes
reasonable and lawful actions to
minimize the degree of such
disclosure.
ARTICLE VIII. RESTRICTIONS ON TRANSFER
---------------------------------------
8.1. TRANSFER OF PARTNERSHIP INTEREST. Neither Partner shall
have the right (directly, indirectly, voluntarily, involuntarily
or by operation of law) to sell, assign, transfer, mortgage, encumber, grant a
security interest in or otherwise dispose of all or any of its interest in the
Partnership, provided that (a) a Partner may transfer all, but not less than
all, of its interest in the Partnership to a party, willing to abide by the
terms of the Basic Agreements and to execute documentation to such effect,
which acquires all or substantially all of the ethical pharmaceutical business
of AHP or Wyeth, on the one hand, or of the business of GI, on the other hand,
by merger, consolidation, sale of assets or otherwise and (b) a Partner may,
subject to the applicable guarantee in the Parent Company Agreement, transfer
all, but not less than all, of its interest in the Partnership to an Affiliate
willing to abide by the terms of the Basic Agreements and to execute
documentation to
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CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
such effect. The provisions of this Section 8.1 shall not apply to any
dissolution of the Partnership in accordance with Article IX of this Agreement.
Unless the conditions of this Section 8.1 are met, the proposed transfer may
not take place and any attempted transfer in derogation hereof shall be deemed
null and void.
8.2. TERMINATION OF PARTNERSHIP. If, at any time
after *****************, AHP Sub shall desire to terminate the Partnership for
any reason, AHP Sub shall have such right so long as AHP Sub and its Affiliates
simultaneously terminate all of the Basic Agreements entered into by them with
the Partnership and comply with all of the terms of this Section 8.2. AHP Sub
shall provide GI Sub with at least ********** prior written notice of its
desire to terminate the Partnership and all of the Basic Agreements entered
into between AHP Sub and its Affiliates with the Partnership. During such
********* period, AHP Sub and its Affiliates shall fulfill all of their
obligations for on-going and previously approved product development activities
with the understanding that ********************* and ******** shall not
*************** the ***** of ******** in the immediately prior *********
period. After such termination, at GI Sub's request and expense, AHP Sub and
its Affiliates shall continue to perform activities to the extent reasonably
necessary for GI Sub to obtain (by filing or transfer) any applicable
regulatory filings or approvals or other rights to continue clinical
development or, to the extent reasonably necessary, permit the Licensed
Products to continue to be developed and marketed without interruption through
an orderly transition of responsibilities, including, for
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<PAGE> 73
CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
example, continuing on-going studies or data analysis, maintaining regulatory
approvals and appointing GI Sub or any of its Affiliates as a distributor. In
such event, the Partners shall take all necessary action, beginning with the
giving of notice by AHP Sub to terminate the Partnership, at GI Sub's expense,
to transfer irrevocably any regulatory filings or approvals, clinical data,
trademarks and similar items, to GI Sub or its designee, and to support GI Sub
in making any necessary filings so that the period of time after such
termination during which AHP Sub and its Affiliates have to continue to perform
such activities on behalf of GI Sub can be minimized. Further, AHP Sub and its
Affiliates shall provide continuing rights to GI Sub to use any other
intellectual property rights owned or controlled by them at the time of such
termination to enable GI Sub, its Affiliates, Sublicensees and distributors to
continue the activities formerly conducted by AHP Sub and its Affiliates,
Sublicensees and distributors as contemplated by the Basic Agreements.
8.3. BUY-SELL PROCEEDINGS.
(a) If, at any time, AHP's Voting Interest (as defined in
the Governance Agreement) is less than ***, GI Sub shall have the right,
but not the obligation, to initiate buy-sell proceedings. In the event
that GI Sub desires to initiate buy-sell proceedings, it shall submit to
AHP Sub in writing a proposed purchase price for AHP Sub's entire interest in
the Partnership. Within ******* after the receipt of a proposed purchase price
from GI Sub, AHP Sub shall elect to (i) purchase GI Sub's entire interest in
the Partnership at the proposed
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CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
purchase price or (ii) sell its entire interest in the Partnership to GI Sub at
the proposed purchase price. Any failure by AHP Sub to respond to GI Sub in
writing within such time period shall be deemed an election by AHP Sub to sell
its entire interest in the Partnership to GI Sub. The closing of any such
purchase and sale shall be made in cash (or by delivery of the note as provided
in paragraph (b) below) and shall be consummated within ******** from AHP Sub's
decision to purchase or sell. At the closing of any such purchase and sale,
there shall be a final accounting between the Partners with respect to the
funding of the Partnership.
(b) GI Sub shall be permitted to pay the purchase price to
AHP Sub in the form of a promissory note in lieu of cash only in the
event that (i) AHP or Holdings has exercised any of its then existing
rights set forth in Section 3.05 of the Governance Agreement preventing GI from
raising the necessary capital, through debt or equity financing, to purchase
AHP Sub's entire interest in the Partnership or (ii) AHP or Holdings does not
vote its shares of GI voting securities in favor of a GI management proposal to
increase the authorized capital stock of GI for the purpose of raising such
capital for GI Sub. Any such promissory note shall be an installment note
providing for periodic payments of principal and interest, a final maturity
that shall not exceed ************** and interest accruing at a floating rate
equal to the prime rate of the Bank of Boston as announced from time to time.
8.4. Effect of Buy-Sell Proceedings. In the event of
a purchase and sale, the license from GI Sub to the Partnership and
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CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
GI's supply rights and obligations shall remain in effect, subject to the
limitation described in Section 10.2. Further, if at the time of a purchase
and sale, the Partnership shall have an existing agreement with the selling
Partner or any of the selling Partner's Affiliates for the conduct of
activities (other than the right and obligation of GI to supply bulk material),
the purchasing Partner shall have the right, upon ********** prior written
notice to the selling Partner, to terminate any or all of such agreements, but
the selling Partner shall be obligated, at the election of the purchasing
Partner, to perform under any such agreement or agreements for a period equal
to the lesser of (x) the remaining term of any such agreement or agreements or
(y) *** ****. After such period, at the purchasing Partner's request and
expense, the selling Partner shall continue to perform activities to the extent
reasonably necessary for the purchasing Partner to obtain (by filing or
transfer) any applicable regulatory filings or approvals or other rights to
continue clinical development or, to the extent reasonably necessary, permit
the Licensed Products to remain on the market without interruption, including,
for example, maintaining regulatory approvals and appointing the purchasing
Partner or any of its Affiliates as a distributor. In such event, the Partners
shall take all necessary action, beginning with the election by AHP Sub to
purchase or sell, at the purchasing Partner's expense, to transfer irrevocably
any regulatory filings or approvals, clinical data, trademarks and similar
items, to the purchasing Partner or its designee, and to support the purchasing
Partner in making any necessary filings so that the period of time after such
termination during which the
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selling Partner has to continue to perform such activities on behalf of the
purchasing Partner can be minimized. Further, the selling Partner shall
provide continuing rights to the purchasing Partner to use any other
intellectual property rights owned or controlled by the selling Partner at the
time of such notice to enable the purchasing Partner, it Affiliates,
Sublicensees and distributors to continue the activities formerly conducted by
the selling Partner and its Affiliates, Sublicensees and distributors as
contemplated by the Basic Agreements.
8.5. APPOINTMENT OF ATTORNEY-IN-FACT.
(a) AHP Sub hereby constitutes and appoints GI Sub, its
agent and attorney-in-fact for the purpose of executing and delivering
any and all documents necessary to transfer its entire interest in the
Partnership pursuant to the provisions of Section 8.2 of this Agreement,
and any transfer so made shall fully divest AHP Sub of all right, title or
interest in and to its entire interest in the Partnership, provided that the
foregoing power of attorney shall be operative only in the event that AHP Sub
shall fail to execute and deliver without reasonable justification any or all
such documents within sixty (60) days after receiving notice from GI Sub so
requesting. The foregoing power of attorney herein granted, being coupled with
an interest, is irrevocable.
(b) Each Partner hereby constitutes and appoints the other
Partner its agent and attorney-in-fact for the purpose of executing and
delivering any and all documents necessary to transfer its entire interest
in the Partnership pursuant to the provisions of Section 8.3 of this
Agreement, and any so made
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shall fully divest the Partner whose entire interest in the Partnership is to
be transferred of all right, title or interest in and to such entire interest
in the Partnership, provided that the foregoing power of attorney shall be
operative only in the event that a Partner shall fail to execute and deliver
without reasonable justification any or all such documents within sixty (60)
days after receiving notice from the other Partner so requesting. The
foregoing power of attorney herein granted, being coupled with an interest, is
irrevocable.
ARTICLE IX. DISSOLUTION AND TERMINATION
----------------------------------------
9.1. EVENTS OF DISSOLUTION.
(a) The Partnership shall be dissolved:
(i) on a date designated by the Partners;
(ii) upon the sale or other disposition
of all or substantially all of the
Partnership's assets;
(iii) upon the termination of the
Partnership pursuant to Section 8.2 of this Agreement;
(iv) upon the closing of a purchase and
sale pursuant to Section 8.3 of this Agreement;
(v) upon the insolvency, the making of a
general assignment for the benefit
of creditors, the suspension of
business, the commission of any act
amounting to a business failure, or
the institution of bankruptcy,
reorganization, liquidation or
receivership proceedings by or
against a Partner and, if instituted
against such Partner, its consent
thereto or the failure to
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cause such proceedings to be discharged within thirty
(30) days thereafter;
(vi) on termination of the License
Agreement; or
(vii) in any event, at 12:00 midnight on December 31, 2094.
(b) Neither Partner shall be entitled to withdraw or
retire voluntarily from the Partnership or to take voluntarily any
action which would cause a dissolution of the Partnership pursuant to Section
9.1(a)(v) of this Agreement.
(c) Dissolution of the Partnership shall be effective on
the day on which the event occurs giving rise to the dissolution,
but the Partnership shall not terminate until the assets of the
Partnership shall have been distributed as provided in this Agreement.
Notwithstanding the dissolution of the Partnership, prior to the termination of
the Partnership, as aforesaid, the business of the Partnership and the affairs
of the Partners, as such, shall continue to be governed by this Agreement.
Upon dissolution, the Steering Committee shall liquidate the assets of the
Partnership, apply and distribute the proceeds thereof, and wind up its affairs
as contemplated by this Agreement.
9.2. DISTRIBUTIONS UPON LIQUIDATION.
(a) After payment of liabilities owing to creditors,
the Steering Committee shall set up such reserves as it deems
reasonably necessary for any contingent or unforeseen liabilities or
obligations of the Partnership. Said reserves may be paid over by the Steering
Committee to a bank, to be held in escrow for the purpose of paying any such
contingent or unforeseen
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liabilities or obligations and, at the expiration of such period as the
Steering Committee may deem advisable, such reserves shall be distributed to
the Partners or their assigns in the manner set forth in subsection (b) below.
(b) After paying liabilities and providing for reserves
in accordance with subsection (a) above, the Steering Committee
shall cause the remaining net assets of the Partnership to be
distributed to the Partners in the manner set forth in Section 6.7 of this
Agreement. In the event that any part of such net assets consists of notes or
accounts receivable or other non-cash assets, the Steering Committee shall take
whatever steps it deems appropriate to convert such assets into cash or into
any other form which would facilitate the distribution thereof. If any assets
of the Partnership are to be distributed in kind, such assets shall be
distributed on the basis of their fair market value.
9.3 APPOINTMENT OF ATTORNEY-IN-FACT. Each Partner hereby
constitutes and appoints the other Partner its agent and attorney-in-fact
for the purpose of executing and delivering any and all documents
necessary to effectuate the provisions of Section 9.2 of this
Agreement, provided that the foregoing power of attorney shall be operative
only in the event that a Partner shall fail to execute and deliver without
reasonable justification any or all such documents within sixty (60) days after
receiving notice from the other Partner so requesting. The foregoing power of
attorney herein granted, being coupled with an interest, is irrevocable.
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ARTICLE X. MISCELLANEOUS PROVISIONS
------------------------------------
10.1. INDEMNIFICATION.
(a) The Partnership agrees to defend each Partner and
its Affiliates, and their agents, directors, officers and employees
at the Partnership's cost and expense, and will indemnify and hold harmless
each Partner and its Affiliates, their agents, directors, officers and
employees, from and against any and all losses, costs, damages, fees or
expenses ("Losses") arising out of or in connection with the Partnership or its
business, including, but not limited to, any actual or alleged injury, damage,
death or other consequence occurring to any person as a result, directly or
indirectly, of the possession, use or consumption of any Licensed Product
(whether claimed by reason of breach of warranty, negligence, product defect,
defect in warning or otherwise) and any claims for patent infringement brought
against a Partner and its Affiliates (but solely for acts or omissions of a
Partner in such Partner's capacity as a general partner of the Partnership and
not in any other capacity) and, in any case, regardless of the form in which
any such claim is made, provided that the foregoing indemnity shall not apply
to the extent that any such Losses are due to the gross negligence or willful
misconduct, or breach of any of the Basic Agreements of or by a Partner or its
Affiliates, or any of their agents, directors, officers or employees. In the
event of any such claim against a Partner or its Affiliates or any of their
agents, directors, officers or employees, such Partner shall promptly notify
the Partnership in writing of the claim and the Partnership shall manage and
control, at its sole expense, the
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defense of the claim and its settlement. Such Partner and its Affiliates, and
their agents, directors, officers and employees, shall cooperate with the
Partnership and may, at its or their option and expense, be represented in any
such action or proceeding. The Partnership shall not be liable for any amounts
paid in settlement by such Partner or its Affiliates, or any of their agents,
directors, officers or employees, without the Partnership's prior written
consent, which consent shall not be unreasonably withheld, or for any
litigation costs or expenses incurred by a Partner or its Affiliates, or any of
their agents, directors, officers or employees, without the Partnership's prior
written authorization, which authorization shall not be unreasonably withheld.
(b) Each Partner (the "indemnifying Partner") agrees to
defend each of the Partnership and the other Partner (the "indemnified
Partner") and its Affiliates, and their agents, directors, officers
and employees at the indemnifying Partner's cost and expense, and will
indemnify and hold harmless each of the Partnership and the other Partner and
its Affiliates, their agents, directors, officers and employees, from and
against any and all losses, costs, damages, fees or expenses ("Losses") arising
out of or in connection with the development, use, registration, formulation,
filling and finishing, distribution and/or sale of any Licensed Product which
activity is conducted by the indemnifying Partner in its capacity as a Sole
Partner or a Continuing Partner, including, but not limited to, any actual or
alleged injury, damage, death or other consequence occurring to any person as a
result, directly or indirectly, of the
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possession, use or consumption of any Licensed Product (whether claimed by
reason of breach of warranty, negligence, product defect, defect in warning or
otherwise) and any claims for patent infringement and, in any case, regardless
of the form in which any such claim is made. In the event of any such claim
against the Partnership or the indemnified Partner or its Affiliates or any of
their agents, directors, officers or employees, the Partnership or indemnified
Partner shall promptly notify the indemnifying Partner in writing of the claim
and the indemnifying Partner shall manage and control, at its sole expense, the
defense of the claim and its settlement. The Partnership and the indemnified
Partner and its Affiliates, and their agents, directors, officers and
employees, shall cooperate with the indemnifying Partner and may, at its or
their option and expense, be represented in any such action or proceeding. The
indemnifying Partner shall not be liable for any amounts paid in settlement by
the Partnership or the indemnified Partner or its Affiliates, or any of their
agents, directors, officers or employees, without the indemnifying Partner's
prior written consent, which consent shall not be unreasonably withheld, or for
any litigation costs or expenses incurred by the Partnership or the indemnified
Partner or its Affiliates, or any of their agents, directors, officers or
employees, without the indemnifying Partner's written authorization, which
authorization shall not be unreasonably withheld.
10.2. ROCHE AND WISTAR RIGHTS. AHP Sub acknowledges
that its rights as a Sole Partner under Section 5.2(c) of this Agreement, as a
Continuing Partner under Section 5.2(d) of this
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Agreement and as a purchasing Partner in a buy-sell proceeding pursuant to
Sections 8.3 and 8.4 of this Agreement may be limited in the event that it
ceases to be an affiliate of GI as defined in each of the Roche Cross-License
and Wistar License. While GI Sub agrees in any of such instances to fully
cooperate with and assist AHP Sub in any attempt by AHP Sub to negotiate to
obtain rights from Roche and/or Wistar, AHP Sub acknowledges that GI Sub cannot
guarantee that, in such event, such rights will be available from Roche or
Wistar.
10.3. OTHER BUSINESSES. It is understood that the Partners
and their Affiliates are and will be engaged in other activities and
occupations not directly related to the Partnership, and, except to the extent
otherwise agreed to, the Partners and their Affiliates shall be required to
devote only so much time as each in its sole discretion may deem necessary to
the affairs of the Partnership. Except as otherwise specifically provided in
the Basic Agreements, and without affecting either Partner's or its Affiliates'
duty to perform its or their obligations under the Basic Agreements in the best
interest of the Partnership, nothing contained in the Basic Agreements shall be
construed as limiting the right of either Partner or its Affiliates to engage
in any business outside of and independent from the Partnership, including (but
not limited to) the businesses in which the respective Partners and their
Affiliates are currently engaged or in which they contemplate being engaged.
Any benefits and/or obligations arising from such independent business shall
inure solely to such Partners or its Affiliates and not the Partnership or the
other Partner or its Affiliates; and neither the
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Partnership nor the other Partners shall have any rights by virtue of this
Agreement in and to such independent ventures or the income or profits derived
therefrom.
10.4. ADDITIONAL POWERS. The Partnership shall have
the power to borrow funds in accordance with the Annual Budgets to accomplish
the purposes of the Partnership. The Partnership shall have the power to form
and to own the capital stock of corporations and to form and to own interests
in other partnerships and business entities in order to accomplish the purposes
of the Partnership.
10.5. PUBLICITY. Except as otherwise required by law, neither
Partner (nor any of their Affiliates) shall originate any publicity,
news release or other public announcement, written or oral, relating
to the Partnership Agreement or the Basic Agreements, or the existence of an
arrangement between the Partners, without prior written notice and consultation
with the Steering Committee, but either Partner shall be free to originate such
publicity unless the Steering Committee determines such proposed publicity
would be detrimental to the best interest of the Partnership.
10.6. ASSIGNMENT. Neither this Agreement nor any of the rights
or obligations hereunder may be assigned or transferred by either Partner
without the prior written consent of the other Partner, except to a
permitted transferee under Section 8.1 of this Agreement.
10.7. GOVERNING LAW. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of Delaware.
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10.8. FORCE MAJEURE. In the event that either
Partner is prevented from performing or is unable to perform any of its
obligations under this Agreement due to any cause beyond the reasonable control
of the Partner invoking this Section 10.8 if such Partner shall have used its
reasonable efforts to avoid such occurrence and minimize its duration, such
Partner shall give notice to the other Partner in writing promptly, and
thereupon the affected Partner's performance shall be excused and the time for
performance shall be extended for the period of delay or inability to perform
due to such occurrence.
10.9. WAIVER. The waiver by either Partner of a
breach or a default of any provision of this Agreement by the other Partner
shall not be construed as a waiver of any succeeding breach of the same or any
other provision, nor shall any delay or omission on the part of either Partner
to exercise or avail itself of any right, power or privilege that it has or may
have hereunder operate as a waiver of any right, power or privilege by such
Partner.
10.10. NOTICES. Any notice or other communication
in connection with this Agreement must be in writing and if sent by mail, by
first class registered or certified mail prepaid, return receipt requested, and
if transmitted by telecopier, with a copy sent by mail in accordance with this
Section 10.10, and shall be effective when delivered personally to the
addressee at the address or telecopier number listed below or such other
address or telecopier number as the addressee shall have specified in a notice
actually received by the addressor, provided that notice
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by telecopier shall not be effective until confirmed by mail as herein
provided.
Notices to AHP Sub shall be addressed as follows:
AHP IL-12 Corporation
c/o American Home Products Corporation
Five Giralda Farms
Madison, New Jersey 07940
Attention: General Counsel
Telecopier: (201) 660-7155
with a copy to:
Wyeth-Ayerst Laboratories
555 Lancaster Avenue
St. David's, Pennsylvania 19087
Attention: Senior Vice President-
Business Development
Telecopier: (610) 688-9498
Notices to GI Sub shall be addressed as follows:
GI Drug Design, Inc.
c/o Genetics Institute, Inc.
87 CambridgePark Drive
Cambridge, Massachusetts 02l40
Attention: President
Telecopier: (617) 876-1679
with a copy to:
General Counsel
Legal Department
Telecopier: (617) 876-5851
Notices to the Partnership shall be addressed in duplicate as follows:
AHP IL-12 Corporation
c/o American Home Products Corporation
Five Giralda Farms
Madison, New Jersey 07940
Attention: General Counsel
Telecopier: (201) 660-7155
and
GI Drug Design, Inc.
c/o Genetics Institute, Inc.
87 CambridgePark Drive
Cambridge, Massachusetts 02l40
Attention: President
Telecopier: (617) 876-1679
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10.11. EXPORT.
(a) The Partners acknowledge that the export of technical
data, materials or products is subject to the exporting Partner
receiving the necessary export licenses and that the Partners cannot be
responsible for any delays attributable to export controls which are beyond the
reasonable control of either Partner. The Partners agree that regardless of
any disclosure made by the Partners receiving an export of an ultimate
destination of any technical data, materials or products, the receiving Partner
will not reexport either directly or indirectly, any technical data, material
or products without first obtaining the applicable validated or general license
from the United States Department of Commerce, United States Food and Drug
Administration and/or any other agency or department of the United States
Government, as required. The receiving Partner shall provide the exporting
Partner with any information, certifications or other documents which may be
reasonably required in connection with such exports under the Export
Administration Act of 1979, as amended, its rules and regulations, the Federal
Food, Drug and Cosmetic Act and other applicable export laws.
(b) Without limitation of the foregoing, and in support
of maintaining a general license for the export of technical data under
this Agreement, a Partner receiving an export agrees to not knowingly export
or reexport any technical data or materials furnished to such Partner
under this Agreement, any part thereof or any direct product thereof,
directly or indirectly, without first obtaining permission to do so from the
80
<PAGE> 88
United States Department of Commerce, the United States Food and Drug
Administration and/or other appropriate United States governmental agencies,
into Afghanistan, the People's Republic of China, South Africa or Namibia,
Iran, Iraq, Syria or any other country with respect to which the United States
maintains terrorist or foreign policy controls, or any of those countries
listed from time to time in supplements to Part 770 to Title 15 of the United
States Code of Federal Regulations in Country Groups Q, S, Y or Z
(collectively, the "Prohibited Countries"), which, as of the date of this
Agreement, are as follows: Group Q (Romania), Group S (Libya), Group Y
(Albania, Armenia, Azerbaijan, Belarus, Bulgaria, Cambodia, Estonia, Georgia,
Kazakhstan, Kyrgyzstan, Laos, Latvia, Lithuania, Mongolia, Russia, Tajikistan,
Turkmenistan, Ukraine, Uzbekistan and Vietnam) and Group Z (Cuba and North
Korea).
10.12. ENTIRE AGREEMENT. This Agreement, the Basic
Agreements and the Schedules hereto contain the full understanding of the
Partners with respect to the subject matter hereof and supersede all prior
understandings and writings relating thereto. No waiver, alteration or
modification of any of the provisions of this Agreement shall be binding unless
made in writing and signed by the Partners by their respective officers
thereunto duly authorized.
10.13. HEADINGS. The headings contained in this Agreement
are for convenience of reference only and shall not be considered in
construing this Agreement.
10.14. SEVERABILITY. In the event that any provision of this
Agreement is held by a court of competent jurisdiction to be
81
<PAGE> 89
unenforceable because it is invalid or in conflict with any law of any relevant
jurisdiction, the validity of the remaining provisions shall not be affected,
and the rights and obligations of the Partners shall be construed and enforced
as if the Agreement did not contain the particular provisions held to be
unenforceable.
10.15. COMPLIANCE WITH APPLICABLE LAW. No Partner
shall be required in any circumstance to take any action which could infringe
any applicable statute or regulation or the order of any court or other
regulatory authority having jurisdiction over this Agreement or its execution.
10.16. EQUITABLE REMEDIES. Either Partner shall, in
addition to all other rights provided herein or as may be provided at law, be
entitled to all equitable remedies, including those of specific performance and
injunction, to enforce its rights hereunder.
10.17. SUCCESSORS AND ASSIGNS. This Agreement shall
be binding upon and inure to the benefit of the Partners hereto and their
successors and permitted transferees and assigns.
10.18. COUNTERPARTS. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same instrument.
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<PAGE> 90
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
to be executed as a sealed instrument in their names by their properly
and duly authorized officers or representatives as of the date set
forth below.
AHP IL-12 CORPORATION
By: /s/ Hans Mueller
--------------------------------
Name: Hans Mueller
------------------------------
Title: Vice President of AHP IL-12
-----------------------------
Date: December 9, 1994
------------------------------
GI DRUG DESIGN, INC.
By: /s/ Jack Morgan
--------------------------------
Name: Jack Morgan
------------------------------
Title: Vice President
-----------------------------
Date: November 29, 1994
------------------------------
83
<PAGE> 91
SCHEDULE A
----------
IL-12 PATENT RIGHTS
-------------------
GI
- --
<TABLE>
<CAPTION>
COUNTRY ____ FILING DATE APPLICATION NO. PATENT NO.
- ------- --------------------------------------------------------------
<S> <C> <C> <C>
Australia 11/9/89 46673/89 638430
Canada 11/9/89 2,002,607-3
Europe a*) 11/9/89 90901161.1
b**) 9/4/91 91918119.8
Japan a) 11/9/89 501209/90
b) 9/4/91 516686/91
Mexico 6/5/92 92/3294
PCT a) 11/9/89 PCT/US89/05027
b) 9/4/91 PCT/US91/06332
USA a) 11/10/88 269,945/88
b) 2/7/89 307,817/89
c) 9/18/90 584,941/90
</TABLE>
<TABLE>
<CAPTION>
ROCHE
- -----
COUNTRY FILING DATE APPLICATION NO. PATENT NO.
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Australia 12/20/90 68349/90
Canada 12/19/90 2032653-1
Europe*** 12/09/90 90123670.3
Ireland 12/21/90 4694/90
Japan 12/22/90 413259/90
New Zealand 12/19/90 236545
Philippines 12/19/90 41751
South Africa 12/19/90 10237/90 10237/90
</TABLE>
84
<PAGE> 92
SCHEDULE A
----------
IL-12 PATENT RIGHTS
-------------------
(CONTINUED)
- -----------
<TABLE>
<CAPTION>
ROCHE (CONTINUED)
- -----------------
COUNTRY FILING DATE APPLICATION NO. PATENT NO.
- ------- ------- ------------------------------------------------------------
<S> <C> <C> <C>
USA a) 12/22/89 455708/89
b) 05/09/90 520935/90
c) 08/27/90 572284/90
d) 03/24/92 957023/92
</TABLE>
* Designated countries: AT, BE, CH, DE, FR, GB, IT, LU, NL, SE
** Designated countries: AT, BE CH, DE, DK, ES, FR, GB, GR, IT, LU, NL, SE
*** Designated countries: AT, BE, CH, DE, DK, FR, GB, IT, LU, NL, SE
85
<PAGE> 93
CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
SCHEDULE B
1994 Budget
***Deleted In Its Entirety***
86
<PAGE> 1
EXHIBIT 10.67
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
LICENSE AGREEMENT
between
GENETICS INSTITUTE, INC.
and
GI DRUG DESIGN, INC.
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Article I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1. Affiliate(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2. Confidential Information . . . . . . . . . . . . . . . . . . . . . . 2
1.3. Direct Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.6. Gene Therapy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.7. GI-Controlled Rights . . . . . . . . . . . . . . . . . . . . . . . . 4
1.8. GI Know-How . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
GI Patent Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.10. GI Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.11. GMP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.12. IL-12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.13. IND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.14. Licensed Field . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.15. Licensed Products . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.16. Licensee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.17. Licensee Improvements . . . . . . . . . . . . . . . . . . . . . . . 7
1.18. Licensee Technology . . . . . . . . . . . . . . . . . . . . . . . . 7
1.19. Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.20. Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.21. PLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.22. Roche . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.23. Roche Cross-License . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
1.24. Roche Know-How . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.25. Roche Patent Rights . . . . . . . . . . . . . . . . . . . . . . . 10
1.26. Sublicensee . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.27. Territory . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.28. Therapeutic Area . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.29. Vaccine Adjuvant . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.30. Valid Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.31. Wistar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.32. Wistar Know-How . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.33. Wistar License . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.34. Wistar Patent Rights . . . . . . . . . . . . . . . . . . . . . . . 12
Article II. PATENT AND KNOW-HOW LICENSES . . . . . . . . . . . . . . . . 13
2.1. Licenses of GI Right . . . . . . . . . . . . . . . . . . . . . . 13
2.2. Sublicenses of Roche Rights . . . . . . . . . . . . . . . . . . 13
2.3. Reservation of Rights . . . . . . . . . . . . . . . . . . . . . 14
2.4. Acknowledgement of Licensee as an Affiliate under
the Wistar Rights . . . . . . . . . . . . . . . . . . . . . . 16
Article III. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 17
3.1. Intellectual Property Rights . . . . . . . . . . . . . . . . . . 17
3.2. Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.3. Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Article IV. TESTING, SCALE-UP AND COMMERCIALIZATION . . . . . . . . . . 19
4.1. Obligations of GI . . . . . . . . . . . . . . . . . . . . . . . 19
4.2. Obligations of Licensee . . . . . . . . . . . . . . . . . . . . 20
Article V. MANUFACTURE . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.1. Non-Commercial Supply . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
5.2. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.3. Commercial Supply . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.4. Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.5 Failure to Supply . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.6 Equal Supply Opportunity . . . . . . . . . . . . . . . . . . . . . . 28
Article VI. INTELLECTUAL PROPERTY RIGHTS . . . . . . . . . . . . . . . . 28
6.1. Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.2. Patent Prosecution and Maintenance . . . . . . . . . . . . . . . . . 29
6.3. Infringement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.4. Claimed Infringement . . . . . . . . . . . . . . . . . . . . . . . . 35
Article VII. CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . 36
7.1. Treatment of Confidential Information . . . . . . . . . . . . . . . 36
7.2. Release from Restrictions . . . . . . . . . . . . . . . . . . . . . 36
7.3. Publications . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Article VIII. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . 38
8.1. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.2. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.3. Disposition of Licensed Products . . . . . . . . . . . . . . . . . . 39
8.4. Survival of Obligations; Return of Confidential Information . . . . 40
Article IX. INDEMNIFICATION AND LIABILITY LIMITATIONS . . . . . . . . . . 40
9.1. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.2. Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Article X. EXPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.1. Acknowledgment . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.2. Written Assurance . . . . . . . . . . . . . . . . . . . . . . . . . 43
Article XI. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 44
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
11.1. Roche and Wistar Rights . . . . . . . . . . . . . . . . . . . . . 44
11.2. Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
1l.3. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.4. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.5. Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.6. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.7. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.8. No Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.9. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.10. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.11. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.12. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 47
11.13. Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.14. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SCHEDULE A
IL-12 PATENT RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
iv
<PAGE> 6
LICENSE AGREEMENT
-----------------
AGREEMENT (the "Agreement") effective as of July 1, 1994 between
GENETICS INSTITUTE, INC., a Delaware corporation having its principal place of
business at 87 CambridgePark Drive, Cambridge, Massachusetts 02140 (hereinafter
referred to as "GI") and GI DRUG DESIGN, INC., a Delaware corporation having
its principal place of business at 87 CambridgePark Drive, Cambridge,
Massachusetts 02140 (hereinafter referred to as "GI Sub").
INTRODUCTION
------------
1. GI has research and development facilities and experienced
scientists, clinicians, engineers, technical associates and assistants and
other personnel which enable it to conduct research and development activities
in the area of biotechnology and the application thereof to the development,
production and manufacture, registration and marketing of biotechnology-based
pharmaceutical products.
2. GI has, in collaboration with Wistar (as defined below),
identified, isolated, purified and cloned IL-12 (as defined below) and has
filed patent applications relating thereto in various countries.
3. GI Sub is a wholly-owned subsidiary of GI established to
develop and market IL-12 in the Territory (as defined below).
4. GI Sub desires to license from GI the right to develop, use,
register, formulate, fill and finish, distribute and sell IL-12 as a
pharmaceutical product in the Territory.
1
<PAGE> 7
5. GI is willing, for the consideration and on the terms set
forth herein, to license IL-12 to GI Sub for such purposes.
In consideration of the mutual covenants and promises contained in
this Agreement and other good and valuable consideration, the Parties agree as
follows:
ARTICLE I. DEFINITIONS
-----------------------
As used in this Agreement, the following terms, whether used
in the singular or plural, shall have the following meanings:
1.1. "Affiliates(s)" of a Party shall mean any corporation or other
---------------
business entity controlling, controlled by or under common control with such
Party. For purposes of this Section 1.1, "control" shall mean the direct or
indirect ownership of more than fifty percent (50%) of the voting or income
interest in such corporation or other business entity, or such other
relationship as, in fact, constitutes actual control.
1.2. "Confidential Information" means (a) all proprietary
--------------------------
information and materials, patentable or otherwise, of a Party which is
disclosed by or on behalf of such Party to the other Party, including DNA
sequences, vectors, cells, substances, formulations, techniques, methodology,
equipment, data, reports, know-how, preclinical and clinical trials and the
results thereof, sources of supply, patent positioning and business plans,
including any negative developments, and (b) any other information designated
by the disclosing Party to the other Party as confidential or proprietary,
whether or not related to making, using or selling
2
<PAGE> 8
Licensed Products.
1.3 "Direct Cost" means (a) costs directly attributable to an
-------------
activity (i.e., those costs which vary with such activity), including, but not
limited to, direct labor and benefit expenses for such activity, consumable
supplies and other materials, and subcontracted costs, as determined in
accordance with generally accepted cost accounting practices in the country of
the activity, plus (b) fixed overhead costs allocable to the activity,
including, but not limited to, direct labor and benefit expenses for technical
services and support services, depreciation, utilities, maintenance and repairs
and insurance costs associated with such activity, as determined in accordance
with generally accepted cost accounting practices in the country of the
activity.
1.4. "Direct Manufacturing Cost" means (a) costs directly
---------------------------
attributable to manufacturing, quality assurance and quality control related to
a unit of product (i.e., those costs which vary with production), including,
but not limited to, direct labor and benefit expenses for manufacturing, and
consumable bulk and other production materials, as determined in accordance
with generally accepted cost accounting practices in the country of
manufacture, plus (b) fixed manufacturing overhead costs allocable to the
product based on the actual percentage utilization (including start-up and
shut-down time) of the capacity of the manufacturing facility, including, but
not limited to, direct labor and benefit expenses for technical services and
support services, depreciation, utilities, maintenance and repairs and
insurance costs associated
3
<PAGE> 9
with such utilization of the manufacturing facility, as determined in
accordance with generally accepted cost accounting practices in the country of
manufacture. Without limiting the generality of the foregoing, Direct
Manufacturing Cost shall be deemed to include (x) the full cost associated with
quality control samples, retention samples, reasonable manufacturing losses and
reasonable production rejects and (y) payments (including, without limitation,
royalties, option fees or license fees) made to one or more third parties to
obtain a license or similar right in the absence of which manufacture could not
be legally undertaken.
1.5. "Excluded Field" is defined in Section 1.14 of this Agreement.
----------------
1.6. "Gene Therapy" means the genetic modification of human
--------------
somatic cells by the introduction of exogenous DNA or RNA into those somatic
cells for the purpose of expressing IL-12 in vivo for the treatment or
prevention of disease or genetic defect.
1.7. "GI Controlled Rights" is defined in Section 6.2 of this
----------------------
Agreement.
1.8. "GI Know-How" means any information, patentable or otherwise,
-------------
of GI, developed, applied or acquired by GI (other than information licensed to
GI pursuant to the terms of Section 6.1 of this Agreement) as of and during the
term of this Agreement in connection with the invention or development of
IL-12, relating to the identification, characterization, use or production of
IL-12 which is reasonably useful or necessary or is required to develop, use,
register, manufacture, formulate, fill and finish, distribute
4
<PAGE> 10
and/or sell Licensed Products including, without limitation, scientific
discoveries, developments, preclinical data, clinical data, and marketing
approval and regulatory filings and records related thereto. "GI Know-How"
shall not include Roche's interest in the information or know-how licensed to
GI under the Roche Cross-License and Wistar's interest in the information or
know-how licensed to GI and its affiliates under the Wistar License.
1.9. "GI Patent Rights" means, with respect to IL-12 or any
------------------
Licensed Products, all patents and patent applications (which for all purposes
of this Agreement shall be deemed to include certificates of invention and
applications for certificates of invention and priority rights) developed,
applied or acquired by GI (other than those licensed to GI pursuant to the
terms of Section 6.1 of this Agreement) as of and during the term of this
Agreement (including any reissues, extensions or other governmental acts which
effectively extend the period of exclusivity by the patent holder,
substitutions, confirmations, registrations, revalidations, additions,
continuations, continuations-in-part, or divisions of or to any of the
foregoing) which are reasonably useful or necessary or are required to develop,
use, register, manufacture, formulate, fill and finish, distribute and/or sell
Licensed Products. "GI Patent Rights" shall not include Roche's interest in
the patents and patent applications licensed to GI under the Roche
Cross-License and Wistar's interest in the patents and patent applications
licensed to GI and its affiliates under the Wistar License.
5
<PAGE> 11
1.10. "GI Technology" means the GI Know-How and GI Patent Rights.
---------------
1.11. "GMP" means the then-current good manufacturing practice
-----
regulations of the United States Food and Drug Administration as described in
the United States Code of Federal Regulations or any corresponding foreign
regulations or their respective successor regulations.
1.12. "IL-12" means: (a) the proteins, peptides or polypeptides,
-------
referred to as NKSF, CLMF or IL-12, which are described or claimed in the GI
and/or Roche patent applications set forth on Schedule A to this Agreement (the
"Protein"); (b) the subunits of the Protein or combination of such subunits to
form the Protein; (c) the polynucleotides ("PNs") which encode the Protein, the
subunits of the Protein and/or subsequences thereof; (d) any modified form of
the Protein; or (e) naturally occurring allotypic variant or mutant forms of
the Protein or of the PNs.
1.13. "IND" means an Investigational New Drug application or its
-----
equivalent or any corresponding foreign application.
1.14. "Licensed Field" means the prevention or treatment of
----------------
disease in humans through the use of Licensed Products, including, without
limitation, Gene Therapy and Vaccine Adjuvant uses and applications thereof.
Licensed Field shall exclude all diagnostic, research reagent and animal health
uses and applications thereof (the "Excluded Field").
1.15. "Licensed Products" means IL-12 and any and all formulations,
-------------------
mixtures or compositions thereof (including those
6
<PAGE> 12
containing more than one active ingredient) which, or the use, making or
manufacturing of which, is covered by a Valid Claim of any of the GI Patent
Rights, Roche Patent Rights or Wistar Patent Rights and/or embodies any GI
Know-How, Roche Know-How or Wistar Know-How.
1.16. "Licensee" means GI Sub or any permitted successor to, or
----------
permitted assignee of, this Agreement.
1.17. "Licensee Improvements" means any information, patentable
-----------------------
or otherwise, developed, applied or acquired by Licensee (other than
information licensed from GI pursuant to the terms of Section 2.1 of this
Agreement, sublicensed from GI pursuant to the terms of Section 2.2 of this
Agreement or licensed from Wistar under the Wistar License) during the term of
this Agreement which is reasonably useful or necessary or is required to
develop, use, register, manufacture, formulate, fill and finish, distribute
and/or sell Licensed Products, including, without limitation, scientific
discoveries, developments, preclinical data, clinical data, and marketing
approval and regulatory filings and records related thereto.
1.18. "Licensee Technology" means the Licensee Improvements.
---------------------
1.19. "Net Sales" means the aggregate United States Dollar
-----------
equivalent of gross revenues derived by or payable to Licensee, its Affiliates
and Sublicensees from or on account of the sale of Licensed Products to third
parties that are not Affiliates of Licensee, less (a) reasonable credits or
allowances, if any, actually granted on account of cash or trade discounts,
recalls,
7
<PAGE> 13
rejection or return of items previously sold, (b) excises, sales taxes, value
added taxes, consumption taxes, duties or other taxes imposed upon and paid
with respect to such sales (excluding income or franchise taxes of any kind)
and (c) separately itemized insurance costs, transportation costs and packaging
costs that are incurred in shipping Licensed Products to such third parties,
provided such costs are not included in the Direct Costs deducted from the
commercial supply price pursuant to clause (y) of Section 5.3(b) of this
Agreement and are separately charged to and paid for by such third parties. No
deduction shall be made for any item of cost incurred by Licensee, its
Affiliates or Sublicensees in preparing, manufacturing, shipping or selling
Licensed Products except as permitted pursuant to clauses (a), (b) and (c) of
the foregoing sentence. Net Sales shall not include any transfer between
Licensee and any of its Affiliates or Sublicensees for resale. In the event
that Licensee or any of its Affiliates or Sublicensees shall make any transfer
of Licensed Products to third parties for other than monetary value, such
transfer shall be considered a sale hereunder for accounting and royalty
purposes. Net Sales for any such transfers shall be determined on a
country-by-country basis and shall be the average price of "arms length" sales
by Licensee, its Affiliates or Sublicensees in such country in the Territory
during the royalty reporting period in which such transfer occurs or, if no
such "arms length" sales occurred in such country in the Territory during such
period, during the last period in which such "arms length" sales occurred.
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If no "arms length" sales have occurred in a particular country in the
Territory, Net Sales for any such transfer in such country in the Territory
shall be the average price of "arms length" sales in all countries in the
Territory. Notwithstanding the foregoing, no transfer of Licensed Products for
test or developmental purposes or as free samples shall be considered a sale
hereunder for accounting and royalty purposes. In the event that Licensee or
any of its Affiliates or Sublicensees shall sell Licensed Products together
with other products of Licensee, its Affiliates or Sublicensees to third
parties and the price attributable to Licensed Products is less than the
average price of "arms length" sales of Licensed Products for such country in
the Territory for the royalty reporting period in which such sales occur (such
sales to be excluded from the calculation of the average price of "arms length"
sales), Net Sales for any such sales shall be the average price of "arms
length" sales of Licensed Products by Licensee, its Affiliates and Sublicensees
in such country in the Territory during the royalty reporting period in which
such sales occur. If no "arms length" sales shall have occurred in such
country in the Territory during such period, the relevant reference factor
shall be the last royalty reporting period in which such "arms length" sales
occurred. If no "arms length" sales have occurred in a particular country in
the Territory, the relevant reference factor shall be the average price of
"arms length" sales in all countries in the Territory.
If Licensed Products (other than in the Vaccine Adjuvant
9
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field) are sold as part of a system, package or combination product, Net Sales
shall be calculated by multiplying the Net Sales of the combination product by
the fraction A/B where "A" is the average unit price in a particular country of
the Licensed Product when sold separately and "B" is the average unit price in
a particular country of the combination Licensed Product. If such Licensed
Product is not sold separately, the Net Sales of such combination product shall
be negotiated in good faith by the Parties. In the Vaccine Adjuvant field, Net
Sales shall be the Net Sales of the combination product (IL-12 plus the
vaccine).
1.20. "Party" means GI or Licensee; "Parties" means GI and Licensee.
-------
1.21. "PLA" means a Product License Application or its equivalent
or any corresponding foreign application.
1.22. "Roche" means Hoffmann-La Roche Inc., a New Jersey
-------
corporation and/or F. Hoffmann-La Roche Ltd., a Swiss corporation.
1.23. "Roche Cross-License" means the Agreement between GI and
---------------------
Roche dated as of July 7, 1994, implementing the Heads of Agreement, as
amended, dated as of May 4, 1992.
1.24. "Roche Know-How" means Roche's interest in all information,
----------------
patentable or otherwise, acquired by non-exclusive license, with limited rights
to sublicense, by GI under the Roche Cross-License.
1.25. "Roche Patent Rights" means Roche's interest in all patents
---------------------
and patent applications acquired by non-exclusive license, with limited rights
to sublicense, by GI under the Roche Cross-
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
License.
1.26. "Sublicensee" means a third party which is not an Affiliate
-------------
of Licensee and to whom Licensee has granted a sublicense to develop, use,
register, formulate, fill and finish, distribute and/or sell Licensed Products.
Without limiting the generality of the foregoing, a Sublicensee shall be deemed
to include any third party who is granted a sublicense hereunder by Licensee
pursuant to the terms of the outcome or settlement of any infringement or
threatened infringement action.
1.27. "Territory" means all countries of the world other than Japan.
-----------
1.28. "Therapeutic Area" means a distinct class of diseases or
------------------
indications, such as, but not limited to the following areas: *******; ******;
********* *********; ********** and ******; ********; *********; ***;
************; ************ ***** *******; ********** **********; ********;
*********; ***** *******; or ******. For purposes of this definition, any use
of IL-12 in the Gene Therapy or Vaccine Adjuvant fields shall be considered a
separate Therapeutic Area even if such use involves one of the foregoing
classes of diseases or indications.
1.29. "Vaccine Adjuvant" means the use of IL-12 in combination with
------------------
an immunogen (e.g., viral proteins, parasite proteins or miscellaneous
antigens) or polynucleotides encoding an immunogen to enhance, suppress or
otherwise modulate the immune system in response to disease or the threat of
disease, whether in vivo or ex vivo. For purposes of this Section 1.29,
-- ---- -- ----
"combination"
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
shall mean use in conjunction with, simultaneously with (combined or
uncombined) or sequentially with an immunogen.
1.30. "Valid Claim" means (a) a claim of an unexpired patent which
-------------
shall not have been withdrawn, canceled or disclaimed, nor held invalid or
unenforceable by a court of competent jurisdiction in an unappealed or
unappealable decision or (b) a claim of a patent application which is either:
(i) the subject of a pending patent interference proceeding or (ii) supported
by the disclosure of such application or any prior filed patent application for
a cumulative period not exceeding ********** from the earliest date of such
supporting disclosure for such claim in any such patent application. For each
Licensed Product under the Basic Agreements for which royalty payments are due
to GI, such Licensed Product shall be considered to be covered by a Valid Claim
under paragraph (b)(ii) for no more than a single ********* period with respect
to royalty payment obligations to GI.
1.31. "Wistar" means The Wistar Institute of Anatomy and Biology,
--------
a Pennsylvania nonprofit corporation.
1.32. "Wistar Know-How" means Wistar's interest in all information,
-----------------
patentable or otherwise, acquired by license by GI and its affiliates under the
Wistar License.
1.33. "Wistar License" means the License Agreement between GI and
----------------
Wistar dated June 30, 1992, as amended from time to time.
1.34. "Wistar Patent Rights" means Wistar's interest in all patents
----------------------
and patent applications acquired by license by GI and its affiliates under the
Wistar License.
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
ARTICLE II. PATENT AND KNOW-HOW LICENSES
-----------------------------------------
2.1. LICENSES OF GI RIGHTS. Subject to the reservations set forth
in Section 2.3 of this Agreement, GI hereby grants to Licensee:
(a) an exclusive license in the Territory under the GI Patent
Rights; and
(b) an exclusive license to use the GI Know-How in the Territory,
including the right to grant sublicenses, for the sole and exclusive purposes
of (i) developing, using, registering, formulating, filling and finishing,
distributing and selling Licensed Products in the Licensed Field in the
Territory and (ii) making, using and selling PNs (as defined in Section 1.12 of
this Agreement) in order to manufacture Licensed Products in the Gene Therapy
field in the Territory. The license granted pursuant to Section 2.1(a) shall
continue in effect until the expiration of the last patent licensed to Licensee
under this Section 2.1. The license granted pursuant to Section 2.1(b) shall
be for a period of xxxxxxxxxxxxx in each country in the Territory after the
first commercial sale of any Licensed Product in each such country in the
Territory, and upon expiration in a particular country in the Territory, shall
become a fully-paid, royalty-free, non-exclusive license, including the right
to grant sublicenses, to use the GI Know-How in such country in the Territory.
2.2. Sublicenses of Roche Rights. Subject to the rights retained
by Roche under the Roche Cross- License and the
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<PAGE> 19
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
reservations set forth in Section 2.3 of this Agreement, GI hereby grants to
Licensee:
(a) an exclusive sublicense in the Territory to GI's interest in
the Roche Patent Rights; and
(b) an exclusive sublicense to GI's interest in the Roche Know-How
in the Territory,
without the right to grant further sublicenses, for the sole and exclusive
purposes of (i) developing, using, registering, formulating, filling and
finishing, distributing and selling Licensed Products in the Licensed Field in
the Territory and (ii) making, using and selling PNs (as defined in Section
1.12 of this Agreement) in order to manufacture Licensed Products in the Gene
Therapy field in the Territory. The sublicense granted pursuant to Section
2.2(a) shall continue in effect until the expiration of the last patent
sublicensed to Licensee under this Section 2.2 or until the earlier termination
of the Roche Cross-License. The sublicense granted pursuant to Section 2.2(b)
shall be for a period of xxxxxxxxxxxxxxxxx in each country in the Territory
after the first commercial sale of any Licensed Product in each such county in
the Territory, and upon expiration in a particular country in the Territory,
shall become a fully-paid, royalty-free, non-exclusive license, without the
right to grant further sublicenses, to GI's interest in the Roche Know-How in
such country, or, in either case, until the earlier termination of such rights
under the Roche Cross-License.
2.3. RESERVATION OF RIGHTS. Subject to Section 5.5 of this
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<PAGE> 20
Agreement, GI hereby retains the following rights:
(a) Except for the rights granted in Sections 2.1(ii) and 2.2(ii)
of this Agreement relating to the Gene Therapy field, GI retains the exclusive
right in the Licensed Field under the GI Patent Rights and Roche Patent Rights
and to the GI Know-How and Roche Know-How to manufacture bulk protein Licensed
Products in the Territory. GI also retains the exclusive right under the GI
Patent Rights and Roche Patent Rights and to the GI Know-How and the Roche
Know-How to make, use and sell IL-12 in the Excluded Field.
(b) GI retains the non-exclusive right in the Licensed Field under
the GI Patent Rights and Roche Patent Rights and to the GI Know-How and Roche
Know-How to (i) develop, use, formulate and fill and finish Licensed Products
in the Territory for the purpose of distributing and/or selling Licensed
Products outside the Territory, (ii) make, use and sell PNs (as defined in
Section 1.12 of this Agreement) in order to manufacture Licensed Products in
the Gene Therapy field in the Territory for the purpose of distributing and/or
selling such Licensed Products outside the Territory, (iii) conduct discovery
research relating to IL-12 (including, without limitation, PNs) and (iv)
perform contract activities for the Licensee.
(c) In connection with the exercise of GI's exclusive rights in
the Excluded Field, GI agrees to include provisions in its agreements with
third parties relating to applications of IL-12 in the Excluded Field which are
necessary and appropriate to inform such third parties of the exclusive rights
held by Licensee in the
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<PAGE> 21
Licensed Field, and to prevent, to the extent permitted by law, such third
parties from making, using or selling IL-12 other than in the Excluded Field.
2.4. ACKNOWLEDGEMENT OF LICENSEE AS AN AFFILIATE UNDER THE WISTAR
RIGHTS. GI hereby acknowledges that Licensee is a licensed affiliate of GI
under the license granted to GI and its affiliates in the Wistar License,
including the right to grant sublicenses, for the sole and exclusive purpose of
(a) developing, using, registering, formulating, filling and finishing,
distributing and selling Licensed Products in the Licensed Field in the
Territory and (b) making, using and selling PNs (as defined in Section 1.12 of
this Agreement) in order to manufacture Licensed Products in the Gene Therapy
field in the Territory. Licensee hereby agrees to comply with the terms and
conditions of the Wistar License.
2.5. SUBLICENSES.
(a) Notwithstanding the prohibition on sublicensing set forth
in Section 2.2 of this Agreement, in the event that Licensee desires to grant a
further sublicense of the rights granted under Section 2.2 of this Agreement to
an Affiliate of GI or a third party commercial collaborator in the Gene Therapy
or Vaccine Adjuvant fields, Licensee shall have the right to grant such further
sublicense, provided that such further sublicense of the Roche Patent Rights
and Roche Know-How is permitted under the Roche Cross-License.
(b) Any sublicense by Licensee of the Wistar Patent Rights or
the Wistar Know-How shall be subject to Wistar's
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<PAGE> 22
approval, the payment of any applicable license fees and royalties to Wistar,
and any other applicable terms and conditions of the Wistar License.
(c) With respect to any sublicense of the GI Patent Rights or
Wistar Patent Rights and of the GI Know-How or Wistar Know-How, and any further
sublicense of the Roche Patent Rights or the Roche Know-How, Licensee shall
remain primarily liable to GI for all of Licensee's duties and obligations
contained in this Agreement, the Roche Cross-License and the Wistar License,
and any act or omission of a Sublicensee that would constitute a material
breach of this Agreement, the Roche Cross- License or the Wistar License, if
performed by Licensee, shall be deemed to be a material breach by Licensee of
this Agreement unless Licensee is diligently enforcing its rights against such
Sublicensee and keeping GI duly informed of its enforcement plans and
activities. A copy of each sublicense granted by Licensee under this Agreement
shall be furnished to GI promptly after execution thereof.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
--------------------------------------------
3.l. INTELLECTUAL PROPERTY RIGHTS.
(a) To the best of GI's knowledge, GI represents and warrants that:
(i) GI owns the GI Patent Rights and GI Know-How in existence on
the date of this Agreement and/or has the right to grant the
licenses under the GI Patent Rights and to the GI Know-How in
existence on the date of this
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<PAGE> 23
Agreement subject to the terms of this Agreement;
(ii) there are no third party patent rights (other than the Roche
Patent Rights and the Wistar Patent Rights) covering the
making, using or selling of IL-12; and
(iii) each of GI, Roche and Wistar have satisfied their respective
statutory requirements and conditions for seeking patent
protection for Valid Claims of the GI Patent Rights, Roche
Patent Rights and Wistar Patent Rights, as applicable.
(b) GI represents and warrants that (i) it has the right to grant
the sublicenses under the Roche Patent Rights and to the Roche Know-How in
existence on the date of this Agreement subject to the terms of this Agreement,
(ii) Licensee as an affiliate of GI is licensed under the Wistar License and
(iii) GI Sub has the right, subject to GI's consent, to assign this Agreement
to Affiliates of GI. GI also represents and warrants that it is not aware of
any third party claims inconsistent with the representations and warranties
set forth in this Section 3.l. GI further agrees to diligently comply with the
terms and conditions of the Roche Cross-License and the Wistar License, and in
the event of an allegation of a breach under such agreements, GI shall promptly
notify Licensee and cooperate with Licensee in remedying any breach or default
thereunder. Each of the foregoing representations and warranties shall not be
construed as a warranty as to the scope and/or validity of any claims in the GI
Patent Rights, Roche Patent Rights or the Wistar Patent Rights.
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<PAGE> 24
(c) GI represents and warrants that the license granted to
GI-Yamanouchi, Inc., GI's Japanese joint venture with Yamanouchi Pharmaceutical
Co., Ltd. and IL-12 licensee in Japan, is for the sole and exclusive purpose of
commercializing IL-12 in Japan and that the geographic territory for which the
license is granted consists solely of Japan.
(d) LICENSEE EXPRESSLY WAIVES ANY RIGHTS TO SEEK DAMAGES OR OTHER
RELIEF FOR BREACH OF THE REPRESENTATIONS AND WARRANTIES IN THIS SECTION 3.1
UNLESS SUCH BREACH HAS A MATERIAL AND ADVERSE EFFECT ON LICENSEE.
3.2. WARRANTY. GI warrants that the bulk Licensed Products, when
delivered, will conform to their applicable specifications in accordance with
Section 5.4 of this Agreement.
3.3. DISCLAIMER. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
NEITHER PARTY MAKES ANY WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT
LIMITED TO IMPLIED WARRANTIES OR MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, OR NON-INFRINGEMENT.
ARTICLE IV. TESTING, SCALE-UP AND COMMERCIALIZATION
----------------------------------------------------
4.1. OBLIGATIONS OF GI. GI agrees to disclose to Licensee, on an
on-going basis, in writing, (a) all GI Patent Rights and GI Know-How (including
those developed, applied or acquired during the term of this Agreement), (b)
all Roche Patent Rights and Roche Know-How licensed to GI, (c) all Wistar
Patent Rights and Wistar Know-How and (d) any other laboratory, animal,
clinical, production and other scientific data in GI's possession or available
through
19
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
its other licensees to GI as may be required by or useful to Licensee in
performing its responsibilities hereunder. In addition, GI, ** *** ***
*******, agrees to use commercially reasonable and diligent efforts to (x)
provide for production of bulk Licensed Products for preclinical and clinical
purposes, (y) complete development of a commercial manufacturing process for
bulk Licensed Products and (z) provide for the commercial scale production of
bulk Licensed Products. To facilitate the sharing of clinical data and
know-how among GI, Licensee and GI's other licensees of IL-12, GI agrees to use
commercially reasonable and diligent efforts to form a worldwide development
committee to facilitate such sharing of data and know-how and to avoid
duplication of effort in the global development of IL-12.
4.2. OBLIGATIONS OF LICENSEE. With respect to those countries in
the Territory in which it is commercially reasonable and economically
justified, Licensee agrees to use commercially reasonable and diligent efforts
to (a) conduct all necessary and appropriate preclinical and clinical trials
and control the manner and extent of such trials in order to file INDs and PLAs
which it believes will be sufficient to obtain approval to develop, use,
register, formulate, fill and finish, distribute and sell Licensed Products in
the Territory, (b) prepare, file and diligently prosecute all governmental
applications necessary to obtain approvals to import, develop, use, register,
formulate, fill and finish, distribute and sell Licensed Products in the
Territory, (c) provide for formulation, filling and finishing of Licensed
Products
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
on a commercial scale, and (d) diligently market Licensed Products in the
Territory on a commercial basis within a reasonable period of time after
receipt of all necessary approvals for marketing by applicable government
regulatory agencies.
ARTICLE V. MANUFACTURE AND SUPPLY
----------------------------------
5.1. NON-COMMERCIAL SUPPLY.
(a) During the term of this Agreement, GI shall supply
Licensee, its Affiliates and Sublicensees with one hundred percent (100%) of
their requirements of bulk Licensed Products for all research, preclinical and
clinical research and development work conducted by or on behalf of Licensee,
and Licensee agrees to purchase such requirements. Licensee agrees to purchase
entire production runs of bulk Licensed Products for research, preclinical and
clinical purposes from GI, excluding material which is retained by GI for its
own use or for sale to another licensee of IL-12. GI shall estimate in advance
of the purchase of a production run the portion which GI expects to retain for
such purposes. GI shall discuss its estimate with Licensee and then agree with
Licensee on a reasonable allocation. Licensee agrees to purchase the next GI
production run for bulk Licensed Product which is currently scheduled to begin
in ************ and to be completed in ******* **** with the understanding that
the delivery and sale of such material to Licensee will not occur earlier than
************, the anticipated completion of such production run. Future
production runs shall be scheduled subject to receipt of an order from
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<PAGE> 27
Licensee. Anything to the contrary notwithstanding, the foregoing supply
obligation of GI shall apply solely to bulk protein and not PNs (as defined in
Section 1.12 of this Agreement).
(b) All bulk Licensed Products supplied by GI for research,
preclinical and clinical purposes pursuant to the foregoing right and
obligation shall be supplied to Licensee at GI's Direct Manufacturing Cost,
F.O.B. GI's manufacturing facility. GI shall invoice Licensee for GI's Direct
Manufacturing Cost associated with each production run of bulk Licensed
Products following completion of each production run with an initial invoice
following shipment covering costs captured through that date and a final
invoice following completion of post production testing. Licensee shall make
such payments to GI within thirty (30) days of receipt of each applicable
invoice. GI shall have the right to undertake such manufacture itself or
through an Affiliate or, with the consent of Licensee which shall not be
unreasonably withheld, through an unrelated third party. In the event that GI
uses an Affiliate to undertake such manufacture, all bulk Licensed Products so
supplied shall be supplied at such Affiliate's Direct Manufacturing Cost,
F.O.B. such Affiliate's manufacturing facility, and if GI uses an unrelated
third party, at GI's Direct Cost for such bulk Licensed Products.
Notwithstanding the foregoing, in the event that GI initially undertakes to
supply Licensee directly and later undertakes to supply Licensee through an
Affiliate, the supply price to Licensee shall be the Affiliate's Direct
Manufacturing Cost which cost shall in no event exceed the Direct
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
Manufacturing Cost last charged by GI plus ***************. In the event
Licensee uses any of the bulk Licensed Product supplied pursuant to this
Section 5.1 to generate Net Sales, Licensee shall pay GI any additional amount
for such bulk Licensed Products such that GI receives the price it would
otherwise be paid pursuant to Section 5.3 of this Agreement.
(c) Licensee shall determine whether Licensee, one of its
Affiliates or a third party will formulate and fill and finish Licensed
Products. In the event that GI performs such formulation and fill and finish
activities, all of such activities shall be paid by Licensee and invoiced at
GI's Direct Cost, and GI shall have the right to use an Affiliate or an
unrelated third party to perform such services on GI's behalf.
5.2. RECORDS. GI shall keep, and shall require all Affiliates to
keep, for a period of at least three years, full, true and accurate books of
accounts and other records containing all information and data which may be
necessary to ascertain and verify the supply price charged for all research,
preclinical and clinical bulk Licensed Products supplied pursuant to Section
5.1 of this Agreement. During the term of this Agreement and for a period of
three years following its termination, Licensee shall have the right from time
to time (not to exceed twice during each calendar year and on not less than 48
hours notice) to inspect in confidence during business hours, or have an agent,
accountant or other representative reasonably acceptable to GI inspect in
confidence, such books, records and supporting data.
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
5.3. COMMERCIAL SUPPLY.
(a) During the term of this Agreement, GI shall supply
Licensee, its Affiliates and Sublicensees with one hundred percent (100%) of
their requirements of bulk Licensed Products for all commercial purposes, and
Licensee agrees to purchase such requirements. All bulk Licensed Products
supplied by GI for commercial purposes pursuant to the foregoing right and
obligation shall be supplied to Licensee pursuant to the terms of a separate
supply agreement. Such supply agreement shall be entered into at least
********** prior to the anticipated initiation of ********* *************** by
Licensee or any of its Affiliates or Sublicensees relating to a Licensed
Product, and at such time, Licensee shall have determined who will formulate
and fill and finish the Licensed Products. Anything to the contrary
notwithstanding, the foregoing supply obligation of GI shall apply solely to
bulk protein and not PNs (as defined in Section 1.12 of this Agreement).
(b) In all fields other than the Vaccine Adjuvant field, GI
shall supply commercial bulk Licensed Products or finished Licensed Products,
as mutually agreed in the supply agreement, at a price equal to *** **********
******* (x) ****** ******* ***** of Net Sales of the Licensed Product and (y)
the Direct Cost incurred by Licensee in formulating, filling and finishing and
packaging the Licensed Product. In the event that, pursuant to the terms of
the supply agreement, GI is also responsible for formulating, filling and
finishing and packaging Licensed Product, GI shall be paid ****** ******* *****
of the Net Sales of such Licensed Product. GI shall invoice Licensee on
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
delivery, F.O.B. GI's manufacturing facility, (net/30) and the calculation of
the invoice price shall be based on the weighted- average Territory-wide Net
Sales per international activity unit based on the most recently reported
calendar quarter's reported average net selling price per activity unit. A good
faith estimate and payment shall be made for shipments made prior to the giving
of the first royalty report, and an adjustment made in the form of a credit to
Licensee or a payment to GI promptly following receipt of such report by GI.
(c) GI agrees to supply bulk Licensed Products to the
Licensee for use in the Vaccine Adjuvant field at the same price as GI sold
bulk Licensed Products to the Licensee during the most recent calendar quarter.
In the event there have been no sales of such bulk Licensed Products, such
price shall be based on *** of Net Sales of the Vaccine Adjuvant product
(IL-12 plus the vaccine), but not less than GI's Direct Manufacturing Cost plus
*********** ******* *****. However, in no event shall the bulk Licensed
Product supply price calculated under the preceding sentence exceed ******
******* ***** of Net Sales of the Vaccine Adjuvant product (IL-12 plus the
vaccine).
(d) In addition to such terms regarding supply price, each
supply agreement shall contain terms regarding forecast procedures, reporting
of Net Sales, order and delivery times, minimum and maximum quantities, mutual
agreement on specifications and quality control, equal supply opportunity,
hardship and other usual and customary terms.
(e) GI shall have the right to undertake such commercial
manufacture itself, through an Affiliate or, with the
25
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
consent of Licensee which shall not be unreasonably withheld, through an
unrelated third party.
(f) It shall not be a breach of either Party's obligation
to supply or purchase Licensed Products under Section 5.1 of this Agreement or
this Section 5.3, if fulfillment of such Party's respective obligation would
infringe a third party's patent which (i) ****** on or after ************ or
(ii) ****** prior to ************ if such ************ could not have been
*********** *********** on ************ with respect to the ******** *****
******* and ************* *******. The sole remedy for such failure by GI is
set forth in Section 5.5 of this Agreement.
5.4. STANDARDS. GI covenants that (a) it will comply with all
manufacturing instructions and specifications, including quality control
standards as filed by GI with the United States Food and Drug Administration
("FDA") or as otherwise mutually agreed in writing, (b) the bulk Licensed
Product will be produced in accordance with such instructions and
specifications and with GMP and other applicable FDA rules and regulations, (c)
upon delivery of the bulk Licensed Product to the carrier designated by the
Licensee, the bulk Licensed Product will be in conformity with said
specifications, (d) the bulk Licensed Product will not be adultered or
misbranded within the meaning of the Federal Food, Drug and Cosmetic Act and
(e) the bulk Licensed Product will not be an article which, under the
provisions of Section 505 of the Federal Food, Drug and Cosmetic Act, may not
be introduced into interstate commerce.
5.5 FAILURE TO SUPPLY. In the event GI fails or is unable to
manufacture bulk Licensed Products to meet Licensee's (and its
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
Affiliates' and Sublicensees') good faith forecasted supply requirements, GI
shall promptly notify Licensee. Licensee shall have the right to give
*********** **** notice of its intent to manufacture unless such failure is due
to a force majeure event as set forth in Section 11.5 of this Agreement.
During this ****** ******** period, GI shall provide Licensee with a plan to
meet Licensee's requirements in as timely a manner as possible. Should these
plans still not ******* for ******* at ***** ****** ******* ***** of **********
********** ****** ************ **** a *** **** ******, Licensee shall have the
right to put in place manufacturing capacity in any location in the world,
internally or through its Affiliates, to make all of its future supply
requirements of such bulk Licensed Product. In such event GI shall promptly
provide Licensee with up to ***** *** ************* of technical assistance
(including, without limitation, GI Know-How to enable Licensee to undertake
such manufacture) at ** **** ** ******** in technical areas which are
reasonably necessary to put in place such capacity. If Licensee grants to an
Affiliate the rights to manufacture bulk Licensed Product, such grant shall
expressly include the right to use biological materials or Confidential
Information delivered by GI to Licensee under this Agreement, but solely in
connection with the manufacture, use or sale of bulk Licensed Product. Upon
termination of such grant, such Affiliate shall return to the parties all
biological materials and Confidential Information delivered to it by GI or
Licensee. The grant agreement shall contain terms which make such Affiliate
subject to the foregoing conditions and to the conditions of this Agreement
that are concerned with the use and disclosure of Confidential Information.
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<PAGE> 33
In addition, Licensee agrees to (a) make GI a party to the grant agreement,
with the right to bring suit against such Affiliate to enforce the foregoing
conditions or (b) authorize GI to bring suit in Licensee's name to enforce the
foregoing conditions.
5.6 EQUAL SUPPLY OPPORTUNITY. With respect to both its obligations
under Sections 5.1 and 5.3 of this Agreement, GI agrees that Licensee will be
in at least as favorable supply priority as GI and GI's other licensees of
IL-12. In the event of a shortage, (a) prior to such time as GI, GI's other
licensees of IL-12 and Licensee have each been marketing Licensed Products on
a commercial basis for a period of twelve (12) months, available supply will be
allocated on a pro-rata basis based on good faith forecasts of requirements,
and (b) thereafter, available supply will be allocated on a pro-rata basis
based on quantities purchased during the prior twelve (12) month period.
ARTICLE VI. INTELLECTUAL PROPERTY RIGHTS
-----------------------------------------
6.1. IMPROVEMENTS.
(a) To the extent that Licensee develops, or otherwise
acquires the right to grant a license covering, any Licensee Improvement,
Licensee hereby grants a non-exclusive, royalty-free license, including the
right to grant sublicenses, to such Licensee Improvement to GI for the sole
and exclusive purposes of (i) manufacturing bulk Licensed Products in the
Licensed Field both in the Territory and outside the Territory, (ii)
developing, using, formulating and filling and finishing Licensed Products in
the Licensed Field in the Territory for the purpose of distributing and selling
Licensed Products outside the Territory and
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURIRIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
(iii) developing, using, registering, formulating, filling and finishing,
distributing and selling Licensed Products in the Licensed Field outside the
Territory.
(b) To the extent that Licensee develops, or otherwise
acquires the right to grant a license covering any Licensee Improvement,
Licensee hereby grants a non-exclusive, royalty-free (except as provided below)
license, including the right to grant sublicenses, to such Licensee Improvement
to GI for the sole and exclusive purpose of developing, using, registering,
manufacturing, formulating, filling and finishing, distributing and selling
Licensed Products in the Excluded Field both in and outside the Territory,
provided that, in the event GI sublicenses the rights to a Licensee Improvement
to a third party that is not an Affiliate of GI, Licensee shall be paid a
royalty to be negotiated by GI and Licensee that will *** ****** *** *******
**** of Net Sales of Licensed Products.
6.2. PATENT PROSECUTION AND MAINTENANCE.
(a) Except as otherwise provided in this Agreement, GI
shall have the right and responsibility to decide whether or not to seek or
continue to seek or maintain patent protection on (i) the GI Technology, and,
to the extent permitted under the terms of the Roche Cross-License or the
Wistar License, (ii) the Roche Patent Rights and (iii) the Wistar Patent
Rights, as applicable (collectively, the "GI-Controlled Rights") in any country
in the Territory, and shall have the right to file for, procure and maintain
patents on any GI-Controlled Rights in any country in the Territory. Licensee
shall reimburse GI for its Direct Costs incurred in connection therewith.
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(b) If GI elects not to seek or continue to seek or
maintain patent protection on any GI Technology or other GI-Controlled Rights
in any country in the Territory, Licensee shall have the right, at its own
expense but in the name of GI, to file, procure and maintain, in such countries
in the Territory, patents on such GI Technology, and to the extent permitted by
the Roche Cross-License or the Wistar License, on the other applicable
GI-Controlled Rights. GI agrees to advise Licensee of all decisions taken
under paragraph (a) above in a timely manner in order to allow Licensee to
exercise its rights under this paragraph (b).
(c) Except as otherwise provided in this Agreement,
Licensee shall have the right and responsibility to decide whether or not to
seek or continue to seek or maintain patent protection on any Licensee
Technology in any country in the Territory, and shall have the right to file
for, procure and maintain patents on any Licensee Technology in any country in
the Territory at its own expense.
(d) If Licensee elects not to seek or continue to seek or
maintain patent protection on any Licensee Technology in any country in the
Territory, GI shall have the right, at its own expense but in the name of
Licensee, to file, procure and maintain, in such countries in the Territory,
patents on such Licensee Technology. Licensee agrees to advise GI of all
decisions taken under paragraph (c) above in a timely manner in order to allow
GI to exercise its rights under this paragraph (d).
(e) Patent counsel for the Parties shall agree on the
process for sharing substantive communications to and from the various patent
offices regarding applications or patents on any GI-
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Controlled Rights or Licensee Technology to be copied and shared on a regular
basis. The final decision with respect to such communications shall be GI's
with respect to the GI-Controlled Rights, and Licensee's with respect to the
Licensee Technology.
(f) Each Party shall make available to the other Party or
its authorized attorneys, agents or representatives, such of its employees whom
the other Party in its reasonable judgment deems necessary in order to assist
it in obtaining patent protection for the GI Technology and the Licensee
Technology. Each Party shall sign or use reasonable and diligent efforts to
have signed all legal documents necessary to file and prosecute patent
applications or to obtain or maintain patents.
6.3. INFRINGEMENT.
(a) Each Party shall promptly report in writing to the
other Party during the term of this Agreement any known (i) infringement or
suspected infringement or (ii) unauthorized use or misappropriation of any of
the GI- Controlled Rights or Licensee Technology in the Territory, and shall
provide the other Party with all available evidence supporting said
infringement, suspected infringement or unauthorized use or misappropriation.
(b) Except as provided in paragraph (d) below, GI shall
have the first right to initiate an infringement or other appropriate suit
anywhere in the Territory against any third party who at any time has infringed
or misappropriated, or is suspected of infringing or misappropriating, any of
the GI-Controlled Rights or Licensee Technology. GI shall give Licensee
sufficient advance notice of its intent to file said suit and the reasons
therefor, and shall provide Licensee with an opportunity to make suggestions
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
and comments regarding such suit. GI shall keep Licensee promptly informed,
and shall from time to time consult with Licensee regarding the status of any
such suit and shall provide Licensee with copies of all documents filed in, and
all written communications relating to, such suit. In the event that GI
decides not to initiate an infringement or other appropriate suit pursuant to
this paragraph (b), GI shall promptly advise Licensee of its intent not to
initiate such suit. In any event, upon written request of Licensee to make an
election, GI shall elect to file a suit no later than one hundred twenty (120)
days following such request, and if GI has failed to initiate suit within said
one hundred twenty (120) day period, Licensee shall, in addition to GI, have
the right to initiate such suit pursuant to paragraph (c) below.
(c) GI shall have the sole and exclusive right to select
counsel for any suit initiated by GI referred to in paragraph (b) above and
shall, except as provided below, pay all expenses of the suit, including
without limitation attorneys' fees and court costs. Licensee, in its sole
discretion, may elect, within sixty (60) days after the commencement of such
litigation, to contribute up to ************ ******* ***** of the costs
incurred by GI in connection with such litigation in the Licensed Field,
including, without limitation, reimbursement of Licensee expenses hereunder,
and, if it so elects, any damages, royalties, settlement fees or other
consideration received by GI or any of its Affiliates for past infringement or
misappropriation as a result of such litigation shall be shared by Licensee and
GI pro-rata based on their respective sharing of the costs of such litigation.
In the event that Licensee elects not to contribute to the costs of
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such litigation, GI and/or its Affiliates shall be entitled to retain any
damages, royalties, settlement fees or other consideration for past
infringement or misappropriation resulting therefrom. If necessary or
desirable, Licensee or its Affiliates and Sublicensees and distributors shall
join as a party to the suit but shall be under no obligation to participate
except to the extent that such participation is required as the result of being
a named party to the suit. Licensee shall offer reasonable assistance to GI in
connection therewith at no charge to GI except for reimbursement of reasonable
out-of-pocket expenses incurred in rendering such assistance. Licensee shall
have the right to participate and be represented in any such suit by its own
counsel at its own expense. If GI requires Licensee to join in such suit and
Licensee has not elected to contribute to the costs of such suit, GI shall
indemnify and defend Licensee against any claims or damages arising out of such
suits or any claims for injunctive or other relief against such third party
infringers. GI shall not settle any such suit involving rights of Licensee
without obtaining the prior written consent of Licensee, which consent shall
not be unreasonably withheld.
(d) In the event GI decides not to initiate a suit or fails to
elect to file a suit within the one hundred twenty (120) day time period set
forth in paragraph (b) above, Licensee shall have the right, but not the
obligation, at its own expense, to initiate an infringement or other
appropriate suit against any third party who at any time has infringed or
misappropriated, or is suspected of infringing or misappropriating, any of the
GI-Controlled Rights or Licensee Technology in the Licensed Field. In
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
exercising its rights pursuant to this paragraph (d), Licensee or its
designated Affiliates shall have the sole and exclusive right to select counsel
and shall, except as provided below, pay all expenses of the suit including
without limitation attorneys' fees and court costs. GI, in its sole
discretion, may elect, within sixty (60) days after the commencement of such
litigation, to contribute to up to ***** ******* ***** of the costs incurred by
Licensee in connection with such litigation and, if it so elects, any damages,
royalties, settlement fees or other consideration received by Licensee or any
of its Affiliates for past infringement or misappropriation as a result of such
litigation shall be shared by GI and Licensee pro-rata based on their
respective sharing of the costs of such litigation. In the event that GI
elects not to contribute to the costs of such litigation, Licensee and/or its
Affiliates shall be entitled to retain any damages, royalties, settlement fees
or other consideration for past infringement or misappropriation resulting
therefrom. If necessary or desirable, GI shall join as a party to the suit but
shall be under no obligation to participate except to the extent that such
participation is required as a result of being a named party to the suit. At
Licensee's request, GI shall offer reasonable assistance to Licensee in
connection therewith at no charge to Licensee except for reimbursement of
reasonable out-of-pocket expenses incurred in rendering such assistance. GI
shall have the right to participate and be represented in any such suit by its
own counsel at its own expense. If Licensee requires GI to join such suit and
GI elects not to contribute to the costs of such suit, Licensee shall indemnify
and defend GI against any claims or damages arising out
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of such suits or any claims for injunctive or other relief against such third
party infringers. Licensee shall not settle any such suit involving rights of
GI without obtaining the prior written consent of GI, which consent shall not
be unreasonably withheld.
(e) The provisions of this Section 6.3 shall also apply to
Roche Patent Rights and Roche Know- How and to Wistar Patent Rights and Wistar
Know-How but only to the extent enforcement rights hereto are available to GI
and/or Licensee under the terms of the Roche Cross-License and/or the Wistar
License, as applicable.
6.4. CLAIMED INFRINGEMENT.
(a) In the event that a third party at any time provides
written notice of a claim to, or brings an action, suit or proceeding against,
either Party or any of their respective Affiliates or Sublicensees, claiming
infringement of its patent rights or unauthorized use or misappropriation of
its know-how, based upon an assertion or claim arising out of the development,
use, manufacture, distribution and/or sale of Licensed Products in the Licensed
Field, such Party shall promptly notify the other Party of the claim or the
commencement of such action, suit or proceeding, enclosing a copy of the claim
and/or all papers served. GI agrees to make available to Licensee its advice
and counsel regarding the technical merits of any such claim at no cost to
Licensee.
(b) EXCEPT FOR BREACHES OF SECTION 3.1 OF THIS AGREEMENT
HAVING A MATERIAL AND ADVERSE EFFECT ON LICENSEE, THE FOREGOING STATES THE
ENTIRE RESPONSIBILITY OF GI IN THE LICENSED FIELD AND IN THE TERRITORY IN THE
CASE OF ANY CLAIMED INFRINGEMENT
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OR VIOLATION OF ANY THIRD PARTY'S RIGHTS OR UNAUTHORIZED USE OR
MISAPPROPRIATION OF ANY THIRD PARTY'S KNOW-HOW.
ARTICLE VII. CONFIDENTIAL INFORMATION
--------------------------------------
7.1. TREATMENT OF CONFIDENTIAL INFORMATION. Each Party hereto
shall maintain the Confidential Information of the other Party in confidence,
and shall not disclose, divulge or otherwise communicate such Confidential
Information to others, or use it for any purpose, except pursuant to, and in
order to carry out, the terms and objectives of this Agreement, and hereby
agrees to exercise every reasonable precaution to prevent and restrain the
unauthorized disclosure of such Confidential Information by any of its
directors, officers, employees, consultants, subcontractors, sublicensees or
agents. This provision shall survive for a period of five (5) years after the
expiration or termination of this Agreement.
7.2. RELEASE FROM RESTRICTIONS. The provisions of Section 7.1
shall not apply to any Confidential Information disclosed hereunder which:
(a) was known or used by the receiving Party or its
Affiliates prior to its date of disclosure to the receiving Party, as evidenced
by the prior written records of the receiving Party or its Affiliates; or
(b) either before or after the date of the disclosure to
the receiving Party is lawfully disclosed to the receiving Party or its
Affiliates by an independent, unaffiliated third party rightfully in possession
of the Confidential Information; or
(c) either before or after the date of the disclosure
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to the receiving Party becomes published or generally known to the public
through no fault or omission on the part of the receiving Party or its
Affiliates; or
(d) is required to be disclosed by the receiving Party to
comply with applicable laws, to defend or prosecute litigation or to comply
with governmental regulations, provided that the receiving Party provides prior
written notice of such disclosure to the other Party and takes reasonable and
lawful actions to avoid and/or minimize the degree of such disclosure.
7.3. PUBLICATIONS. Notwithstanding the provisions of Section 7.1,
and subject to the following restrictions, each Party and any employee or
consultant of such Party shall be permitted to make disclosures in scientific
journals or publications relating to IL-12 or the Licensed Products which
contain Confidential Information of the other Party:
(a) a Party (the "publishing Party") shall provide the
other Party with an advance copy of any proposed publication (which may be in
draft form) and such other Party shall have a reasonable opportunity to
recommend any changes it reasonably believes are necessary to preserve patent
rights or know-how belonging in whole or in part to GI or Licensee, and the
incorporation of such recommended changes shall not be unreasonably refused; and
(b) if such other Party informs the publishing Party,
within thirty (30) days of receipt of an advance copy of a proposed
publication, that such publication in its reasonable judgment could be expected
to have a material adverse effect on any patent rights or know-how belonging in
whole or in part to GI or Licensee, the publishing Party shall, to the extent
permitted by its agreements
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with its employees and consultants, delay or prevent such publication as
proposed. In the case of inventions, the delay shall be sufficiently long to
permit the timely preparation and filing of a patent application(s) or
application(s) for a certificate of invention on the information involved.
ARTICLE VIII. TERMINATION
--------------------------
8.1. Term. This Agreement shall remain in effect until terminated
in accordance with the provisions of this Article VIII or until the termination
of all of the licenses or sublicenses granted pursuant to Article II of this
Agreement. Nothing herein is intended to indicate that the perpetual
non-exclusive GI Know-How license under Section 2.1 of this Agreement expires
pursuant to this Section 8.1.
8.2. Termination. Each Party shall be entitled to terminate this
Agreement and the licenses and sublicenses granted by it hereunder by written
notice to the other Party in the event that the other Party shall be in default
of any of its material obligations hereunder, and shall fail to remedy any such
default within sixty (60) days after notice thereof by the non-breaching Party.
Any such notice of default shall specifically state that the non-breaching
Party intends to terminate this Agreement in the event that the breaching Party
shall fail to remedy the default. Notwithstanding the foregoing, in the event
of a default of a material obligation that cannot, by its nature, be cured
within such sixty (60) day period, a non-breaching Party shall not have the
right to terminate this Agreement (but shall retain any other rights and
remedies it may be afforded by law and in equity) if the
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breaching Party shall propose a plan of action relating to such default which
is reasonably acceptable to the non-breaching Party and the breaching Party
shall be diligently complying with such plan. Upon any termination of this
Agreement pursuant to this Section 8.2, neither Party shall be relieved of any
obligations incurred prior to such termination, and:
(a) In the event of termination by GI for breach by Licensee,
Licensee shall promptly deliver to GI, at no cost to GI, all animal and human
data and such other information, materials (including biological materials) and
documents in Licensee's possession that GI or any successor licensee may
require in order to obtain approval of applicable government regulatory
agencies to develop, use, register, formulate, fill and finish, distribute and
sell Licensed Products in the Territory; and
(b) In the event of termination by GI for breach by Licensee,
the licenses set forth in Section 6.1 of this Agreement (including the
obligation to pay royalties set forth in paragraph (b) thereof) shall survive.
In addition, in the event of such a termination, Licensee hereby grants to GI a
non-exclusive, royalty-free license, including the right to grant sublicenses,
to all Licensee Improvements to develop, use, formulate and fill and finish
Licensed Products in the Territory for the purpose of registering, distributing
and selling Licensed Products in the Licensed Field in the Territory.
8.3. DISPOSITION OF LICENSED PRODUCTS. Upon any termination of
this Agreement pursuant to Section 8.2 hereof, Licensee shall within thirty
(30) days of the effective date of such termination notify GI in writing of
the amount of Licensed Products which
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Licensee, its Affiliates and Sublicensees then have completed on hand, the sale
of which would, but for the termination, be subject to royalty, and Licensee,
its Affiliates and Sublicensees shall thereupon be permitted during the six (6)
months following such termination to sell that amount of Licensed Products,
provided that Licensee shall pay the aggregate royalty thereon at the
conclusion of the earlier of the last such sale or such six month period.
Except as provided above, all sublicenses granted by Licensee shall forthwith
terminate upon the termination of this Agreement.
8.4. SURVIVAL OF OBLIGATIONS; RETURN OF CONFIDENTIAL INFORMATION.
Notwithstanding any termination of this Agreement, the continuing obligations
of the Parties under Articles VI, VII, VIII and IX, as well as under any other
provisions which by their nature are intended to survive any such termination,
shall survive and continue to be enforceable. Upon any termination of this
Agreement pursuant to Section 8.2 hereof, each Party shall promptly return to
the other Party all written Confidential Information, and all copies thereof,
of the other Party which is not covered by a license surviving such
termination. All other rights and obligations shall expire upon such
termination.
ARTICLE IX. INDEMNIFICATION AND LIABILITY LIMITATIONS
------------------------------------------------------
9.1. INDEMNIFICATION.
(a) Licensee agrees to defend GI and its Affiliates, their
agents, directors, officers and employees at Licensee's cost and expense, and
will indemnify and hold harmless GI and its Affiliates, their agents,
directors, officers and employees, from and against any and all losses, costs,
damages, fees or expenses
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("Losses") arising out of or in connection with the development, use,
manufacture, formulation, filling and finishing, distribution, sublicense
and/or sale of any Licensed Product in the Licensed Field and in the Territory,
including, but not limited to, any actual or alleged injury, damage, death or
other consequence occurring to any person as a result, directly or indirectly,
of the possession, use or consumption of any Licensed Product, but excluding
claims for patent infringement, whether claimed by reason of breach of
warranty, negligence, product or labelling defect or otherwise, and regardless
of the form in which any such claim is made, provided that the foregoing
indemnity shall not apply to the extent that any such Losses are due to the
failure of the bulk Licensed Products delivered by GI to Licensee pursuant to
Sections 5.1 and 5.3 hereunder to meet the specifications called for by this
Agreement or the supply agreement to be entered into pursuant to Section 5.3 of
this Agreement. In the event of any such claim against GI or its Affiliates or
any of their agents, directors, officers or employees, GI shall promptly notify
Licensee in writing of the claim and Licensee shall manage and control, at its
sole expense, the defense of the claim and its settlement. GI shall cooperate
with Licensee and may, at its option and expense, be represented in any such
action or proceeding. Licensee shall not be liable for any settlements,
litigation costs or expenses incurred by GI without Licensee's written
authorization.
(b) GI agrees to defend Licensee and its Affiliates, their
agents, directors, officers and employees at GI's cost and expense, and will
indemnify and hold harmless Licensee and its Affiliates, their agents,
directors, officers and employees, from
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and against any and all Losses, but excluding claims for patent infringement,
arising out of or in connection with the failure of the bulk Licensed Products
delivered by GI to Licensee pursuant to Sections 5.1 and 5.3 hereunder to meet
the specifications called for by this Agreement or the supply agreement to be
entered into pursuant to Section 5.3 of this Agreement, whether claimed by
reason of breach of warranty, negligence, product or labelling defect or
otherwise and regardless of the form in which any such claim is made. In the
event of any such claim against Licensee or its Affiliates or any of their
agents, directors, officers or employees, Licensee shall promptly notify GI in
writing of the claim and GI shall manage and control, at its sole expense, the
defense of the claim and the settlement. Licensee shall cooperate with GI and
may, at its option and expense, be represented in any such action or
proceeding. GI shall not be liable for any settlements, litigation costs or
expenses incurred by Licensee without GI's written authorization.
9.2. LIABILITY. GI shall not be liable under this Agreement for
special, incidental or consequential damages or for loss of profit or lost
revenue, even if GI has been advised of the possibility of such damages.
ARTICLE X. EXPORT
-----------------
10.1. ACKNOWLEDGMENT. The Parties acknowledge that the export of
technical data, materials or products is subject to the exporting Party
receiving the necessary export licenses and that the Parties cannot be
responsible for any delays attributable to export controls which are beyond the
reasonable control of either
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Party. The Parties agree that regardless of any disclosure made by the Party
receiving an export to an ultimate destination of any technical data, materials
or products, the receiving Party will not reexport either directly or
indirectly, any technical data, material or products without first obtaining
the applicable validated or general license from the United States Department
of Commerce, United States Food and Drug Administration and/or any other agency
or department of the United States Government, as required. The receiving
Party shall provide the exporting Party with any information, materials,
certifications or other documents which may be reasonably required in
connection with such exports under the Export Administration Act of 1979, as
amended, its rules and regulations, the Federal Food, Drug and Cosmetic Act and
other applicable export laws.
10.2. WRITTEN ASSURANCE. Without limitation of the foregoing, and
in support of maintaining a general license for the export of technical data
under this Agreement, a Party receiving an export agrees to not knowingly
export or reexport any technical data or materials furnished to such Party
under this Agreement, any part thereof or any direct product thereof, directly
or indirectly, without first obtaining permission to do so from the United
States Department of Commerce, the United States Food and Drug Administration
and/or other appropriate United States governmental agencies, into Afghanistan,
the People's Republic of China, South Africa, Namibia, Iran, Iraq, Syria, or
any other country subject to applicable terrorist or foreign policy controls,
or any of those countries listed from time to time in supplements to Part 770
to Title 15 of the Code of Federal Regulations in Country Groups Q, S,
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W, Y or Z, (collectively, the "Prohibited Countries"), which, are as follows:
Group Q (Romania), Group S (Libya), Group Y (Albania, Armenia, Azerbijan,
Belarus, Bulgaria, Cambodia, Estonia, Georgia, Kazakhstan, Kyrgyzstan, Laos,
Latvia, Lithuania, Mongolia, Russia, Tajikistan, Turkmenistan, Ukraine,
Uzbekistan and Vietnam) and Group Z (Cuba and North Korea).
ARTICLE XI. MISCELLANEOUS
--------------------------
11.1. ROCHE AND WISTAR RIGHTS. Licensee acknowledges that its
rights as a Licensee under Sections 2.2, 2.4, 5.5, 6.2 and 6.3 of this
Agreement may be limited in the event Licensee ceases to be an affiliate of GI
as defined in each of the Roche Cross-License and Wistar License. While GI
agrees in any of such instances to fully cooperate with and assist Licensee in
any attempt by Licensee to negotiate to obtain rights from Roche and/or Wistar,
Licensee acknowledges that GI cannot guarantee that, in such event, such rights
will be available from Roche and/or Wistar.
11.2. PUBLICITY. Neither Party, nor any of its Affiliates, shall
originate any publicity, news release or other public announcement, written or
oral, relating to this Agreement or the existence of an arrangement between the
Parties, without the prior written approval of the other Party, which approval
shall not be unreasonably withheld, except as otherwise required by law.
1l.3. ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned or transferred by either Party without
the prior written consent of the other Party, except to a party who acquires
all or substantially all of the business of the assigning Party by merger,
consolidation, sale of
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all or substantially all of its assets or otherwise.
11.4. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the Commonwealth of Massachusetts.
11.5. FORCE MAJEURE. In the event that either Party is prevented
from performing or is unable to perform any of its obligations under this
Agreement due to any cause beyond the reasonable control of the Party invoking
this Section 1l.5 if such Party shall have used all reasonable efforts to avoid
such occurrence, such Party shall give notice to the other Party in writing
promptly, and thereupon the affected Party's performance shall be excused and
the time for performance shall be extended for the period of delay or inability
to perform due to such occurrence.
11.6. WAIVER. The waiver by either Party of a breach or a default
of any provision of this Agreement by the other Party shall not be construed as
a waiver of any succeeding breach of the same or any other provision, nor shall
any delay or omission on the part of either Party to exercise or avail itself
of any right, power or privilege that it has or may have hereunder operate as a
waiver of any right, power or privilege by such Party.
11.7. NOTICES.
(a) Any notice or other communication in connection with
this Agreement must be in writing and if sent by mail, by first class
registered or certified mail prepaid, return receipt requested, and if
transmitted by telecopier, with a copy sent by mail in accordance with this
Section 11.7, and shall be effective when delivered personally to the addressee
at the address or telecopier number listed below or such other address or
telecopier
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number as the addressee shall have specified in a notice actually received by
the addressor, provided that notice by telecopier shall not be effective until
confirmed by mail as herein provided.
Notices to GI shall be addressed as follows:
Genetics Institute, Inc.
87 CambridgePark Drive
Cambridge, Massachusetts 02140
Attention: President
Telecopier: (617) 876-1679
with a copy to:
General Counsel
Legal Department
Telecopier: (617) 876-5851
Notices to GI Sub shall be addressed as follows:
GI Drug Design, Inc.
c/o Genetics Institute, Inc.
87 CambridgePark Drive
Cambridge, Massachusetts 02140
Attention: President
Telecopier: (617) 876-1679
with a copy to:
General Counsel
Legal Department
Telecopier: (617) 876-5851
11.8. NO AGENCY. Nothing herein shall be deemed to constitute
either Party as the agent or representative of the other Party, or both Parties
as joint venturers or partners for any purpose. Each Party shall be an
independent contractor, not an employee or partner of the other Party, and the
manner in which each Party renders its services under this Agreement shall be
within its sole discretion. Neither Party shall be responsible for the acts or
omissions of the other Party, and neither Party will have authority to speak
for, represent or obligate the other Party in any way without prior written
authority from the other Party.
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11.9. ENTIRE AGREEMENT. This Agreement and the Schedule hereto
(which Schedule is deemed to be a part of this Agreement for all purposes)
contain the full understanding of the Parties with respect to the subject
matter hereof and supersede all prior understandings and writings relating
thereto. No waiver, alteration or modification of any of the provisions hereof
shall be binding unless made in writing and signed by the Parties by their
respective officers thereunto duly authorized.
11.10. HEADINGS. The headings contained in this Agreement are for
convenience of reference only and shall not be considered in construing this
Agreement.
11.11. SEVERABILITY. In the event that any provision of this
Agreement is held by a court of competent jurisdiction to be unenforceable
because it is invalid or in conflict with any law of any relevant jurisdiction,
the validity of the remaining provisions shall not be affected, and the rights
and obligations of the Parties shall be construed and enforced as if the
Agreement did not contain the particular provisions held to be unenforceable.
11.12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the Parties hereto and their successors and
permitted assigns.
11.13. THIRD PARTIES. None of the provisions of this Agreement shall
be for the benefit of or enforceable by any third party other than Roche and
Wistar in accordance with the Roche Cross-License and the Wistar License.
11.14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same
47
<PAGE> 53
instrument.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to
be executed as a sealed instrument in their names by their properly and duly
authorized officers or representatives as of the date set forth below.
GENETICS INSTITUTE, INC.
By: /s/ Jack Morgan
----------------------
Name: Jack Morgan
----------------------
Title: Vice President
----------------------
Date: November 29, 1994
----------------------
GI DRUG DESIGN, INC.
By: /s/ Jack Morgan
----------------------
Name: Jack Morgan
----------------------
Title: Vice President
----------------------
Date: November 29, 1994
----------------------
48
<PAGE> 54
SCHEDULE A
IL-12 PATENT RIGHTS
-------------------
<TABLE>
<CAPTION>
GI
- --
COUNTRY FILING DATE APPLICATION NO. PATENT NO.
- ------- ----- ----------- --------------- ----------
<S> <C> <C> <C>
Australia 11/9/89 46673/89 638430
Canada 11/9/89 2,002,607-3
Europe a*) 11/9/89 90901161.1
b**) 9/4/91 91918119.8
Japan a) 11/9/89 501209/90
b) 9/4/91 516686/91
Mexico 6/5/92 92/3294
PCT a) 11/9/89 PCT/US89/05027
b) 9/4/91 PCT/US91/06332
USA a) 11/10/88 269,945/88
b) 2/7/89 307,817/89
c) 9/18/90 584,941/90
</TABLE>
<TABLE>
<CAPTION>
ROCHE
- -----
COUNTRY FILING DATE APPLICATION NO. PATENT NO.
- ------- ----------- --------------- ----------
<S> <C> <C>
Australia 12/20/90 68349/90
Canada 12/19/90 2032653-1
Europe*** 12/09/90 90123670.3
Ireland 12/21/90 4694/90
Japan 12/22/90 413259/90
New Zealand 12/19/90 236545
Philippines 12/19/90 41751
South Africa 12/19/90 10237/90
10237/90
</TABLE>
49
<PAGE> 55
SCHEDULE A
IL-12 PATENT RIGHTS
<TABLE>
<CAPTION>
(CONTINUED)
- -----------
ROCHE (CONTINUED)
- -----------------
COUNTRY FILING DATE APPLICATION NO. PATENT NO.
- ------- ------ ----------- --------------- ----------
<S> <C> <C>
USA a) 12/22/89 455708/89
b) 05/09/90 520935/90
c) 08/27/90 572284/90
d) 03/24/92 957023/92
<FN>
* Designated countries: AT, BE, CH, DE, FR, GB, IT, LU, NL, SE
** Designated countries: AT, BE CH, DE, DK, ES, FR, GB, GR, IT, LU, NL, SE
*** Designated countries: AT, BE, CH, DE, DK, FR, GB, IT, LU, NL, SE
</TABLE>
50
<PAGE> 1
EXHIBIT 10.68
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
AGREEMENT (the "Agreement") effective as of July 1, 1994 among GI DRUG
DESIGN, INC., a Delaware corporation having its principal place of business at
87 CambridgePark Drive, Cambridge, Massachusetts 02140 (hereinafter referred to
as "GI Sub"), IL-12 PARTNERS, a general partnership organized under the laws
of the State of Delaware (the "Partnership"), and GENETICS INSTITUTE, INC., a
Delaware corporation having its principal place of business at 87 CambridgePark
Drive, Cambridge, Massachusetts 02140 (hereinafter referred to as "GI").
INTRODUCTION
------------
1. GI has entered into a License Agreement effective as of July
1, 1994 (the "License Agreement") with GI Sub relating to the development and
commercialization of IL-12 (as defined in the License Agreement) in the
Territory (as defined in the License Agreement).
2. AHP IL-12 Corporation and GI Sub have entered into a
Partnership Agreement effective as of July 1, 1994 (the "Partnership
Agreement") to form the Partnership to provide for the development and
commercialization of IL-12 in the Territory.
3. GI Sub desires to contribute the License Agreement to the
Partnership by assigning the License Agreement to the Partnership for the
consideration set forth herein and the Partnership desires to assume any and
all rights and obligations of GI Sub under the
<PAGE> 2
License Agreement.
4. GI is willing to consent to such assignment and assumption of
the License Agreement.
In consideration of the mutual covenants and promises contained in
this Agreement and other good and valuable consideration, the parties agree as
follows:
Article I. DEFINITIONS
----------------------
All capitalized terms not expressly defined in this Agreement shall
have the meanings assigned to them in the License Agreement and the Partnership
Agreement.
Article II. ASSIGNMENT AND ASSUMPTION
-------------------------------------
2.1 ASSIGNMENT. GI Sub hereby assigns, transfers and conveys
to the Partnership any and all of its rights, obligations and interests under
the License Agreement. The foregoing assignment shall survive any liquidation
or dissolution of the Partnership.
2.2. ASSUMPTION. The Partnership hereby agrees to assume, and
to fully perform, pay and discharge, any and all of GI Sub's rights,
obligations and interests under the License Agreement.
2.3. CONSIDERATION. In consideration of the foregoing assignment
of the License Agreement, the Partnership shall pay to GI Sub the royalties set
forth in Article IV of this Agreement.
-2-
<PAGE> 3
Article III. CONSENT AND SUBSTITUTION
--------------------------------------
3.1. CONSENT. GI hereby consents to the foregoing
assignment and assumption of the License Agreement by GI Sub to the
Partnership.
3.2. SUBSTITUTION. GI Sub, the Partnership and GI hereby agree
that all references in the License Agreement to Licensee shall be deemed to be
references to the Partnership. With respect to Section 11.7 of the License
Agreement, GI Sub, the Partnership and GI hereby agree that the reference to
notices to GI Sub shall be deemed to be a reference to notices to the
Partnership, and all notices to the Partnership under the License Agreement
shall be addressed to the Partnership as set forth in Section 6.6 of this
Agreement. GI Sub, the Partnership, and GI hereby agree to amend and restate
Section 11.3 of the License Agreement as follows:
"11.3 ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned or transferred by either Party
without the prior written consent of the other Party, except (a) to a
person who acquires all or substantially all of the ethical
pharmaceutical business of the assigning Party by merger,
consolidation, sale of its assets or otherwise or (b) to a Sole
Partner, Continuing Partner, or a Partner pursuant to the terms of the
Partnership Agreement."
GI further agrees that to the extent a default is attributable to an act or
omission of GI Sub under the Partnership Agreement, or GI under the Parent
Company Agreement, GI shall not exercise its rights under Section 8.2 of the
License Agreement, and any purported exercise of such rights shall be of no
effect.
-3-
<PAGE> 4
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
Article IV. ROYALTIES
----------------------
4.1. Royalties.
---------
<TABLE>
(a) For each annual period, the Partnership shall pay to
GI Sub during the term described in paragraph (b) below, the following earned
royalties at the percentage rate set forth for each incremental bracket of Net
Sales made by the Partnership, its Affiliates or Sublicensees (including,
without limitation, Sole Partners and Continuing Partners) of Licensed Products
in the Territory (other than Net Sales to or by third party commercial
collaborators of the Partnership in the Gene Therapy and Vaccine Adjuvant
fields, for which the terms of sale are dealt with in Section 5.2(b) of the
Partnership Agreement):
<CAPTION>
Royalty Rate Annual Net Sales in the Territory
------------ ---------------------------------
<S> <C>
***** Net Sales up to U.S. ************
***** Incremental Net Sales above U.S. ************ and up to and including
************
***** Incremental Net Sales above U.S. ************ and up to and including
************
***** Incremental Net Sales above U.S. ************ and up to and including
************
***** Incremental Net Sales above U.S. ************
</TABLE>
For the purpose of calculating royalties, the annual period shall begin with
the first full calendar quarter of Net Sales of Licensed Products following
market approval anywhere in the Territory, and
-4-
<PAGE> 5
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATEY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
shall be independent of GI Sub's and the Partnership's fiscal years. In
addition, for the purpose of calculating royalties payable on Net Sales of
Vaccine Adjuvant Licensed Products hereunder, such Net Sales shall not be based
on the combined product price as set forth in Section 1.19 of the License
Agreement. The Parties shall instead, on a product-by-product basis, negotiate
in good faith a formula which reasonably allocates to GI Sub a royalty based on
the relative contributions of IL-12 and the vaccine to each Vaccine Adjuvant
Licensed Product.
(b) Royalties based on patent rights shall be payable on
Licensed Products, the making, using or selling of which is covered by a Valid
Claim under the GI Patent Rights, Roche Patent Rights or Wistar Patent Rights
in the Territory for the life of such patents rights in the country of
manufacture, use or sale. Royalties based solely on know-how shall be payable
on a country- by-country basis on Licensed Products, the making, using or
selling of which involves use of the Know-How, Roche Know-How or Wistar
Know-How, for a period of ************ years in each country in the Territory
after the first commercial sale of any Licensed Product in each such country in
the Territory. Under no circumstances shall the Partnership be obligated to
pay royalties under paragraph (a) above with respect to both (i) the GI Patent
Rights, Roche Patent Rights and/or Wistar Patent Rights and (ii) the GI
Know-How, Roche Know-How and/or Wistar Know-How; only one royalty shall be due
with respect to each sale of a Licensed Product.
-5-
<PAGE> 6
(c) During the term of the sublicenses granted in Section
2.2 of the License Agreement, the Partnership shall pay to GI Sub (or at GI
Sub's option, pay to Roche directly), earned royalties at the rate and on the
terms set forth in the Roche Cross-License on all sales or other disposition by
the Partnership, its Affiliates and Sublicensees of Licensed Products for which
earned royalties are payable to Roche under the Roche Cross-License. All
earned royalties and other income paid to GI by Roche pursuant to the Roche
Cross-License with respect to the Territory shall promptly be paid by GI to the
Partnership, and GI agrees to diligently enforce its rights to such royalties
in accordance with the terms of the Roche Cross-License.
(d) In addition, the Partnership shall pay to Wistar (or
at GI Sub's option, to GI Sub as its payment agent for payment to Wistar)
earned royalties at the rate and on the terms set forth in the Wistar License
on all sales or other disposition by the Partnership, its Affiliates and
Sublicensees of Licensed Products for which earned royalties are payable to
Wistar under the Wistar License.
(e) To the extent provided in this paragraph (e), the
Partnership shall be responsible for any and all future license fees, royalties
and similar payments which may become due to a third party or parties in
connection with the exploitation of the licenses and sublicenses granted or
acknowledged pursuant to the License Agreement. In the event that the
Partnership, or GI or any of its Affiliates, with the Partnership's consent,
which consent
-6-
<PAGE> 7
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
shall not be unreasonably withheld, enters into any future agreements with
third parties (other than the Roche Cross-License and Wistar License as in
effect as of the date of this Agreement or an agreement entered into pursuant
to paragraph (f) below) which are reasonably necessary or useful for using,
developing, registering, manufacturing PNs, formulating, filling and finishing,
distributing and/or selling Licensed Products in the Territory and which
provide for the payment of royalties, license fees or other amounts, the
Partnership shall pay such amounts to such third party or reimburse GI or GI
Sub for making such payments to such third party. Notwithstanding the
foregoing, the Partnership shall have the right to deduct from the royalties
thereafter payable to GI Sub pursuant to paragraph (a) above on Net Sales of
Licensed Products, the sale of which are subject to such third party payments,
an amount equal to up to ***** ******* ***** of such third party payments,
provided that the total royalties otherwise due GI Sub on Net Sales, subject to
such third party payments, in any calendar quarter shall not be reduced by more
than ***** ******* ***** as a result of such deduction and deductions taken
pursuant to paragraphs (f) and (g) of this Section 4.1.
(f) If the Partnership, in order to operate under or
exploit in the Territory any of the licenses granted or acknowledged under
Article II of the License Agreement, must make payments (including without
limitation royalties, option fees or license fees) to one or more unrelated
third parties (other than payments to Roche or Wistar pursuant to the terms of
the Roche
-7-
<PAGE> 8
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
Cross-License and Wistar License in effect as of the date of this Agreement) to
obtain a license or similar right in the absence of which Licensed Products
could not thereafter be developed, used, registered, formulated, filled and
finished, distributed and/or sold in the Territory, the Partnership shall have
the right to deduct from the royalties thereafter payable to GI Sub pursuant to
paragraph (a) above on Net Sales of Licensed Products, the sale of which are
subject to such third party payments, an amount equal to up to ***** *******
***** of such third party payments, provided that the total royalties otherwise
due GI Sub on Net Sales, subject to such third party payments, in any calendar
quarter shall not be reduced by more than ***** ******* ***** as a result of
such deduction and deductions taken pursuant to paragraphs (e) and (g) of this
Section 4.1.
(g) The Partnership shall have the right to deduct from
the current or future royalties payable to GI Sub pursuant to paragraph (a)
above an amount equal to up to *** ******* ******* ****** of the cumulative
Direct Cost reimbursement required to be made by the Partnership to GI pursuant
to Section 6.2(a) of the License Agreement, provided that the total royalties
otherwise due GI Sub on Net Sales in any calendar quarter shall not be reduced
by more than *********** ******* ***** as a result of such deduction and by not
more than ***** ******* ***** as a result of such deduction and deductions
taken pursuant to paragraphs (e) and (f) of this Section 4.1.
-8-
<PAGE> 9
4.2. REPORTS AND PAYMENT. The Partnership shall deliver to GI Sub
within forty five (45) days after the end of each calendar quarter following
the first market approval of a Licensed Product a written report showing its
computation of royalties due under this Agreement upon Net Sales by the
Partnership, its Affiliates and Sublicensees during such calendar quarter. All
Net Sales shall be segmented in each such report according to sales by the
Partnership, each Affiliate and each Sublicensee, as well as on a
country-by-country basis, including the rates of exchange used to convert such
royalties to United States Dollars from the currency in which such sales were
made. For the purposes hereof, the rates of exchange to be used for converting
royalties due pursuant to (i) Section 4.1(a) of this Agreement to United States
Dollars shall be those published for the purchase of Dollars in the East Coast
Edition of the WALL STREET JOURNAL for the last business day of the calendar
quarter for which payment is due, (ii) Section 4.1(c) of this Agreement to
United States Dollars shall be those set forth in the Roche Cross-License and
(iii) Section 4.1(d) of this Agreement to United States Dollars shall be those
set forth in the Wistar License. Subject to the provisions of Section 4.3 of
this Agreement, the Partnership, simultaneously with the delivery of each such
report, shall tender payment in United States Dollars of all royalties shown to
be due therein.
4.3. FOREIGN ROYALTIES. Where royalties are due GI Sub hereunder
for sales of Licensed Products in a country in the Territory where, by reason
of currency regulations or taxes of any
-9-
<PAGE> 10
kind, it is impossible or illegal for the Partnership, any Affiliate or
Sublicensee to transfer royalty payments to GI Sub for Net Sales in that
country in the Territory, such royalties shall be deposited in whatever
currency is allowable by the person or entity not able to make the transfer for
the benefit or credit of GI Sub in an accredited bank in that country in the
Territory that is acceptable to GI Sub. At the Partnership's option, royalties
payable on account of Net Sales of a Sublicensee may be paid directly to GI Sub
by such Sublicensee, provided that the Partnership shall remain jointly and
severally liable for such payment until received by GI Sub.
4.4. TAXES. Any and all taxes imposed or levied on account of
royalties payable under this Agreement which are required to be withheld by the
Partnership shall be paid by the Partnership, its Affiliates or Sublicensees on
behalf of GI Sub and will be paid to the proper taxing authority. Proof of
payment will be secured, if available, and sent to GI Sub by the Partnership,
its Affiliates or Sublicensees as evidence of such payment in such form as
required by the tax authorities having jurisdiction over the Partnership, its
Affiliates or Sublicensees. Such taxes will be deducted from the amount which
would otherwise be remittable by the Partnership, its Affiliates or
Sublicensees.
4.5. RECORDS. The Partnership shall keep, and shall require all
Affiliates and Sublicensees to keep, for a period of at least three years,
full, true and accurate books of accounts and other records containing all
information and data which may be necessary
-10-
<PAGE> 11
to ascertain and verify the royalties payable to GI Sub, to Roche, to Wistar
and to other third parties. During the term of this Agreement and for a period
of three years following its termination, GI Sub shall have the right from time
to time (not to exceed twice during each calendar year and on not less than 48
hours notice) to inspect in confidence during business hours, or have an agent,
accountant or other representative reasonably acceptable to the Partnership
inspect in confidence, such books, records and supporting data.
Article V. DEFAULTS
--------------------
5.1 PARTNERSHIP DEFAULT. In the event that the Partnership
shall be in default of any of its material obligations hereunder and shall fail
to remedy any such default within sixty (60) days after notice thereof by GI
Sub, such default shall be a default under this Agreement and shall be deemed a
default of a material obligation under the License Agreement. In any such
event, GI Sub shall be entitled to seek any rights and remedies available at
law and in equity. In addition, GI shall be entitled to terminate the License
Agreement at the end of such sixty (60) day period. Notwithstanding the
foregoing, in the event of a default that cannot, by its nature, be cured
within such sixty (60) day period, GI Sub and GI shall not have the right to
terminate this Agreement or the License Agreement (but GI Sub shall retain any
other rights and remedies it may be afforded by law or in equity) if the
Partnership proposes a plan of action relating to
-11-
<PAGE> 12
such default which is reasonably acceptable to GI Sub and the Partnership is
diligently complying with such plan.
5.2. SUBLICENSEE DEFAULT. With respect to any sublicense of
the GI Patent Rights or Wistar Patent Rights and of the GI Know-How or Wistar
Know-How, any further sublicense of the Roche Patent Rights or the Roche
Know-How, the Partnership shall remain primarily liable to GI Sub for all of
the Partnership's duties and obligations contained in this Agreement, provided
that the Partnership shall be excused from its duties and obligations to GI Sub
to the extent that a Sublicensee shall have defaulted in its duties and
obligations to the Partnership so long as the Partnership is diligently
enforcing its rights against such Sublicensee and is keeping GI Sub informed of
any suspected or actual default thereof and its actions relating thereto.
5.3. ROCHE DEFAULT. GI shall be primarily liable to the
Partnership for all amounts due the Partnership pursuant to the last sentence
of Section 4.1(c) of this Agreement, provided that GI shall be excused from
such liability to the extent that Roche shall have defaulted in its payment to
GI so long as GI is diligently enforcing its rights against Roche and is
keeping the Partnership informed of any suspected or actual default thereof and
its actions related thereto.
Article VI. MISCELLANEOUS
--------------------------
6.1. PUBLICITY. Except as required by law, none of the parties (nor
any of their Affiliates) shall originate any
-12-
<PAGE> 13
publicity, news release or other public announcement, written or oral, relating
to the Partnership Agreement or the Basic Agreements, or the existence of an
arrangement among the parties, without prior written notice and consultation
with the Steering Committee of the Partnership, and such party shall be free to
originate such publicity unless the Steering Committee determines such proposed
publicity would be detrimental to the best interest of the Partnership. This
Section 6.1 shall supersede Section 11.2 of the License Agreement.
6.2. ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned or transferred by a party without the
prior written consent of the other parties, except to a party who acquires all
or substantially all of the ethical pharmaceutical business of the assigning
party by merger, consolidation, sale of assets or otherwise.
6.3. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the Commonwealth of Massachusetts.
6.4. FORCE MAJEURE. In the event that a party is prevented from
performing or is unable to perform any of its obligations under this Agreement
due to any cause beyond the reasonable control of the party invoking this
Section 6.4 if such party shall have used all reasonable efforts to avoid such
occurrence, such party shall give notice to the other parties in writing
promptly, and thereupon the affected party's performance shall be excused and
the time for performance shall be extended for the period of delay or
-13-
<PAGE> 14
inability to perform due to such occurrence.
6.5. WAIVER. The waiver by any party of a breach or a default of
any provision of this Agreement by another party shall not be construed as a
waiver of any succeeding breach of the same or any other provision, nor shall
any delay or omission on the part of a party to exercise or avail itself of any
right, power or privilege that it has or may have hereunder operate as a waiver
of any right, power or privilege by such party.
6.6. NOTICES. Any notice or other communication
in connection with this Agreement must be in writing and if by sent mail, by
first class registered or certified mail pre-paid, return receipt requested,
and if transmitted by telecopier, with a copy sent by mail in accordance with
this Section 6.6, and shall be effective when delivered personally to the
addressee at the address or telecopier number listed below or such other
address or telecopier number as the addressee shall have specified in a notice
actually received by the addressor, provided that notice by telecopier shall
not be effective until confirmed by mail as herein provided.
Notices to GI Sub shall be addressed as follows:
GI Drug Design, Inc.
c/o Genetics Institute, Inc.
87 CambridgePark Drive
Cambridge, Massachusetts 02140
Attention: President
Telecopier: (617)876-1679
with a copy to:
General Counsel
Legal Department
Telecopier: (617) 876-5851
-14-
<PAGE> 15
Notices to the Partnership shall be addressed in duplicate as follows:
IL-12 Partners
c/o AHP IL-12 Corporation
c/o American Home Products Corporation
Five Giralda Farms
Madison, NJ 07940
Attention: General Counsel
Telecopier: (201) 660-7155
with a copy to:
Wyeth-Ayerst Laboratories
555 Lancaster Avenue
St. David's, PA 19087
Attention: Senior Vice President-
Business Development
Telecopier: (610) 688-9498
and:
IL-12 Partners
c/o GI Drug Design, Inc.
c/o Genetics Institute, Inc.
87 CambridgePark Drive
Cambridge, Massachusetts 02140
Telecopier: (617) 876-1679
Attention: President
with a copy to:
General Counsel
Legal Department
Telecopier: (617) 876-5851
Notices to GI shall be addressed as follows:
Genetics Institute, Inc.
87 CambridgePark Drive
Cambridge, Massachusetts 02140
Attention: President
with a copy to:
General Counsel
Legal Department
Telecopier: (617) 876-5851
6.7. NO AGENCY. Nothing herein shall be deemed to constitute
the parties as the agent or representative of another party, or the parties as
joint venturers or partners for any
-15-
<PAGE> 16
purpose. Each party shall be an independent contractor, not an employee or
partner of the other parties, and the manner in which each party renders its
services under this Agreement shall be within its sole discretion. No party
shall be responsible for the acts or omissions of another party, and no party
will have authority to speak for, represent or obligate another party in any
way without prior written authority from the other party.
6.8. ENTIRE AGREEMENT. This Agreement contains the full
understanding of the parties with respect to the subject matter hereof and
supersedes all prior understandings and writings relating thereto. No waiver,
alteration or modification of any of the provisions hereof shall be binding
unless made in writing and signed by the parties by their respective officers
thereunto duly authorized.
6.9. HEADINGS. The headings contained in this Agreement are for
convenience of reference only and shall not be considered in construing this
Agreement.
6.10. SEVERABILITY. In the event that any provision of this
Agreement is held by a court of competent jurisdiction to be unenforceable
because it is invalid or in conflict with any law of any relevant jurisdiction,
the validity of the remaining provisions shall not be affected, and the rights
and obligations of the parties shall be construed and enforced as if the
Agreement did not contain the particular provisions held to be unenforceable.
6.11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and
-16-
<PAGE> 17
their successors and permitted assigns.
6.12. THIRD PARTIES. None of the provisions of this Agreement
shall be for the benefit of or enforceable by any third party other than Roche
and Wistar in accordance with the Roche Cross-License and the Wistar License.
6.13. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument in their names by their properly and duly
authorized officers or representatives as of the date set forth below.
GI DRUG DESIGN, INC.
By: /s/ Jack Morgan
-----------------------------
Name: Jack Morgan
-----------------------------
Title: Vice President
-----------------------------
Date: November 29, 1994
-----------------------------
IL-12 PARTNERS
By: AHP IL-12 Corporation
-----------------------------
Name: /s/ Hans Mueller
-----------------------------
Title: Vice Pres. of AHP IL-12
-----------------------------
Date: December 9, 1994
-----------------------------
-17-
<PAGE> 18
By: GI Drug Design, Inc.
----------------------------
Name: /s/ Jack Morgan
----------------------------
Title: Vice President
----------------------------
Date: November 29, 1994
----------------------------
GENETICS INSTITUTE, INC.
By: /s/ Jack Morgan
----------------------------
Name: Jack Morgan
----------------------------
Title: Vice President
----------------------------
Date: November 29, 1994
----------------------------
-18-
<PAGE> 1
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
EXHIBIT 10.69
SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------------
AGREEMENT (the "Agreement") effective as of July 1, 1994 between AHP
IL-12 CORPORATION, a Nevada corporation having its principal place of business
at Five Giralda Farms, Madison, New Jersey 07940 (hereinafter referred to as
"AHP Sub"), and GI DRUG DESIGN, INC., a Delaware corporation having its
principal place of business at 87 CambridgePark Drive, Cambridge, Massachusetts
02140 (hereinafter referred to as "GI Sub").
INTRODUCTION
------------
1. AHP Sub and GI Sub have entered into a Partnership Agreement
effective as of July 1, 1994 (the "Partnership Agreement") to form a general
partnership (the "Partnership") to provide for the development and
commercialization of IL-12 (as defined in the Partnership Agreement) in the
Territory (as defined in the Partnership Agreement).
2. GI Sub has entered into a License Agreement effective as of
July 1, 1994 (the "License Agreement") with Genetics Institute, Inc. ("GI")
pursuant to which GI has exclusively licensed its patent rights and know-how
rights relating to IL-12 to GI Sub.
3. Pursuant to an Assignment and Assumption Agreement effective
as of July 1, 1994 among GI, GI Sub and the Partnership, GI Sub has assigned
the License Agreement to the Partnership.
4. In exchange for the assignment of the License Agreement and
its cash contribution of ************ to the capital of the Partnership, GI Sub
has acquired an interest in the Partnership.
<PAGE> 2
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
5. In exchange for its cash contribution of ************ to the
capital of the Partnership, AHP Sub has acquired an interest in the
Partnership.
6. AHP Sub desires to purchase from GI Sub and GI Sub desires to
sell to AHP Sub a portion of GI Sub's interest in the Partnership with the
result that AHP Sub and GI Sub will each own a 50% interest in the Partnership.
In consideration of the mutual covenants and promises contained in
this Agreement and other good and valuable consideration, the parties agree as
follows:
ARTICLE I. DEFINITIONS
----------------------
All capitalized terms not expressly defined in this Agreement shall
have the meaning assigned to them in the Partnership Agreement and the License
Agreement.
ARTICLE II. SALE, ASSIGNMENT AND ASSUMPTION
-------------------------------------------
2.1. SALE AND ASSIGNMENT. GI Sub hereby sells, ssigns, transfers and
conveys to AHP Sub all of its right, title and interest in and to that
portion of GI Sub's interest in the Partnership as is necessary to equalize
the ownership of the Partnership by AHP Sub and GI Sub (the "Partial
Interest"), including, without limitation, all allocations of profits and
losses, and distributions of cash or other property, represented by the Partial
Interest.
2.2 ASSUMPTION. AHP Sub hereby purchases and accepts the foregoing sale
and assignment of the Partial Interest, and hereby
<PAGE> 3
agrees to assume and fully perform, pay and discharge, any and all rights,
obligations and interests associated with the Partial Interest.
2.3 PURCHASE PRICE. In consideration of the foregoing sale and
assignment, AHP Sub agrees to pay GI Sub the consideration set forth on
SCHEDULE A to this Agreement.
ARTICLE III. CONSENT AND AMENDMENT
-----------------------------------
3.1. CONSENT. AHP Sub hereby consents to the foregoing sale,
assignment and assumption of the Partial Interest.
3.2. AMENDMENT. In connection with the foregoing sale, assignment and
assumption of the Partial Interest, AHP Sub and GI Sub hereby amend Section
6.1(b) of the Partnership Agreement to read in its entirety as follows:
"(b) On or before the first day of each fiscal quarter or at such
other times as the Steering Committee shall determine, AHP Sub and GI
Sub shall contribute to the Partnership an amount equal to their
respective percentage shares ("Percentage Shares") of the
Partnership's capital requirements for the following fiscal quarter as
shown in the applicable Annual Budget, as such Annual Budget may be
adjusted from time to time. For purposes of this Agreement, the
Percentage Share of AHP Sub shall be equal to fifty percent (50%) and
the Percentage Share of GI Sub shall be equal to fifty percent (50%)."
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
-------------------------------------------
4.1. REPRESENTATIONS OF AHP SUB. AHP Sub hereby represents and warrants
to GI Sub as follows:
(a) ORGANIZATION AND STANDING. AHP Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power and
-3-
<PAGE> 4
authority to conduct its business as presently conducted and as proposed to be
conducted by it. AHP Sub has full corporate power and authority to enter into
and perform this Agreement and to carry out the transactions contemplated by
this Agreement.
(b) AUTHORITY FOR AGREEMENT. The execution, delivery and
performance by AHP Sub of this Agreement have been duly authorized by all
necessary corporate action, and this Agreement has been duly executed and
delivered by AHP Sub. This Agreement constitutes the valid and binding
obligation of AHP Sub enforceable in accordance with its terms, subject as to
enforcement of remedies to applicable bankruptcy, insolvency, reorganization or
similar laws affecting generally the enforcement of creditors' rights and
subject to a court's discretionary authority with respect to the granting of a
decree ordering specific performance or other equitable remedies. The
execution of and performance of this Agreement and compliance with its
provisions by AHP Sub will not violate any provision of law and will not
conflict with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default under, the charter documents or by-laws
of American Home Products Corporation ("AHP") or AHP Sub or any indenture,
lease, agreement or other instrument to which AHP or AHP Sub is a party or by
which they or any of their respective properties are bound, or any decree,
judgment, order, statute, rule or regulation applicable to AHP or AHP Sub.
(c) GOVERNMENTAL CONSENTS. No Filings with or by any
governmental authority are required on the part of AHP or AHP Sub
-4-
<PAGE> 5
in connection with the execution and delivery of this Agreement or the
transactions contemplated by this Agreement, except for (i) such Filings as
shall have been made prior to and shall be effective as of the date hereof and
(ii) regulatory approvals relating to the testing, production or marketing of
any Licensed Product.
(d) LITIGATION. There is no action, suit, proceeding or
investigation pending, or, to the best of AHP Sub's knowledge, any basis
therefor or threat thereof, against AHP or AHP Sub which questions the validity
of this Agreement or the right of AHP Sub to enter into this Agreement, or
which is likely to result, either individually or in the aggregate, in the
inability of AHP Sub to perform the transactions contemplated by this
Agreement.
4.2 REPRESENTATIONS OF GI SUB. GI Sub hereby represents and warrants
to AHP Sub as follows:
(a) ORGANIZATION AND STANDING. GI Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power and authority to conduct its
business as presently conducted and as proposed to be conducted by it. GI Sub
has full corporate power and authority to enter into and perform this Agreement
and to carry out the transactions contemplated by this Agreement.
(b) AUTHORITY FOR AGREEMENT. The execution, delivery and
performance by GI Sub of this Agreement have been duly authorized by all
necessary corporate action, and this Agreement has been duly executed and
delivered by GI Sub. This Agreement
-5-
<PAGE> 6
constitutes the valid and binding obligation of GI Sub enforceable in
accordance with its terms, subject as to enforcement of remedies to applicable
bankruptcy, insolvency, reorganization or similar laws affecting generally the
enforcement of creditors' rights and subject to a court's discretionary
authority with respect to the granting of a decree ordering specific
performance or other equitable remedies. The execution of and performance of
this Agreement and compliance with its provisions by GI Sub will not violate
any provision of law and will not conflict with or result in any breach of any
of the terms, conditions or provisions of, or constitute a default under, the
charter documents or by-laws of GI or GI Sub or any indenture, lease, agreement
or other instrument to which GI or GI Sub is a party or by which they or any of
their respective properties are bound, or any decree, judgment, order, statute,
rule or regulation applicable to GI or GI Sub.
(c) GOVERNMENTAL CONSENTS. No Filings with or by any
governmental authority are required on the part of GI or GI Sub in connection
with the execution and delivery of this Agreement or the transactions
contemplated by this Agreement, except for (i) such Filings as shall have been
made prior to and shall be effective as of the date hereof and (ii) regulatory
approvals relating to the testing, production or marketing of any Licensed
Product.
(d) LITIGATION. There is no action, suit, proceeding or
investigation pending, or, to the best of GI Sub's knowledge, any basis
therefor or threat thereof, against GI or GI Sub which questions the validity
of this Agreement or the right of GI Sub to
-6-
<PAGE> 7
enter into this Agreement, or which is likely to result, either individually or
in the aggregate, in the inability of GI Sub to perform the transactions
contemplated by this Agreement.
ARTICLE V. MISCELLANEOUS
-------------------------
5.1. PUBLICITY. Except as required by law, neither party (nor any
of its Affiliates) shall originate any publicity, news release or other public
announcement, written or oral, relating to the Partnership Agreement, the Basic
Agreements or this Agreement, or the existence of an arrangement between the
parties, without prior written notice and consultation with the Steering
Committee, but either party shall be free to originate such publicity unless
the Steering Committee determines such proposed publicity would be detrimental
to the best interest of the Partnership.
5.2. ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned or transferred by either party without
the prior written consent of the other party, except to a party who acquires
all or substantially all of the ethical pharmaceutical business of AHP or
Wyeth, on the one hand, or of the business of GI, on the other hand, by merger,
consolidation, sale of assets or otherwise.
5.3. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Delaware.
5.4. FORCE MAJEURE. In the event that either party is prevented
from performing or is unable to perform any of its obligations under this
Agreement due to any cause beyond the
-7-
<PAGE> 8
reasonable control of the party invoking this Section 5.4 if such party shall
have used all reasonable efforts to avoid such occurrence, such party shall
give notice to the other party in writing promptly, and thereupon the affected
party's performance shall be excused and the time for performance shall be
extended for the period of delay or inability to perform due to such
occurrence.
5.5. WAIVER. The waiver by any party of a breach or a default of
any provision of this Agreement by the another party shall not be construed as
a waiver of any succeeding breach of the same or any other provision, nor shall
any delay or omission on the part of either party to exercise or avail itself
of any right, power or privilege that it has or may have hereunder operate as a
waiver of any right, power or privilege by such party.
5.6 NOTICES. Any notice or other communication in connection
with this Agreement must be in writing and if sent by mail, by first class
registered or certified mail prepaid, return receipt requested, and if
transmitted by telecopier, with a copy sent by mail in accordance with this
Section 5.6, and shall be effective when delivered personally to the addressee
at the address or telecopier number listed below or such other address or
telecopier number as the addressee shall have specified in a notice actually
received by the addressor, provided that notice by telecopier shall not be
effective until confirmed by mail as herein provided.
-8-
<PAGE> 9
Notices to AHP Sub shall be addressed as follows:
AHP IL-12 Corporation
c/o American Home Products Corporation
Five Giralda Farms
Madison, New Jersey 07940
Attention: General Counsel
Telecopier: (201) 660-7155
with a copy to:
Wyeth-Ayerst Laboratories
555 Lancaster Avenue
St. David's, Pennsylvania 19087
Attention: Senior Vice President-
Business Development
Telecopier: (610) 688-9498
Notices to GI Sub shall be addressed as follows:
GI Drug Design, Inc.
c/o Genetics Institute, Inc.
87 CambridgePark Drive
Cambridge, Massachusetts 02140
Attention: President
Telecopier: (617) 876-1679
with a copy to:
General Counsel
Legal Department
Telecopier: (617) 876-5851
5.7. NO AGENCY. Nothing herein shall be deemed to constitute
a party as the agent or representative of another party for any
purpose, or the parties as joint venturers or partners for any purpose other
than as set forth in the Partnership Agreement. Each party shall be an
independent contractor, not an employee or partner of the other, and the manner
in which each party renders its services under this Agreement shall be within
its sole discretion. Neither party shall be responsible for the acts or
omissions of the other party, and neither party will have authority
-9-
<PAGE> 10
to speak for, represent or obligate the other party in any way
without prior written authority from the other party.
5.8. ENTIRE AGREEMENT. This Agreement and the Schedule hereto
(which Schedule is deemed to be a part of this Agreement for all
purposes) contain the full understanding of the parties with respect to the
subject matter hereof and supersede all prior understandings and writings
relating thereto. No waiver, alteration or modification of any of the
provisions hereof shall be binding unless made in writing and signed by the
parties by their respective officers thereunto duly authorized.
5.9. HEADINGS. The headings contained in this Agreement are
for convenience of reference only and shall not be considered in
construing this Agreement.
5.10. SEVERABILITY. In the event that any provision of this
Agreement is held by a court of competent jurisdiction to be unenforceable
because it is invalid or in conflict with any law of any relevant
jurisdiction, the validity of the remaining provisions shall not be affected,
and the rights and obligations of the parties shall be construed and enforced
as if the Agreement did not contain the particular provisions held to be
unenforceable.
5.11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their successors
and permitted assigns.
5.12. THIRD PARTIES. None of the provisions of this Agreement
shall be for the benefit of or enforceable by any third party.
-10-
<PAGE> 11
5.13. COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the Parties hereto have caused this
Agreement to be executed as a sealed instrument in their names by
their properly and duly authorized officers or representatives as
of the date set forth below.
AHP IL-12 CORPORATION
By: /s/ Hans Mueller
-----------------------------
Name: Hans Mueller
---------------------------
Title: Vice Pres. of AHP IL-12
--------------------------
Date: December 9, 1994
---------------------------
GI DRUG DESIGN, INC.
By: /s/ Jack Morgan
-----------------------------
Name: Jack Morgan
---------------------------
Title: Vice President
--------------------------
Date: November 29, 1994
---------------------------
-11-
<PAGE> 12
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
Schedule A
----------
I. The Parties hereby acknowledge the prior upfront
payment of *********** by AHP Sub to GI Sub in
consideration of the sale of the Partial Interest by GI
Sub to AHP Sub.
II. As further consideration for the sale of the Partial
Interest by GI Sub to AHP Sub, the milestone payments
set forth below shall be paid by AHP Sub to GI Sub upon
the achievement of the milestones set forth below by
the Partnership (or its Affiliates, Sublicensees or
distributors) in connection with the development and
commercialization of IL-12 outside the Gene Therapy and
Vaccine Adjuvant fields. Payments shall be made for
the first indication to achieve each milestone in each
of up to ***** Therapeutic Areas outside the Gene
Therapy and Vaccine Adjuvant fields. Accordingly, GI
Sub shall only receive payments once for each completed
milestone in each Therapeutic Area. If the first
indication in a Therapeutic Area fails before PLA
approval, GI Sub shall be entitled to receive any
unpaid milestone payments for that Therapeutic Area as
milestones are achieved in another indication in that
Therapeutic Area or in another indication in an
additional Therapeutic Area for which the remaining
milestone payments have not been paid. In no event
shall GI Sub receive milestone payments in excess of
************** in any one Therapeutic Area or milestone
payments in excess of *************** in the aggregate
for all Therapeutic Areas.
<TABLE>
<CAPTION>
Milestone Payment
------------------------ -------------------------
<S> <C>
********** of ********** $********* per indication
*********************(1)
************* of ******** ********* per indication
in a *****************(2)
**********: **** ********* per indication
**** ********* per indication
************: **** ********* per indication
**** ********* per indication
</TABLE>
- ---------
(l) The Partners hereby acknowledge the prior payment
of ********** by AHP Sub to GI Sub in consideration
of the
-i-
<PAGE> 13
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
********** of *********************** in the *** and ******** Therapeutic
Areas.
(2) This is a ************************ milestone which will occur when
******** of **************, **************** and ***** ******** of
***************** are obtained. ******** ******** ********, while
project dependent, will usually be based on *** or **********************
(i.e., ******************** or ************************** for a
*******************).
In the event that any of the foregoing milestones in a Therapeutic Area
shall be achieved by GI Sub (or its Affiliates, Sublicensees or
distributors) in its capacity as either a Sole Partner or a Continuing
Partner (including during the ********* transition period described in
Section 5.2(d) of the Partnership Agreement), such milestone or milestones
shall not be deemed to have been achieved for purposes of this Agreement
unless and until the Partnership shall thereafter reacquire rights to such
Therapeutic Area pursuant to Section 5.2(c) or 5.2(d) of the Partnership
Agreement. Upon the reacquisition of such rights by the Partnership, AHP
Sub shall pay to GI Sub the related milestone payments. In the event that
any of the foregoing milestones in a Therapeutic Area shall be achieved by
AHP Sub (or its Affiliates, Sublicensees or distributors) in its capacity
as either a Sole Partner or a Continuing Partner, such milestones shall be
deemed to have been achieved for purposes of this Agreement at such time
or times and, upon such time or times, AHP Sub shall pay to GI Sub the
related milestone payments.
III. As further consideration for the sale of the Partial Interest by GI Sub to
AHP Sub, in the event the Partnership (or its Affiliates, Sublicensees or
distributors, but not third party commercial collaborators as described in
Section 5.2(b) of the Partnership Agreement) shall develop and
commercialize an IL-12 Gene Therapy or Vaccine Adjuvant Licensed Product,
then AHP Sub shall negotiate, in good faith, license fees payable to GI
Sub on the accomplishment of appropriate milestones which shall not exceed
********** per Licensed Product and with payments for no more than ***
complete sets of milestone payments regardless of the number of Gene
Therapy and Vaccine Adjuvant Licensed Products that may be commercialized
by the Partnership (or its Affiliates, Sublicensees or distributors, but
not third party commercial collaborators as described in Section 5.2(b) of
the Partnership Agreement). Thus, if *** Licensed Products complete
development and their respective milestone payments are fully paid, no
additional benchmarks shall be payable for a ***** Licensed Product. If
any of the first *** Licensed Products (or their substitutes) fail before
payment of all of the applicable milestone payments, then regardless of
the value of a substitute Licensed Product, only
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<PAGE> 14
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
the remaining unpaid milestone payments negotiated with respect to the
Licensed Product it is replacing shall be paid for such substitute
Licensed Product. In addition, in no event shall the aggregate milestone
payments for all Gene Therapy and Vaccine Adjuvant Licensed Products
exceed ***********.
-iii-
<PAGE> 1
EXHIBIT 10.70
PARENT COMPANY AGREEMENT
AGREEMENT effective as of July 1, 1994 among GENETICS INSTITUTE, INC.,
a Delaware corporation having its principal place of business at 87
CambridgePark Drive, Cambridge, Massachusetts 02140 (hereinafter referred to
as "GI"), AMERICAN HOME PRODUCTS CORPORATION, a Delaware corporation having
its principal place of business at Five Giralda Farms, Madison, New Jersey
07940 (hereinafter referred to as "AHP"), and AHP BIOTECH HOLDINGS, INC., a
Delaware corporation having its principal place of business at Five Giralda
Farms, Madison, New Jersey 07940 (hereinafter referred to as "Holdings").
1. GI DRUG DESIGN, INC., a Delaware corporation and wholly owned
subsidiary of GI ("GI Sub") and AHP IL-12 CORPORATION, a Nevada corporation and
wholly owned subsidiary of AHP ("AHP Sub") have entered into a Partnership
Agreement (the "Partnership Agreement") effective July 1, 1994 pursuant to
which IL-12 PARTNERS, a partnership organized under the laws of the State of
Delaware (the "Partnership"), has been formed.
2. GI Sub and AHP Sub and/or their Affiliates (as defined in the
Partnership Agreement) have entered into the Basic Agreements (as defined in
the Partnership Agreement) relating to the Partnership, and GI Sub and AHP Sub
have entered into the Sale, Assignment and Assumption Agreement effective as of
July 1, 1994 (the "SAA Agreement") relating to the sale by GI Sub of a portion
of its interest in the Partnership to AHP Sub.
<PAGE> 2
3. GI, AHP and Holdings (the "Parties") desire to set forth
certain independent obligations of GI, AHP and Holdings relating to the
Partnership Agreement, the Basic Agreements and the SAA Agreement.
In consideration of the mutual covenants and promises contained in
this Agreement and other good and valuable consideration, the Parties agree as
follows:
1. REPRESENTATIONS AND WARRANTIES. GI hereby makes to AHP each
of the representations and warranties made by GI Sub in the following sections
of the following agreements as if such representations and warranties were
fully set forth in this Agreement:
<TABLE>
<S> <C>
Section Agreement
------- ---------
3.2 Partnership Agreement
4.2 SAA Agreement
</TABLE>
AHP hereby makes to GI each of the representations and warranties made by AHP
Sub in the following sections of the following agreements as if such
representations and warranties were fully set forth in this Agreement:
<TABLE>
<S> <C>
Section Agreement
------- ---------
3.1 Partnership Agreement
4.1 SAA Agreement
</TABLE>
2. CONSULTATION. GI and AHP agree to make their respective
corporate officers or other key employees reasonably available for managerial
assistance and consultation to the Partnership upon reasonable request
therefor by the Partnership and to make their employees and employees of their
Affiliates
-2-
<PAGE> 3
available for performance of services pursuant to the Basic Agreements on
behalf of the Partnership.
3. CONFIDENTIAL INFORMATION. GI agrees to be bound, with respect
to the Confidential Information of the Partnership and AHP Sub and its
Affiliates, by the confidentiality obligations set forth in Article VII of the
Partnership Agreement. AHP agrees to be bound, with respect to the
Confidential Information of the Partnership and GI Sub and its Affiliates, by
the confidentiality obligations set forth in Article VII of the Partnership
Agreement.
4. GUARANTEE OF THE OBLIGATIONS OF GI SUB; PARTNERSHIP MANAGEMENT.
(a) GI hereby guarantees all of the obligations of GI
Sub set forth in the Partnership Agreement and the Basic Agreements related
thereto, and GI hereby agrees to make its chief executive officer reasonably
available for purposes of fulfilling the terms of Section 4.8 of the
Partnership Agreement. GI hereby further guarantees the obligations of GI Sub
under the SAA Agreement. In addition to such guarantee and the remedies
otherwise available to AHP, in the event that GI Sub fails to fulfill any of
such obligations to AHP Sub or the Partnership, then AHP may so notify GI, and
GI shall use reasonable and diligent efforts to cause GI Sub to perform such
obligations in accordance with the terms of the relevant agreements.
(b) The Partnership Agreement contains a number of
provisions which set forth the manner in which the Partnership shall be managed
and the procedures to be followed in conducting
-3-
<PAGE> 4
certain aspects of its business. GI hereby acknowledges such provisions and
agrees to use reasonable and diligent efforts to cause GI Sub and/or Affiliates
of GI Sub to act at all times in a manner consistent with the requirements of
the Partnership Agreement.
5. GUARANTEE OF THE OBLIGATIONS OF AHP SUB; PARTNERSHIP
MANAGEMENT.
(a) AHP hereby guarantees all of the obligations of AHP
Sub set forth in the Partnership Agreement and the Basic Agreements related
thereto, and AHP hereby agrees to make its executive officer of AHP in charge
of pharmaceutical operations of Wyeth reasonably available for purposes of
fulfilling the terms of Section 4.8 of the Partnership Agreement. AHP hereby
further guarantees the obligations of AHP Sub under the SAA Agreement,
including without limitation, the milestone payment obligations under
Section 2.3 of the SAA Agreement. In addition to such guarantee and the
remedies otherwise available to GI, in the event that AHP Sub fails to fulfill
any of such obligations to GI Sub or the Partnership, then GI may so notify
AHP, and AHP shall use reasonable and diligent efforts to cause AHP Sub to
perform such obligations in accordance with the terms of the relevant
agreements.
(b) The Partnership Agreement contains a number of
provisions which set forth the manner in which the Partnership shall be managed
and the procedures to be followed in conducting certain aspects of its
business. AHP hereby acknowledges such provisions and agrees to use reasonable
and diligent efforts to
-4-
<PAGE> 5
cause AHP Sub and/or Affiliates of AHP Sub to act at all times in a manner
consistent with the requirements of the Partnership Agreement. AHP and
Holdings further agree not to exercise any of their rights set forth in
Sections 3.05 and 3.07 of the Governance Agreement which would prevent or
interfere with GI Sub's ability to (a) exercise and implement tie-breaking
rights in connection with decisions of the Steering Committee under Section 4.8
of the Partnership Agreement, (b) pursue development activities as a Sole
Partner or a Continuing Partner pursuant to Section 5.2 of the Partnership
Agreement, or (c) issue a promissory note to AHP Sub in connection with a
buy-sell proceeding in accordance with Section 8.3 of the Partnership
Agreement. AHP hereby waives its right of first refusal under Section 3.07 of
the Governance Agreement in connection with commercialization collaborations to
be entered into by the Partnership with third parties pursuant to Section 4.2
of the Partnership Agreement in the Gene Therapy and Vaccine Adjuvant fields.
6. COMMITMENT OF PARTIES. GI and AHP hereby agree to work
together in the spirit of mutual cooperation in order to foster the success of
the Partnership and hereby agree to work to resolve any problems or differences
of opinion which may arise in a manner which will be of overall benefit to the
Partnership, consistent with the provisions of Article IV of the Partnership
Agreement.
7. TRANSFER OF INTEREST IN PARTNER. For so long as GI Sub is a
Partner in the Partnership with AHP Sub, GI will not sell,
-5-
<PAGE> 6
assign, transfer, mortgage, encumber, grant a security interest in or otherwise
dispose of all or any of its interest in GI Sub, provided that GI may transfer
all, but not less than all, of its interest in GI Sub to an Affiliate of GI
willing to abide by the terms of this Agreement and to execute an agreement to
such effect; provided, however, that such transfer shall not, without the
written agreement of AHP, release GI from its continuing obligations hereunder.
For so long as AHP Sub is a Partner in the Partnership with GI Sub, AHP will
not sell, assign, transfer, mortgage, encumber, grant a security interest in or
otherwise dispose of all or any of its interest in AHP Sub, provided that AHP
may transfer all, but not less than all, of its interest in AHP Sub to an
Affiliate of AHP willing to abide by the terms of this Agreement and to execute
an agreement to such effect; provided, however, that such transfer shall not,
without the written agreement of GI, release AHP from its continuing
obligations hereunder.
8. TERMS. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings given them in the
Partnership Agreement.
9. PUBLICITY. Except as required by law, none of the Parties
(nor any of their Affiliates) shall originate any publicity, news release or
other public announcement, written or oral, relating to the Partnership
Agreement, the Basic Agreements or the SAA Agreement, or the existence of an
arrangement among the Parties, without prior written notice and consultation
with the Steering Committee, but any Party shall be free to originate
-6-
<PAGE> 7
such publicity unless the Steering Committee determines such proposed publicity
would be detrimental to the best interest of the Partnership.
10. ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned or transferred by a Party without the
prior written consent of the other Parties, except to a party who acquires all
or substantially all of the business of GI or Holdings, on the one hand, or of
the ethical pharmaceutical business of AHP or Wyeth, on the other hand, by
merger, consolidation, sale of assets or otherwise.
11. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Delaware.
12. FORCE MAJEURE. In the event that a Party is prevented from
performing or is unable to perform any of its obligations under this Agreement
due to any cause beyond the reasonable control of the Party invoking this
Section 12 if such Party shall have used all reasonable efforts to avoid such
occurrence, such Party shall give notice to the other Parties in writing
promptly, and thereupon the affected Party's performance shall be excused and
the time for performance shall be extended for the period of delay or inability
to perform due to such occurrence.
13. WAIVER. The waiver by any Party of a breach or a default of
any provision of this Agreement by another Party shall not be construed as a
waiver of any succeeding breach of the same or any other provision, nor shall
any delay or omission on the part of a Party to exercise or avail itself of any
right, power
-7-
<PAGE> 8
or privilege that it has or may have hereunder operate as a waiver of any
right, power or privilege by such Party.
14. NOTICES. Any notice or other communication in connection
with this Agreement must be in writing and if sent by mail, by first class
registered or certified mail prepaid, return receipt requested, and if
transmitted by telecopier, with a copy sent by mail in accordance with this
Section 14, and shall be effective when delivered personally to the addressee
at the address or telecopier number listed below or such other address or
telecopier number as the addressee shall have specified in a notice actually
received by the addressor, provided that notice by telecopier shall not be
effective until confirmed by mail as herein provided.
Notices to GI shall be addressed as follows:
Genetics Institute, Inc.
87 CambridgePark Drive
Cambridge, Massachusetts 02140
Attention: President
Telecopier: (617) 876-1679
with a copy to:
General Counsel
Legal Department
Telecopier: (617) 876-5851
Notices to AHP shall be addressed as follows:
American Home Products Corporation
Five Giralda Farms
Madison, New Jersey 07940
Attention: General Counsel
Telecopier: (201) 660-7155
-8-
<PAGE> 9
with a copy to:
Wyeth-Ayerst Laboratories
555 Lancaster Avenue
St. David's, Pennsylvania 19087
Attention: Senior Vice President-
Business Development
Telecopier: (610) 688-9498
Notices to Holdings shall be addressed as follows:
AHP Biotech Holdings, Inc.
c/o American Home Products Corporation
Five Giralda Farms
Madison, New Jersey 07940
Attention: General Counsel
Telecopier: (201) 660-7155
15. NO AGENCY. Nothing herein shall be deemed to constitute
a Party as the agent or representative of another Party, or the Parties as
joint venturers or partners for any purpose. Each Party shall be an
independent contractor, not an employee or partner of another Party, and the
manner in which each Party renders its services under this Agreement shall be
within its sole discretion. No Party shall be responsible for the acts or
omissions of the another Party, and no Party will have authority to speak for,
represent or obligate another Party in any way without prior written authority
from the other Party.
16. ENTIRE AGREEMENT. This Agreement contains the full
understanding of the Parties with respect to the subject matter hereof and
supersedes all prior understandings and writings relating thereto. No waiver,
alteration or modification of any of the provisions hereof shall be binding
unless made in writing and signed by the Parties by their respective officers
thereunto duly authorized.
-9-
<PAGE> 10
17. HEADINGS. The headings contained in this Agreement are
for convenience of reference only and shall not be considered in construing
this Agreement.
18. SEVERABILITY. In the event that any provision of this
Agreement is held by a court of competent jurisdiction to be unenforceable
because it is invalid or in conflict with any law of any relevant jurisdiction,
the validity of the remaining provisions shall not be affected, and the rights
and obligations of the Parties shall be construed and enforced as if the
Agreement did not contain the particular provisions held to be unenforceable.
19. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the Parties hereto and their successors and
permitted assigns.
20. THIRD PARTIES. None of the provisions of this Agreement
shall be for the benefit of or enforceable by any third party.
21. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to
be executed as a sealed instrument in their names by their properly and duly
authorized officers or representatives as of the date set forth below.
-10-
<PAGE> 11
GENETICS INSTITUTE, INC.
By: /s/ Jack Morgan
----------------------------
Title: Vice President
----------------------------
Name: Jack Morgan
----------------------------
Date: November 29, 1994
----------------------------
AMERICAN HOME PRODUCTS CORPORATION
By: /s/ Thomas M. Nee
----------------------------
Title: Vice President
----------------------------
Name: Thomas M. Nee
----------------------------
Date: December 13, 1994
----------------------------
AHP BIOTECH HOLDINGS, INC.
BY: /s/ Thomas M. Nee
----------------------------
Title: Vice President
----------------------------
Name: Thomas M. Nee
----------------------------
Date: December 13, 1994
----------------------------
-11-
<PAGE> 1
EXHIBIT 10.71
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
GI RESEARCH AND DEVELOPMENT AGREEMENT
-------------------------------------
AGREEMENT (the "Agreement") effective as of July 1, 1994 between IL-12
PARTNERS, having its principal place of business 87 CambridgePark Drive,
Cambridge, Massachusetts 02140 (hereinafter referred to as the "Partnership")
and GENETICS INSTITUTE, INC., a Delaware corporation having its principal place
of business at 87 CambridgePark Drive, Cambridge, Massachusetts 02140, or its
other designated Affiliates (hereinafter individually or collectively referred
to as "GI").
INTRODUCTION
------------
1. GI has research and development facilities and experienced
scientists, clinicians, engineers, technical associates and assistants and
other personnel which enable it to conduct research and development activities
in the area of biotechnology and the application thereof to the development,
production and manufacture, registration and marketing of biotechnology based
pharmaceutical products.
2. GI, in collaboration with Wistar (as defined in the Partnership
Agreement identified below), has identified, isolated, purified and cloned
IL-12 (as defined in the Partnership Agreement identified below) and has filed
patent applications relating thereto in various countries.
3. AHP IL-12 Corporation and GI Drug Design, Inc. ("GI Sub") have
entered into a Partnership Agreement effective as of July 1,
<PAGE> 2
1994 (the "Partnership Agreement") to form the Partnership to provide for
the development and commercialization of IL-12 in the Territory (as defined in
the Partnership Agreement).
4. GI has entered into a License Agreement effective as of July 1,
1994 (the "License Agreement") with GI Sub pursuant to which GI has exclusively
licensed its patent rights and know-how rights relating to IL-12 to GI Sub in
the Licensed Field (as defined in the Partnership Agreement) in the Territory,
and GI Sub has assigned the License Agreement to the Partnership, giving
the Partnership the right to develop, use, register, formulate, fill and
finish, distribute and sell human pharmaceutical products derived from IL-12 in
the Licensed Field in the Territory.
5. The Partnership desires that GI, on behalf of the Partnership
and in collaboration with American Home Products Corporation ("AHP") and its
Wyeth-Ayerst Laboratories division ("Wyeth"), undertake research and
development activities related to the further development and commercialization
of IL-12, and that GI, on behalf of the Partnership, manage the development and
commercialization of IL-12 in the Gene Therapy and Vaccine Adjuvant fields (as
defined in the Partnership Agreement).
6. GI is willing, for the consideration and on the terms set forth
herein, to use its research and development facilities and scientists,
clinicians, engineers, technical associates and assistants and other personnel
to conduct such activities.
2
<PAGE> 3
In consideration of the mutual covenants and promises contained in this
Agreement and other good and valuable consideration, the parties agree as
follows:
Article I. DEFINITIONS
-----------------------
As used in this Agreement, all terms not expressly defined herein shall
have the meanings assigned to them in the Partnership Agreement.
Article II. THE PROJECT
------------------------
2.1. General.
-------
(a) Subject to the terms and conditions contained in this
Agreement, GI in cooperation with Wyeth (and each of Wyeth's Affiliates) agrees
to undertake such IL-12 research and/or development activities in the Licensed
Field as are reasonably requested by the Partnership (the "Project").
Participation of GI employees on the Project Team (but not on the Steering
Committee) shall be deemed to be part of the activities performed by GI
pursuant to this Agreement.
(b) In accordance with Section 5.2(b) of the Partnership
Agreement, GI shall manage the research, development and commercialization of
IL-12 by such third party collaborators in the Gene Therapy and Vaccine
Adjuvant fields and shall keep the Steering Committee informed of its
activities in these fields. In the event the Partnership enters into such a
commercialization collaboration in either the Gene Therapy or Vaccine Adjuvant
field,
3
<PAGE> 4
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
any revenue, royalties, fees or consideration payable by such third party shall
be paid ************************* directly to GI and the balance shall be paid
to the Partnership. Notwithstanding the foregoing, in the event that the
Partnership shall have conducted any research and/or development in the Vaccine
Adjuvant field, any revenue, royalties, fees or other consideration payable by
such third party in respect of a commercialization collaboration in such field
shall be distributed as follows: (i) first, to the extent available, to the
Partnership in an amount equal to up to ************************** of the
Development Costs incurred by the Partnership in conducting such research
and/or development in such field; (ii) second, to the extent available,
directly to GI in an amount equal to up to ************************* of such
revenue, royalties, fees or other consideration; and (iii) the balance, if any,
to the Partnership. In addition to the forgoing, to the extent that the
Partnership decides to conduct research and/or development activities in the
Gene Therapy or Vaccine Adjuvant fields through the Partnership, GI may be
engaged to conduct research in these fields pursuant to paragraph (a) above.
2.2. Assignment of Work.
------------------
(a) Except for research and/or development activities in the Gene
Therapy and Vaccine Adjuvant fields, research and development activities shall
be managed by the Partnership through the Project Team under the supervision of
the Steering Committee, as more fully described in Article IV of the
Partnership Agreement. The Project Team shall, subject to the review and
approval of the
4
<PAGE> 5
Steering Committee, assign work to GI under this Agreement and to Wyeth under
the Wyeth Development Agreement. In the Gene Therapy and Vaccine Adjuvant
fields, such management and assignment shall be the responsibility of the
Steering Committee or a separate project team or teams established by the
Partnership. Because the Partnership intends to take advantage of the
expertise of GI and Wyeth throughout the Territory, it is anticipated that
there may be assignments made to both GI and Wyeth to work collaboratively on
many of the activities. GI shall have the right to request, but shall not be
obligated to obtain, written authorization to proceed on activities requested
to be performed by it from the Project Team (or from the Steering Committee or
the separate project teams in the Gene Therapy and Vaccine Adjuvant fields).
Further, GI shall have the right to rely on written or oral communications from
either Project Director (or such other persons as shall be designated for the
Gene Therapy and Vaccine Adjuvant fields) requesting that GI perform activities
on behalf of the Partnership, subject to the overall budgetary limitation on
expenditures set forth in Section 3.2 of this Agreement. All clinical work to
be performed by GI under this Agreement shall be in compliance with the
additional terms and conditions set forth in Exhibit A to this Agreement.
(b) As provided in Section 5.2 of the Partnership Agreement, GI shall
have the right to engage consultants, collaborators and subcontractors in
connection with the performance of the activities assigned to GI to the extent
GI would generally seek third party
5
<PAGE> 6
assistance in connection with the performance of such activities. For example,
such assistance may include collaboration and consulting agreements, material
transfer agreements, sponsored research agreements or other customary
subcontracts involving discovery research, preclinical and clinical
investigations, toxicology studies, and clinical monitoring. Unless otherwise
approved by the Project Team, such agreements shall reserve or obtain on behalf
of the Partnership a license of (or rights to license) new uses or other
improvements to Licensed Products in the Licensed Field which result from
discovery research conducted pursuant to such agreements. Material transfer
agreements with United States government investigators which do not provide
such rights shall also be permitted if the scope of the discovery research is
determined by GI's patent counsel to be likely not to result in a patentable
invention. In addition, GI shall, upon request of the Partnership and in
accordance with the authority granted, negotiate agreements with third parties
in the name of the Partnership and in accordance with the Partnership
Agreement.
2.3. STAFFING. The activities to be performed by GI shall be
conducted at and/or coordinated from the facilities of GI under the supervision
and direction of the GI Project Director (or such other persons as shall be
designated for the Gene Therapy and Vaccine Adjuvant fields). GI shall, as
soon as is practicable, assemble a team of scientists, clinicians, engineers,
technical associates and assistants and other personnel under the supervision
and direction of the GI Project Director (or such other persons as
6
<PAGE> 7
shall be designated for the Gene Therapy and Vaccine Adjuvant fields). GI
shall be responsible for the administrative management and fiscal control of
the activities performed by GI in support of the Project.
2.4. INSPECTION. The Partnership shall have the right to arrange
to visit GI at its offices and laboratories and to discuss Project work and its
results in detail with the technical employees and consultants of GI, provided
that such visits shall be during normal business hours and shall not
unreasonably interrupt the operations of GI.
2.5. PATENT AND CONFIDENTIAL INFORMATION AGREEMENTS. GI shall
require the GI Project Director, Steering Committee members, Project Team
members and all other scientists, clinicians, engineers and technical
associates and assistants assigned to the Project to execute an agreement for
the assignment of inventions and for the protection of Confidential Information
in such reasonable form as may from time to time be used by GI for such purpose.
2.6. REPORTS AND MEETINGS. From time-to-time, upon reasonable
request, GI shall provide the Steering Committee with written progress reports
summarizing the current status and progress of GI's activities under the
Project and any issues relating to the Project. GI officers and employees
shall participate in meetings of the Project Team and the Steering Committee
(and any separate project teams) as provided for in the
7
<PAGE> 8
Partnership Agreement, and shall otherwise be reasonably available to meet to
discuss the status and progress of the Project.
2.7. FORMAL PROCEDURES. The Partnership intends that GI and Wyeth
will work together informally and collaboratively through the Project Team (or
through the Steering Committee or the separate project teams in the Gene
Therapy and Vaccine Adjuvant fields) to accelerate the development program. In
the event that the Partnership determines that more formal procedures for
allocating Project activities or that more or less frequent reports or meetings
would be of mutual benefit, they shall meet and agree on such changes.
2.8. OWNERSHIP OF TECHNOLOGY. GI shall own, or hold exclusive
rights to, the entire right, title and interest in and to all GI Patent Rights
and GI Know-How developed hereunder (a) solely by employees or consultants of
GI or (b) jointly by GI and a third party collaborator (other than Wyeth or an
AHP Affiliate) pursuant to this Agreement. Wyeth shall own, or hold exclusive
rights to, the entire right, title and interest in and to all patent rights
(the "Wyeth Patent Rights") and know-how (the "Wyeth Know-How") developed (a)
solely by employees or consultants of Wyeth (or an AHP Affiliate) or (b)
jointly by Wyeth (or an AHP Affiliate) and a third party collaborator (other
than GI) pursuant to the Wyeth Development Agreement. GI and Wyeth shall
jointly own an undivided one-half interest in the entire right, title and
interest in and to all patent rights and know-how developed hereunder jointly
by employees or consultants of each of GI or its Affiliates, on the
8
<PAGE> 9
one hand, and Wyeth, AHP or its Affiliates on the other hand. Each undivided
one-half interest shall be GI Patent Rights and GI Know-How of GI, on the one
hand, and Wyeth Patent Rights and Wyeth Know-How of Wyeth, on the other hand.
Inventorship shall be determined by applicable patent law and any issues
relating to inventorship shall be referred to the chief patent counsel of each
of GI and Wyeth (or AHP) for resolution. In the event that the chief patent
counsel of GI and Wyeth (or AHP) are unable to reach agreement on any such
issue, they shall mutually agree on an independent third party to whom the
issue shall be referred for final and binding resolution. For purposes of
clarification, Wyeth Patent Rights shall not include patent rights developed by
Wyeth outside the scope of the Wyeth Development Agreement and Wyeth Know-How
shall not include know-how developed by Wyeth outside the scope of the Wyeth
Development Agreement.
2.9. LICENSE TO THE PARTNERSHIP OF RIGHTS DEVELOPED UNDER THIS
AGREEMENT. GI hereby acknowledges that all GI Patent Rights and GI Know-How
developed hereunder shall be licensed to the Partnership pursuant to the
License Agreement.
2.10. LICENSE TO GI. The Partnership hereby grants to GI and its
Affiliates a non-exclusive, royalty-free license, including the right to grant
sublicenses, under the GI Patent Rights, Wyeth Patent Rights, and Roche Patent
Rights and the GI Know-How, Wyeth Know-How, and Roche Know-How, for the sole
and exclusive purpose of conducting the Project and managing the research,
development and commercialization of IL-12 in the Gene Therapy and Vaccine
Adjuvant
9
<PAGE> 10
fields under this Agreement and in accordance with Section 5.2(b) of the
Partnership Agreement.
ARTICLE III. PROJECT FUNDING
-----------------------------
3.1. GENERAL. In consideration of the research conducted by GI
with regard to the Project, the Partnership shall make payments to GI as
specified in this Article III. Funding of such research shall be effective as
of July 1, 1994.
3.2. REIMBURSEMENT FOR DEVELOPMENT COSTS. The Partnership shall
determine the annual research and development budget for each calendar year
during the term of this Agreement in accordance with the terms of the
Partnership Agreement. Such budgets shall include a schedule of activities
expected to be performed by GI under this Agreement and Wyeth under the Wyeth
Development Agreement as well as the budgeted costs of such activities. GI
shall not in any year incur Development Costs in excess of the related annual
budget without the prior written approval of the Partnership, which approval
shall not be unreasonably withheld. During the term of this Agreement, GI
shall invoice the Partnership for all Development Costs incurred by it in
connection with the Project at regular intervals determined by the Partnership,
but no more frequently than monthly. The Partnership shall pay such invoices
within thirty (30) days after receipt thereof. GI shall keep true and accurate
records to substantiate all amounts invoiced to the Partnership. Upon request
from the Partnership, GI shall permit the Partnership or its authorized
representatives to inspect such
10
<PAGE> 11
records in confidence in order to verify the amounts invoiced hereunder.
ARTICLE IV. CONFIDENTIAL INFORMATION
-------------------------------------
4.1. TREATMENT OF CONFIDENTIAL INFORMATION. Each party hereto
shall maintain the Confidential Information of the other party in confidence,
and shall not disclose, divulge or otherwise communicate such Confidential
Information to others, or use it for any purpose, except pursuant to, and in
order to carry out, the terms and objectives of this Agreement, and hereby
agrees to exercise every reasonable precaution to prevent and restrain the
unauthorized disclosure of such Confidential Information by any of its
directors, officers, employees, consultants, subcontractors, sublicensees or
agents. This provision shall survive for a period of five (5) years after the
expiration or termination of this Agreement.
4.2. RELEASE FROM RESTRICTIONS. The provisions of Section 4.1
shall not apply to any Confidential Information disclosed hereunder which:
(a) in the case of the non-use restrictions, was known
or used by the receiving party or its Affiliates prior to its date of
disclosure to the receiving party, as evidenced by the prior written records of
the receiving party or its Affiliates; or
(b) in the case of the non-disclosure restrictions, (i)
was known or used by the receiving party or its Affiliates prior to its date of
disclosure to the receiving party, as
11
<PAGE> 12
evidenced by the prior written records of the receiving party or its
Affiliates, (ii) is know-how and (iii) does not solely relate to the use of
IL-12 in the Licensed Field; or
(c) either before or after the date of the disclosure to
the receiving party is lawfully disclosed to the receiving party or its
Affiliates by an independent, unaffiliated third party rightfully in possession
of the Confidential Information; or
(d) either before or after the date of the disclosure to
the receiving party becomes published or generally known to the public through
no fault or omission on the part of the receiving party or its Affiliates; or
(e) is required to be disclosed by the receiving party
to comply with applicable laws, to defend or prosecute litigation or to comply
with governmental regulations, provided that the receiving party provides prior
written notice of such disclosure to the other party and takes reasonable and
lawful actions to avoid and/or minimize the degree of such disclosure.
Notwithstanding the foregoing releases from the restrictions in Section 7.1 of
this Agreement, the provisions of Section 2.9 of this Agreement shall apply and
take precedence over the foregoing releases.
4.3. PUBLICATIONS. Notwithstanding the provisions of Section
4.1, and subject to the following restrictions, each party and any employee or
consultant of such party shall be permitted to make disclosures in scientific
journals or publications relating to
12
<PAGE> 13
IL-12 or the Licensed Products which contain Confidential Information of the
other party:
(a) a party (the "publishing Party") shall provide the
other party with an advance copy of any proposed publication (which may be in
draft form) and such other party shall have a reasonable opportunity to
recommend any changes it reasonably believes are necessary to preserve patent
rights or know-how belonging in whole or in part to GI or the Partnership, and
the incorporation of such recommended changes shall not be unreasonably
refused; and
(b) if such other party informs the publishing party,
within thirty (30) days of receipt of an advance copy of a proposed
publication, that such publication in its reasonable judgment could be expected
to have a material adverse effect on any patent rights or know-how belonging in
whole or in part to GI or the Partnership, the publishing party shall, to the
extent permitted by its agreements with its employees and consultants, delay or
prevent such publication as proposed. In the case of inventions, the delay
shall be sufficiently long to permit the timely preparation and filing of a
patent application(s) or application(s) for a certificate of invention on the
information involved.
ARTICLE V. TERMINATION
5.1. TERM. This Agreement shall remain in effect until terminated
in accordance with the provisions of this Article V or until completion of the
Project.
13
<PAGE> 14
5.2. TERMINATION FOR BREACH. Each party shall be entitled to
terminate this Agreement (but not the Partnership Agreement or any of the other
Basic Agreements) by written notice to the other party in the event that the
other party shall be in default of any of its material obligations hereunder,
and shall fail to remedy any such default within sixty (60) days after notice
thereof by the non-breaching party. Any such notice shall specifically state
that the non-breaching party intends to terminate this Agreement in the event
that the breaching party shall fail to remedy the default. Upon termination of
this Agreement pursuant to this Section 5.2, neither party shall be relieved of
any obligations incurred prior to such termination.
5.3. TERMINATION FOR OTHER THAN BREACH. Except as set forth in
Section 5.2 of this Agreement, either party may elect, by providing written
notice to the other party, to terminate this Agreement solely in connection
with a termination of the Partnership pursuant to the terms of the Partnership
Agreement. If either party elects to terminate this Agreement pursuant to this
Section 5.3, the Partnership shall continue to pay to GI the Development Costs
incurred by GI during the six-month period following the notice of such
termination in an amount not to exceed that incurred during the six-month
period immediately prior to the notice of such termination.
5.4. SURVIVAL OF OBLIGATIONS; RETURN OF CONFIDENTIAL INFORMATION.
Notwithstanding any termination of this Agreement, the obligations of the
parties under Section 2.9, Article IV and
14
<PAGE> 15
Exhibit A of this Agreement, as well as under any other provisions which by
- ------- -
their nature are intended to survive any such termination, shall survive and
continue to be enforceable. Upon any termination of this Agreement pursuant to
Sections 5.2 or 5.3, each party shall promptly return to the other party all
written Confidential Information, and all copies thereof, of the other party
(except to the extent that the Confidential Information relates to a continuing
license pursuant to Section 2.9 of this Agreement or pursuant to the
Partnership Agreement or any of the other Basic Agreements).
ARTICLE VI. MISCELLANEOUS
--------------------------
6.1. PUBLICITY. Except as otherwise required by law, neither
party (nor any of its Affiliates) shall have the right to originate any
publicity, news release or other public announcement, written or oral, relating
to this Agreement or the existence of an arrangement between the Parties,
without prior written notice and consultation with the Steering Committee, but
either party shall be free to originate such publicity unless the Steering
Committee determines such proposed publicity would be detrimental to the best
interest of the Partnership.
6.2. ASSIGNMENT. Except as otherwise provided in this Agreement,
neither this Agreement nor any of the rights obligations hereunder may be
assigned or transferred by either party without the prior written consent of
the other party, except to a party who acquires all or substantially all of the
business of the assigning
15
<PAGE> 16
party by merger, consolidation, sale of its assets or otherwise.
Notwithstanding the foregoing, in the event of a dissolution of the
Partnership, the Partnership shall have the right to assign this Agreement, or
its rights or obligations under this Agreement, to either or both of its
Partners.
6.3. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the law of the Commonwealth of Massachusetts.
6.4. FORCE MAJEURE. In the event that either party is prevented
from performing or is unable to perform any of its obligations under this
Agreement due to any cause beyond the reasonable control of the party invoking
this Section 6.4 if such party shall have used reasonable and diligent efforts
to avoid such occurrence, such party shall give notice to the other party in
writing promptly, and thereupon the affected party's performance shall be
excused and the time for performance shall be extended for the period of delay
or inability to perform due to such occurrence.
6.5. WAIVER. The waiver by either party of a breach or a default
of any provision of this Agreement by the other party shall not be construed as
a waiver of any succeeding breach of the same or any other provision, nor shall
any delay or omission on the part of either party to exercise or avail itself
of any right, power or privilege that it has or may have hereunder operate as
a waiver of any right, power or privilege by such party.
6.6. NOTICES. Any notice or other communication in connection
with this Agreement must be in writing and if sent by
16
<PAGE> 17
mail, by first class registered or certified mail prepaid, return receipt
requested, and if transmitted by telecopier, with a copy sent by mail in
accordance with this Section 6.6, and shall be effective when delivered
personally to the addressee at the address listed below or such other address
as the addressee shall have specified in a notice actually received by the
addressor, provided that notice by telecopier shall not be effective until
confirmed by mail as herein provided. Notices to the Partnership shall be
addressed as follows:
AHP IL-12 Corporation
c/o American Home Products Corporation
Five Giralda Farms
Madison, New Jersey 07940
Attention: General Counsel
Telecopier: (201) 660-7155
and:
GI Drug Design, Inc.
c/o Genetics Institute, Inc.
87 CambridgePark Drive
Cambridge, Massachusetts 02140
Attention: President
Telecopier: (617) 876-1679
with a copy to:
General Counsel
Legal Department
Telecopier: (617) 876-5851
Notices to GI shall be addressed as follows:
Genetics Institute, Inc.
87 CambridgePark Drive
Cambridge, Massachusetts 02140
Attention: President
Telecopier: (617) 876-1679
with a copy to:
17
<PAGE> 18
General Counsel
Legal Department
Telecopier: (617) 876-5851
6.7. NO AGENCY. Nothing herein shall be deemed to constitute
either party as the agent or representative of the other party, or both parties
as joint venturers or partners for any purpose. Each party shall be an
independent contractor, not an employee or partner of the other, and the manner
in which each party renders its services under this Agreement shall be within
its sole discretion. Neither party shall be responsible for the acts or
omissions of the other party, and neither party will have authority to speak
for, represent or obligate the other party in any way without prior written
authority from the other party.
6.8. EXPORTS.
(a) The parties acknowledge that the export of technical data,
materials or products is subject to the exporting Party receiving the necessary
export licenses and that the parties cannot be responsible for any delays
attributable to export controls which are beyond the reasonable control of
either party. The parties agree that regardless of any disclosure made by the
party receiving an export to an ultimate destination of any technical data,
materials or products, the receiving party will not reexport either directly or
indirectly, any technical data, material or products without first obtaining
the applicable validated or general license from the United States Department
of Commerce, United States Food and Drug Administration and/or any other agency
or department of the United States Government, as required. The receiving party
18
<PAGE> 19
shall provide the exporting Party with any information, materials,
certifications or other documents which may be reasonably required in
connection with such exports under the Export Administration Act of 1979, as
amended, its rules and regulations, the Federal Food, Drug and Cosmetic Act and
other applicable export laws.
(b) Without limitation of the foregoing, and in support of maintaining
a general license for the export of technical data under this Agreement, a
party receiving an export agrees to not knowingly export or reexport any
technical data or materials furnished to such party under this Agreement, any
part thereof or any direct product thereof, directly or indirectly, without
first obtaining permission to do so from the United States Department of
Commerce, the United States Food and Drug Administration and/or other
appropriate United States governmental agencies, into Afghanistan, the People's
Republic of China, South Africa, Namibia, Iran, Iraq, Syria, or any other
country subject to applicable terrorist or foreign policy controls, or any of
those countries listed from time to time in supplements to Part 770 to Title 15
of the Code of Federal Regulations in Country Groups Q, S, Y or Z, which, as of
the date of this Agreement, are as follows: Group Q (Romania), Group S
(Libya), Group Y (Albania, Armenia, Azerbaijan, Belarus, Bulgaria, Cambodia,
Estonia, Georgia, Kazakhstan, Kyrgyzstan, Laos, Latvia, Lithuania, Mongolia,
Russia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan and Vietnam) and Group Z
(Cuba and North Korea).
19
<PAGE> 20
6.9. ENTIRE AGREEMENT. This Agreement contains the full
understanding of the parties with respect to the subject matter hereof and
supersedes all prior understandings and writings relating thereto. No waiver,
alteration or modification of any of the provisions hereof shall be binding
unless made in writing and signed by the parties by their respective officers
thereunto duly authorized.
6.10. HEADINGS. The headings contained in this Agreement are for
convenience of reference only and shall not be considered in construing this
Agreement.
6.11. SEVERABILITY. In the event that any provision of this
Agreement is held by a court of competent jurisdiction to be unenforceable
because it is invalid or in conflict with any law of any relevant jurisdiction,
the validity of the remaining provisions shall not be affected, and the rights
and obligations of the Parties shall be construed and enforced as if the
Agreement did not contain the particular provisions held to be unenforceable.
6.12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their successors and
permitted assigns.
6.13. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as a sealed instrument in their names by
20
<PAGE> 21
their properly and duly authorized officers or representatives as of the date
set forth below.
IL-12 PARTNERS
By: AHP IL-12 Corporation
By: /s/ Hans Mueller
--------------------------
Name: Hans Mueller
-------------------------
Title: Vice Pres. of AHP IL-12
-----------------------
Date: December 9, 1994
-------------------------
By: GI Drug Design, Inc.
By: /s/ Jack Morgan
-------------------------
Name: Jack Morgan
------------------------
Title: Vice President
------------------------
Date: November 29, 1994
------------------------
GENETICS INSTITUTE, INC.
By: /s/ Jack Morgan
------------------------
Name: Jack Morgan
------------------------
Title: Vice President
------------------------
Date: November 29, 1994
------------------------
21
<PAGE> 22
Exhibit A
Special Provisions Relating to the Conduct of
Clinical Studies
(a) SPONSOR. The Partnership, or such other party designated by the
Partnership, shall be named as the sponsor of each pre-clinical protocol and
clinical protocol performed hereunder.
(b) PROTOCOLS. GI agrees, and shall cause its sponsored institutions
to agree, to conduct the clinical studies in strict accordance with their
applicable protocol(s), which shall be reviewed and approved by the Project
Team of the Partnership. Sponsored institutions may only deviate from a
clinical protocol when necessary to protect the safety, rights or welfare of
patients enrolled in the clinical study.
(c) PRINCIPAL INVESTIGATORS. Clinical studies to be performed by GI
will be conducted by and under the direction of principal investigators (the
"Principal Investigator(s)") selected by GI after consultation with the Project
Team. GI will use customary and reasonable efforts consistent with its own
standard operating procedures to screen Principal Investigators and sponsored
institutions for such studies to ensure that personnel of a sponsored
institution (including Principal Investigators) are under no contractual or
other legal obligations or restrictions which are inconsistent with GI's
obligations under this Agreement and do not have a financial or other conflict
of interest with GI, AHP or the outcome of the studies which might interfere
with their independent judgment.
(d) ADMINISTRATION. GI's administration of its responsibilities under
this Agreement and the studies are to be supervised by the GI Project Director
and the respective GI members of the Project Team in the pre-clinical and
clinical areas. GI has or will obtain customary and reasonable agreements with
each sponsored institution which impose confidentiality obligations on its
personnel and effectively vests in GI (for the benefit of the Partnership)
sufficient rights in the results of their work and which are adequate to
permit GI to license (under customary and reasonable terms) those rights to the
Partnership under this Agreement.
(e) INSTITUTIONAL REVIEW BOARDS. GI will not release Licensed
Products for use in clinical studies until its or any applicable sponsored
institution's institutional review board, ethics committee, or the equivalent,
has approved the applicable clinical protocol in writing and a copy of this
approval has been received by GI. Clinical studies shall be carried out under
the supervision
-i-
<PAGE> 23
of the an institutional review board or ethics committee, and the Principal
Investigator will be required to keep the institutional review board or ethics
committee fully informed of the progress of the clinical study(ies) under its
jurisdiction, and shall prepare such reports as may be required to maintain
approval of such institutional review board or ethics committee. GI shall
cause its sponsored institutions and Principal Investigators to exercise
independent medical judgment in compliance with the applicable protocol as to
the suitability of each prospective patient for enrollment in a clinical.
Prior to enrollment in a clinical study, GI shall cause each Principal
Investigator to obtain a written informed consent from each patient in a form
acceptable to the institutional review board or ethics committee, and to the
U.S. Food and Drug Administration (the "FDA"), the Committee for Proprietary
Medicinal Products for the European Community (the "CPMP")or other applicable
regulatory authorities.
(f) ENROLLMENT. GI will use reasonable and diligent efforts to cause
its sponsored institutions and Principal Investigators to enroll, the
requisite number of patients in the clinical studies.
(g) DATA MANAGEMENT. Clinical data management will be conducted by
the party assigned that responsibility by the Partnership and not necessarily
the party managing a clinical study. If GI is not handling data management
for a particular clinical study, GI will have the right to be copied on all
data queries issued from the sites in a study or to review the case report
forms prior to data entry. GI shall cause its Principal Investigators and
sponsored institutions to complete and allow the Partnership access to GI's
case report forms ("CRFs"), which shall be in a form reasonably acceptable to
the Partnership, for all patients enrolled in the clinical studies it is
managing. At the Partnerships's request, GI shall, or shall cause its
Principal Investigators to, promptly correct any errors and/or omissions to the
CRFs in a manner consistent with the GCPs (as defined below) and GI's standard
operating procedures, and will make available to the Partnership the corrected
CRFs for further audit. GI will provide any necessary translation from native
language to English and supply both the original and translated CRFs to the
Partnership.
(h) LICENSED PRODUCT RECORDS. GI shall maintain and shall cause each
sponsored institution or Principal Investigator to keep records on the receipt
and disposition of all Licensed Products, including dates, quantity and use by
patients. If requested by Partnership, all empty or unused Licensed Product
vials will be retained and returned to the Partnership or its designee by the
Principal Investigators. GI shall retain, or shall cause each sponsored
institution and Principal Investigator to retain on its behalf, organized
original patient, laboratory and drug inventory records relating to each
clinical study for not less than fifteen (15) years following the later of
notification by GI that all
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<PAGE> 24
investigations of a Licensed Product have been discontinued or approved of an
application to market such Licensed Product. Thereafter, GI, or the applicable
sponsored institution, will not destroy such records without giving the
Partnership prior written notice and the opportunity to further store such
records, at the Partnership's cost and expense.
(i) REGULATORY COMPLIANCE. GI shall, and shall require each sponsored
institution and Principal Investigator to, adhere to all applicable government
laws and regulations, including without limitation, the rules and regulations
of the FDA, CPMP and other applicable regulatory authorities, the FDA and CPMP
guidelines on good clinical practices (the "GCPs"). GI acknowledges that it is
the intention of the Partnership to harmonize study requirements between the
United States and the European Community and that both FDA and CPMP compliance
should be sought in a given study, even if not required by the applicable
regulatory authority for that country, if the Partnership determines it is
desirable to do so and that it is necessary to use the clinical study results
in the rest of the Territory.
(j) SITE VISITS; AUDITS. The Partnership shall have the right to
monitor the progress of each clinical study to ascertain that the study is
being performed in accordance with the requirements of this Agreement. The
Partnership shall have the right to make site visits with the GI personnel or
to audit the sites or the files maintained by GI pertaining to the studies. GI
shall ensure that it and representatives of the Partnership are permitted,
during normal business hours and at mutually agreeable times, to inspect the
records kept or made by each Principal Investigator, including original patient
records and test reports, to the extent permitted by law. The Partnership
shall have the right to approve in advance any study sites where inspection or
audit is not permitted by law. GI shall conduct such audits of such
information as are necessary to ensure their reliability, in accordance with
its standard operating procedures. GI will cooperate with the Partnership in
any further review of such records by the Partnership and its verification of
the information contained in the CRFs. A Principal Investigator will not be
required to disclose information in the CRFs which would permit identification
of a patient enrolled in, or a candidate for, a clinical study.
(k) STUDY RECORDS. GI will keep, and shall cause its sponsored
institutions and Principal Investigators to keep, complete and accurate records
of the status and progress of the clinical studies, and, in any event, with
sufficient detail for use in reports to CPMP, FDA, and all other applicable
regulatory agencies. GI shall maintain such records in accordance with the
GCPs as implemented by GI's standard operating procedures.
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<PAGE> 25
(l) SPECIAL NOTIFICATIONS. GI shall, or shall cause its sponsored
institutions and Principal Investigators to, immediately notify the Partnership
of any (a) deviations from a clinical study protocol determined to be necessary
to protect the safety, rights or welfare of patients enrolled in that clinical
study, (b) serious and/or unexpected adverse patient reactions in the course of
the clinical studies or (c) communications with a regulatory agency concerning
(i) the clinical studies, including any requests to inspect, examine, copy or
remove records of the clinical studies or (ii) the qualification of the
Principal Investigator or other GI personnel to perform this or any other
research.
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<PAGE> 1
EXHIBIT 10.72
WYETH RESEARCH AND DEVELOPMENT AGREEMENT
AGREEMENT (the "Agreement") effective as of July 1,
1994 between IL-12 PARTNERS, having its principal place of business at 87
CambridgePark Drive, Cambridge, Massachusetts 02140 (hereinafter referred to as
the "Partnership") and AMERICAN HOME PRODUCTS CORPORATION, a Delaware
corporation having its principal place of business at Five Giralda Farms,
Madison, NJ 07904 (hereinafter referred to as "AHP"), acting through its
WYETH-AYERST LABORATORIES division, or its other designated Affiliates
(hereinafter individually or collectively referred to as "Wyeth").
INTRODUCTION
1. Wyeth has research and development facilities and experienced
scientists, clinicians, engineers, technical associates and assistants and
other personnel which enable it to conduct research and development activities
in the development, production and manufacture, registration and marketing of
pharmaceutical products.
2. Genetics Institute, Inc. ("GI"), in collaboration with Wistar
(as defined in the Partnership Agreement identified below), has identified,
isolated, purified and cloned IL-12 (as defined in the Partnership Agreement
identified below) and has filed patent applications relating thereto in
various countries.
3. AHP IL-12 Corporation and GI Drug Design,Inc. ("GI Sub") have
entered into a Partnership Agreement effective as of July 1,
<PAGE> 2
1994 (the "Partnership Agreement") to form the Partnership to provide for
the development and commercialization of IL-12 in the Territory (as defined in
the Partnership Agreement).
4. GI has entered into a License Agreement effective as of July 1,
1994 (the "License Agreement") with GI Sub pursuant to which GI has exclusively
licensed its patent rights and know-how rights relating to IL-12 to GI Sub in
the Licensed Field (as defined in the Partnership Agreement) in the Territory,
and GI Sub has assigned the License Agreement to the Partnership, giving the
Partnership the right to develop, use, register, formulate, fill and finish,
distribute and sell human pharmaceutical products derived from IL-12 in the
Licensed Field in the Territory.
5. The Partnership desires that Wyeth, on behalf of the
Partnership and in collaboration with GI, undertake research and development
activities related to the further development and commercialization of IL-12.
6. Wyeth is willing, for the consideration and on the terms set
forth herein, to use its research and development facilities and scientists,
clinicians, engineers, technical associates and assistants and other personnel
to conduct such activities.
In consideration of the mutual covenants and promises contained in
this Agreement and other good and valuable consideration, the parties agree as
follows:
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<PAGE> 3
ARTICLE I. DEFINITIONS
-----------------------
As used in this Agreement, all terms not expressly defined herein
shall have the meanings assigned to them in the Partnership Agreement.
ARTICLE II. THE PROJECT
------------------------
2.1. GENERAL.
(a) Subject to the terms and conditions contained in this
Agreement, Wyeth in cooperation with GI (and each of GI's Affiliates) agrees to
undertake such IL-12 research and/or development activities in the Licensed
Field as are reasonably requested by the Partnership (the "Project").
Participation of AHP and Wyeth employees on the Project Team (but not on the
Steering Committee) shall be deemed to be part of the activities performed by
Wyeth pursuant to this Agreement.
(b) In accordance with Section 5.2(b) of the Partnership
Agreement, GI shall manage the research, development and commercialization of
IL-12 by third party collaborators in the Gene Therapy and Vaccine Adjuvant
fields under the terms of the GI Development Agreement. Notwithstanding the
foregoing, to the extent that the Partnership decides to conduct research
and/or development activities in these fields through the Partnership, Wyeth
may be engaged to conduct research in the Gene Therapy and Vaccine Adjuvant
fields pursuant to paragraph (a) above. The Partnership may also enter into a
development and/or commercialization collaboration outside the scope of this
Agreement
3
<PAGE> 4
with Wyeth as if it were a third party with respect to particular Licensed
Products in such fields.
2.2. ASSIGNMENT OF WORK.
(a) Except for research and/or development activities in
the Gene Therapy and Vaccine Adjuvant fields, research and development
activities shall be managed by the Partnership through the Project Team under
the supervision of the Steering Committee, as more fully described in Article
IV of the Partnership Agreement. The Project Team shall, subject to the review
and approval of the Steering Committee, assign work to Wyeth under this
Agreement and to GI under the GI Development Agreement. In the Gene Therapy
and Vaccine Adjuvant fields, such management and assignment shall be the
responsibility of the Steering Committee or a separate project team or teams
established by the Partnership. Because the Partnership intends to take
advantage of the expertise of Wyeth and GI throughout the Territory, it is
anticipated that there may be assignments made to both GI and Wyeth to work
collaboratively on many of the activities. Wyeth shall have the right to
request, but shall not be obligated to obtain, written authorization to proceed
on activities requested to be performed by it from the Project Team (or from
the Steering Committee or the separate project teams in the Gene Therapy and
Vaccine Adjuvant fields). Further, Wyeth shall have the right to rely on
written or oral communications from either Project Director (or such other
persons as shall be designated for the Gene Therapy and Vaccine Adjuvant
fields) requesting that Wyeth perform activities on behalf of the
4
<PAGE> 5
Partnership, subject to the overall budgetary limitation on expenditures set
forth in Section 3.2 of this Agreement. All clinical work to be performed by
Wyeth under this Agreement shall be in compliance with the additional terms and
conditions set forth in Exhibit A to this Agreement.
------- -
(b) As provided in Section 5.2 of the Partnership Agreement, Wyeth
shall have the right to engage consultants, collaborators and subcontractors in
connection with the performance of the activities assigned to Wyeth to the
extent Wyeth would generally seek third party assistance in connection with
the performance of such activities. For example, such assistance may include
collaboration and consulting agreements, material transfer agreements,
sponsored research agreements, or other customary subcontracts involving
discovery research, preclinical and clinical investigations, toxicology
studies, and clinical monitoring. Unless otherwise approved by the Project
Team, such agreements shall reserve or obtain on behalf of the Partnership a
license of (or rights to license) new uses or other improvements to Licensed
Products in the Licensed Field which result from discovery research conducted
pursuant to such agreements. Material transfer agreements with United States
government investigators which do not provide such rights shall also be
permitted if the scope of the discovery research is determined by Wyeth's
patent counsel to be likely not to result in a patentable invention. In
addition, Wyeth shall, upon request of the Partnership and in accordance with
the authority granted, negotiate agreements with third parties in the
5
<PAGE> 6
name of the Partnership and in accordance with the Partnership Agreement.
2.3. STAFFING. The activities to be performed by Wyeth shall be
conducted at and/or coordinated from the facilities of Wyeth under the
supervision and direction of the Wyeth Project Director (or such other persons
as shall be designated for the Gene Therapy and Vaccine Adjuvant fields).
Wyeth shall, as soon as is practicable, assemble a team of scientists,
clinicians, engineers, technical associates and assistants and other personnel
under the supervision and direction of the Wyeth Project Director (or such
other persons as shall be designated for the Gene Therapy and Vaccine Adjuvant
fields). Wyeth shall be responsible for the administrative management and
fiscal control of the activities performed by Wyeth in support of the Project.
2.4. INSPECTION. The Partnership shall have the right to
arrange to visit Wyeth at its offices and laboratories and to discuss Project
work and its results in detail with the technical employees and consultants of
Wyeth, provided that such visits shall be during normal business hours and
shall not unreasonably interrupt the operations of Wyeth.
2.5. PATENT AND CONFIDENTIAL INFORMATION AGREEMENTS. Wyeth
shall require the Wyeth Project Director, Steering Committee members, Project
Team members, and all other scientists, clinicians, engineers and technical
associates and assistants assigned to the Project to execute an agreement for
the assignment of inventions and for the protection of Confidential Information
in
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<PAGE> 7
such reasonable form as may from time to time be used by Wyeth for such
purpose.
2.6. REPORTS AND MEETINGS. From time-to-time, upon reasonable
request, Wyeth shall provide the Steering Committee with written progress
reports summarizing the current status and progress of Wyeth's activities under
the Project and any issues relating to the Project. AHP and Wyeth officers
and employees shall participate in meetings of the Project Team and the
Steering Committee (and any separate project teams) as provided for in the
Partnership Agreement, and shall otherwise be reasonably available to meet to
discuss the status and progress of the Project.
2.7. FORMAL PROCEDURES. The Partnership intends that GI and
Wyeth will work together informally and collaboratively through the Project
Team (or through the Steering Committee or the separate project teams in the
Gene Therapy and Vaccine Adjuvant fields) to accelerate the development
program. In the event that the Partnership determines that more formal
procedures for allocating Project activities or that more or less frequent
reports or meetings would be of mutual benefit, they shall meet and agree on
such changes.
2.8. OWNERSHIP OF TECHNOLOGY. Wyeth shall own, or hold exclusive
rights to, the entire right, title and interest in and to all patent rights
(the "Wyeth Patent Rights") and know-how (the "Wyeth Know-How") developed
hereunder (a) solely by employees or consultants of Wyeth (or an AHP Affiliate)
or (b) jointly by Wyeth (or an AHP Affiliate) and a third party collaborator
(other than
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GI) pursuant to this Agreement. GI shall own, or hold exclusive rights to, the
entire right, title and interest in and to all GI Patent Rights and GI Know-How
developed (a) solely by employees or consultants of GI or (b) jointly by GI and
a third party collaborator (other than Wyeth or an AHP Affiliate) pursuant to
the GI Development Agreement. GI and Wyeth shall jointly own an undivided
one-half interest in the entire right, title and interest in and to all patent
rights and know-how developed hereunder jointly by employees or consultants of
each of GI or its Affiliates, on the one hand, and Wyeth, AHP or its
Affiliates, on the other hand. Each undivided one-half interest shall be GI
Patent Rights and GI Know-How of GI, on the one hand, and Wyeth Patent Rights
and Wyeth Know-How of Wyeth, on the other hand. Inventorship shall be
determined by applicable patent law and any issues relating to inventorship
shall be referred to the chief patent counsel of each of GI and Wyeth (or AHP)
for resolution. In the event that the chief patent counsel of GI and Wyeth (or
AHP) are unable to reach agreement on any such issue, they shall mutually agree
on an independent third party to whom the issue shall be referred for final and
binding resolution. For purposes of clarification, Wyeth Patent Rights shall
not include patent rights developed by Wyeth outside the scope of this
Agreement and Wyeth Know-How shall not include know-how developed by Wyeth
outside the scope of this Agreement.
2.9. LICENSE TO THE PARTNERSHIP OF RIGHTS DEVELOPED UNDER THIS
AGREEMENT. Wyeth hereby grants to the Partnership:
8
<PAGE> 9
(a) a royalty-free, exclusive license throughout the world
under the Wyeth Patent Rights, and
(b) a royalty-free, exclusive license to use the Wyeth
Know-How throughout the world, including the right to grant sublicenses, for
the sole and exclusive purpose of developing, using, registering,
manufacturing, formulating, filling and finishing, distributing and selling
Licensed Products throughout the world for any purpose whatsoever. The licenses
granted pursuant to paragraph (a) above shall continue in effect until the
expiration of the Valid Claims (as defined in the License Agreement) of such
patent rights; the licenses granted pursuant to paragraph (b) above shall be
perpetual.
2.10. LICENSE TO THE PARTNERSHIP OF INDEPENDENT RIGHTS. Wyeth
Independent Patent Rights shall mean all patent rights of Wyeth and Wyeth
Independent Know-How shall mean all know-how of Wyeth which, in each case, are
not developed by Wyeth hereunder but have potential value or use in the
development, use, registration, manufacture, formulation, filling and
finishing, distribution and/or sale of Licensed Products. In the event that
Wyeth shall desire to employ, at its sole discretion, in the Project any Wyeth
Independent Patent Rights and/or Wyeth Independent Know-How having incidental
value or use, it shall have the right to do so without providing prior written
notice to the Partnership and any such Wyeth Independent Patent Rights and/or
Wyeth Independent Know-How shall thereupon be deemed licensed to the
Partnership on the same terms and conditions of Section 2.9 of this Agreement,
provided
9
<PAGE> 10
that the license shall be a non-exclusive license. In the event that Wyeth
shall desire to employ in the Project any Wyeth Independent Patent Rights
and/or Wyeth Independent Know-How having significant value or use, it shall
provide prior written notice to the Partnership of such desire and a
description of the potential value or use of the Wyeth Independent Patent
Rights and/or Wyeth Independent Know-How. In the event that the Partnership
desires to license such Wyeth Independent Patent Rights and/or Wyeth
Independent Know-How, the Partnership and Wyeth shall negotiate in good faith
the terms of such license. Under no circumstances shall Wyeth employ in the
Project any Wyeth Independent Patent Rights and/or Wyeth Independent Know-How
having significant value or use prior to the entering into of a license
agreement between the Partnership and Wyeth. Any Wyeth Independent Patent
Rights and/or Wyeth Independent Know-How employed in the Project beyond the
research stage without the entering of a license agreement between the
Partnership and Wyeth shall be conclusively deemed to be of incidental value or
use. In addition, biostatistics software programs used in the Project shall be
deemed to be incidental, subject to third party royalties and rights.
2.11. LICENSE TO WYETH. The Partnership hereby grants to Wyeth,
AHP and its Affiliates a non-exclusive, royalty-free sublicense, including the
right to grant sublicenses, under the GI Patent Rights, Wyeth Patent Rights and
Roche Patent Rights and the GI Know-How, Wyeth Know-How and Roche Know-How, for
the sole and exclusive purpose of conducting the Project. The foregoing
10
<PAGE> 11
sublicense to the GI Patent Rights, Wyeth Patent Rights, GI Know-How and Wyeth
Know-How shall continue in effect until the expiration of this Agreement or
until the earlier termination of the License Agreement. The foregoing
sublicense to the Roche Patent Rights and the Roche Know-How shall continue in
effect until the expiration of this Agreement or until the earlier termination
of the License Agreement or the Roche Cross-License. The Partnership also
acknowledges that Wyeth is an affiliate of GI under the Wistar License. Wyeth
agrees to comply with the terms of the Wistar License insofar as applicable, it
being understood that Wyeth shall be entitled to rely on written or oral
communications from the Partnership interpreting the Wistar License. Wyeth
acknowledges that the foregoing sublicense of the Roche Patent Rights and Roche
Know-How and that its license under the Wistar License may be limited in the
event that Wyeth ceases to be an affiliate of GI as defined in the Roche
Cross-License and Wistar License. While GI Sub, on behalf of the Partnership,
agrees in any of such instances to fully cooperate with and assist Wyeth in any
attempt by Wyeth to negotiate to obtain rights from Roche and/or Wistar, Wyeth
acknowledges that GI Sub, on behalf of the Partnership, cannot guarantee that,
in such event, such rights will be available from Roche and/or Wistar.
ARTICLE III. PROJECT FUNDING
-----------------------------
3.1. GENERAL. In consideration of the research conducted by
Wyeth with regard to the Project, the Partnership shall make
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<PAGE> 12
payments to Wyeth as specified in this Article III. Funding of such research
shall be effective as of July 1, 1994.
3.2. REIMBURSEMENT FOR DEVELOPMENT COSTS. The Partnership shall
determine the annual research and development budget for each calendar year
during the term of this Agreement in accordance with the terms of the
Partnership Agreement. Such budgets shall include a schedule of activities
expected to be performed by Wyeth under this Agreement and GI under the GI
Development Agreement as well as the budgeted costs of such activities. Wyeth
shall not in any year incur Development Costs in excess of the related annual
budget without the prior written approval of the Partnership, which approval
shall not be unreasonably withheld. During the term of this Agreement, Wyeth
shall invoice the Partnership for all Development Costs incurred by it in
connection with the Project at regular intervals determined by the Partnership,
but no more frequently than monthly. The Partnership shall pay such invoices
within thirty (30) days after receipt thereof. Wyeth shall keep true and
accurate records to substantiate all amounts invoiced to the Partnership. Upon
request from the Partnership, Wyeth shall permit the Partnership or its
authorized representatives to inspect such records in confidence in order to
verify the amounts invoiced hereunder.
ARTICLE IV. CONFIDENTIAL INFORMATION
-------------------------------------
4.1. TREATMENT OF CONFIDENTIAL INFORMATION. Each party hereto
shall maintain the Confidential Information of the other
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<PAGE> 13
party in confidence, and shall not disclose, divulge or otherwise communicate
such Confidential Information to others, or use it for any purpose, except
pursuant to, and in order to carry out, the terms and objectives of this
Agreement, and hereby agrees to exercise every reasonable precaution to prevent
and restrain the unauthorized disclosure of such Confidential Information by
any of its directors, officers, employees, consultants, subcontractors,
sublicensees or agents. This provision shall survive for a period of five (5)
years after the expiration or termination of this Agreement.
4.2. RELEASE FROM RESTRICTIONS. The provisions of Section 7.1
shall not apply to any Confidential Information disclosed hereunder which:
(a) in the case of the non-use restrictions, was known
or used by the receiving party or its Affiliates prior to its date of
disclosure to the receiving party, as evidenced by the prior written records of
the receiving party or its Affiliates; or
(b) in the case of the non-disclosure restrictions, (i)
was known or used by the receiving party or its Affiliates prior to its date of
disclosure to the receiving party, as evidenced by the prior written records of
the receiving party or its Affiliates, (ii) is know-how and (iii) does not
solely relate to the use of IL-12 in the Licensed Field; or
(c) either before or after the date of the disclosure
to the receiving party is lawfully disclosed to the receiving party
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<PAGE> 14
or its Affiliates by an independent, unaffiliated third party rightfully in
possession of the Confidential Information; or
(d) either before or after the date of the disclosure to
the receiving party becomes published or generally known to the public through
no fault or omission on the part of the receiving party or its Affiliates; or
(e) is required to be disclosed by the receiving party to
comply with applicable laws, to defend or prosecute litigation or to comply
with governmental regulations, provided that the receiving party provides prior
written notice of such disclosure to the other party and takes reasonable and
lawful actions to avoid and/or minimize the degree of such disclosure.
Notwithstanding the foregoing releases from the restrictions of Section 7.1 of
this Agreement, the provisions of Section 2.9 of this Agreement shall apply and
take precedence over the foregoing releases.
4.3. PUBLICATIONS. Notwithstanding the provisions of Section 4.1,
and subject to the following restrictions, each party and any employee or
consultant of such party shall be permitted to make disclosures in scientific
journals or publications relating to IL-12 or the Licensed Products which
contain Confidential Information of the other party:
(a) a party (the "publishing party") shall provide the
other party with an advance copy of any proposed publication (which may be in
draft form) and such other party shall have a reasonable opportunity to
recommend any changes it reasonably believes are
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necessary to preserve patent rights or know-how belonging in whole or in part
to the Partnership or Wyeth, and the incorporation of such recommended changes
shall not be unreasonably refused; and
(b) if such other party informs the publishing party,
within thirty (30) days of receipt of an advance copy of a proposed
publication, that such publication in its reasonable judgment could be expected
to have a material adverse effect on any patent rights or know-how belonging in
whole or in part to the Partnership or Wyeth, the publishing party shall, to
the extent permitted by its agreements with its employees and consultants,
delay or prevent such publication as proposed. In the case of inventions, the
delay shall be sufficiently long to permit the timely preparation and filing of
a patent application(s) or application(s) for a certificate of invention on the
information involved.
ARTICLE V. TERMINATION
-----------------------
5.1. TERM. This Agreement shall remain in effect until
terminated in accordance with the provisions of this Article V or until
completion of the Project.
5.2. TERMINATION FOR BREACH. Each party shall be entitled to
terminate this Agreement (but not the Partnership Agreement or any of the other
Basic Agreements) by written notice to the other party in the event that the
other party shall be in default of any of its material obligations hereunder,
and shall fail to remedy any such default within sixty (60) days after notice
thereof by the non-breaching party. Any such notice shall specifically state
that
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the non-breaching party intends to terminate this Agreement in the event that
the breaching party shall fail to remedy the default. Upon termination of this
Agreement pursuant to this Section 5.2, neither party shall be relieved of any
obligations incurred prior to such termination.
5.3. TERMINATION FOR OTHER THAN BREACH. Except as set forth in
Section 5.2 of this Agreement, either party may elect, by providing written
notice to the other party, to terminate this Agreement solely in connection
with a termination of the Partnership pursuant to the terms of the Partnership
Agreement. If either party elects to terminate this Agreement pursuant to this
Section 5.3, the Partnership shall continue to pay to Wyeth the Development
Costs incurred by Wyeth during the six-month period following the notice of
such termination in an amount not to exceed that incurred during the six-month
period immediately prior to the notice of such termination.
5.4. SURVIVAL OF OBLIGATIONS; RETURN OF CONFIDENTIAL INFORMATION.
Notwithstanding any termination of this Agreement, the obligations of the
parties under Section 2.9, 2.10, Article IV and Exhibit A of this Agreement,
as well as under any other provisions which by their nature are intended to
survive any such termination, shall survive and continue to be enforceable.
Upon any termination pursuant to Section 5.3, the license granted pursuant to
Section 2.9 shall convert to a non- exclusive license. Upon any termination of
this Agreement pursuant to Sections 5.2 or 5.3, each party shall promptly
return to the other party all written Confidential
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Information, and all copies thereof, of the other party (except to the extent
that the Confidential Information relates to a continuing license pursuant to
Section 2.9 or 2.10 of this Agreement or pursuant to the Partnership Agreement
or any of the other Basic Agreements).
ARTICLE VI. MISCELLANEOUS
--------------------------
6.1. PUBLICITY. Except as otherwise required by law, neither
party (nor any of its Affiliates) shall have the right to originate any
publicity, news release or other public announcement, written or oral, relating
to this Agreement or the existence of an arrangement between the Parties,
without prior written notice and consultation with the Steering Committee, but
either party shall be free to originate such publicity unless the Steering
Committee determines such proposed publicity would be detrimental to the best
interest of the Partnership.
6.2. ASSIGNMENT. Except as otherwise provided in this
Agreement, neither this Agreement nor any of the rights obligations hereunder
may be assigned or transferred by either party without the prior written
consent of the other party, except to a party who acquires all or substantially
all of the business of the Partnership, on the one hand, or of the ethical
pharmaceutical business of AHP or Wyeth, on the other hand, by merger,
consolidation, sale of its assets or otherwise. Notwithstanding the foregoing,
in the event of a dissolution of the Partnership, the Partnership shall have
the right to assign this Agreement, or
17
<PAGE> 18
its rights or obligations under this Agreement, to either or both of its
Partners.
6.3. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the law of the Commonwealth of Massachusetts.
6.4. FORCE MAJEURE. In the event that either party is
prevented from performing or is unable to perform any of its obligations under
this Agreement due to any cause beyond the reasonable control of the party
invoking this Section 6.4 if such party shall have used reasonable and diligent
efforts to avoid such occurrence, such party shall give notice to the other
party in writing promptly, and thereupon the affected party's performance shall
be excused and the time for performance shall be extended for the period of
delay or inability to perform due to such occurrence.
6.5. WAIVER. The waiver by either party of a breach or a
default of any provision of this Agreement by the other party shall not be
construed as a waiver of any succeeding breach of the same or any other
provision, nor shall any delay or omission on the part of either party to
exercise or avail itself of any right, power or privilege that it has or may
have hereunder operate as a waiver of any right, power or privilege by such
party.
6.6. NOTICES. Any notice or other communication in connection
with this Agreement must be in writing and if sent by mail, by first class
registered or certified mail prepaid, return receipt requested, and if
transmitted by telecopier, with a copy sent by mail in accordance with this
Section 6.6, and shall be
18
<PAGE> 19
effective when delivered personally to the addressee at the address listed
below or such other address as the addressee shall have specified in a notice
actually received by the addressor, provided that notice by telecopier shall
not be effective until confirmed by mail as herein provided.
Notices to the Partnership shall be addressed as follows:
AHP IL-12 Corporation
c/o American Home Products Corporation
Five Giralda Farms
Madison, New Jersey 07940
Attention: General Counsel
Telecopier: (201) 660-7155
and:
GI Drug Design, Inc.
c/o Genetics Institute, Inc.
87 CambridgePark Drive
Cambridge, Massachusetts 02140
Attention: President
Telecopier: (617) 876-1679
with a copy to:
General Counsel
Legal Department
Telecopier: (6l7) 876-5851
Notices to AHP shall be addressed as follows:
American Home Products Corporation
Five Giralda Farms
Madison, New Jersey 07904
Attention: General Counsel
Telecopier: (201) 660-7155
with a copy to:
Wyeth-Ayerst Laboratories
555 Lancaster Avenue
St. David's, Pennsylvania 19087
Attention: Senior Vice President-
Business Development
Telecopier: (610) 688-9498
19
<PAGE> 20
6.7. NO AGENCY. Nothing herein shall be deemed to constitute
either party as the agent or representative of the other party, or both parties
as joint venturers or partners for any purpose. Each party shall be an
independent contractor, not an employee or partner of the other, and the manner
in which each party renders its services under this Agreement shall be within
its sole discretion. Neither party shall be responsible for the acts or
omissions of the other party, and neither party will have authority to speak
for, represent or obligate the other party in any way without prior written
authority from the other party.
6.8. EXPORTS.
(a) The parties acknowledge that the export of technical data,
materials or products is subject to the exporting Party receiving the necessary
export licenses and that the parties cannot be responsible for any delays
attributable to export controls which are beyond the reasonable control of
either party. The parties agree that regardless of any disclosure made by the
party receiving an export to an ultimate destination of any technical data,
materials or products, the receiving party will not reexport either directly or
indirectly, any technical data, material or products without first obtaining
the applicable validated or general license from the United States Department
of Commerce, United States Food and Drug Administration and/or any other agency
or department of the United States Government, as required. The receiving
party shall provide the exporting Party with any information, materials,
certifications or other documents which may be reasonably required
20
<PAGE> 21
in connection with such exports under the Export Administration Act of 1979, as
amended, its rules and regulations, the Federal Food, Drug and Cosmetic Act and
other applicable export laws.
(b) Without limitation of the foregoing, and in support of
maintaining a general license for the export of technical data under this
Agreement, a party receiving an export agrees to not knowingly export or
reexport any technical data or materials furnished to such party under this
Agreement, any part thereof or any direct product thereof, directly or
indirectly, without first obtaining permission to do so from the United States
Department of Commerce, the United States Food and Drug Administration and/or
other appropriate United States governmental agencies, into Afghanistan, the
People's Republic of China, South Africa, Namibia, Iran, Iraq, Syria, or any
other country subject to applicable terrorist or foreign policy controls, or
any of those countries listed from time to time in supplements to Part 770 to
Title 15 of the Code of Federal Regulations in Country Groups Q, S, Y or Z,
which, as of the date of this Agreement, are as follows: Group Q (Romania),
Group S (Libya), Group Y (Albania, Armenia, Azerbaijan, Belarus, Bulgaria,
Cambodia, Estonia, Georgia, Kazakhstan, Kyrgyzstan, Laos, Latvia, Lithuania,
Mongolia, Russia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan and Vietnam)
and Group Z (Cuba and North Korea).
6.9. ENTIRE AGREEMENT. This Agreement contains the full
understanding of the parties with respect to the subject matter hereof and
supersedes all prior understandings and writings
21
<PAGE> 22
relating thereto. No waiver, alteration or modification of any of the
provisions hereof shall be binding unless made in writing and signed by the
parties by their respective officers thereunto duly authorized.
6.10. HEADINGS. The headings contained in this Agreement are
for convenience of reference only and shall not be considered in construing
this Agreement.
6.11. SEVERABILITY. In the event that any provision of this
Agreement is held by a court of competent jurisdiction to be unenforceable
because it is invalid or in conflict with any law of any relevant jurisdiction,
the validity of the remaining provisions shall not be affected, and the rights
and obligations of the Parties shall be construed and enforced as if the
Agreement did not contain the particular provisions held to be unenforceable.
6.12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their successors and
permitted assigns.
6.13. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as a sealed instrument in their names by their properly and duly
authorized officers or representatives as of the date set forth below.
22
<PAGE> 23
IL-12 PARTNERS
By: AHP IL-12 Corporation
By: /s/ Hans Mueller
-------------------------
Name: Hans Mueller
-------------------------
Title: Vice Pres. of AHP IL-12
------------------------
Date: December 9, 1994
------------------------
By: GI Drug Design, Inc.
By: /s/ Jack Morgan
------------------------
Name: Jack Morgan
------------------------
Title: Vice President
------------------------
Date: November 29, 1994
------------------------
AMERICAN HOME PRODUCTS CORPORATION,
acting through its WYETH-AYERST
LABORATORIES division
By: /s/ Hans Mueller
-------------------------
Name: Hans Mueller
-------------------------
Senior Vice Pres.-Business
Development of Wyeth-Ayerst
Title:Laboratories
-------------------------
Date: December 9, 1994
-------------------------
23
<PAGE> 24
EXHIBIT A
Special Provisions Relating to the Conduct of
Clinical Studies
(a) SPONSOR. The Partnership, or such other party designated by
the Partnership, shall be named as the sponsor of each pre-clinical protocol
and clinical protocol performed hereunder.
(b) PROTOCOLS. Wyeth agrees, and shall cause its sponsored
institutions to agree, to conduct the clinical studies in strict accordance
with their applicable protocol(s), which shall be reviewed and approved by the
Project Team of the Partnership. Sponsored institutions may only deviate from
a clinical protocol when necessary to protect the safety, rights or welfare of
patients enrolled in the clinical study.
(c) PRINCIPAL INVESTIGATORS. Clinical studies to be performed by
Wyeth will be conducted by and under the direction of principal investigators
(the "Principal Investigator(s)") selected by Wyeth after consultation with the
Project Team. Wyeth will use customary and reasonable efforts consistent with
its own standard operating procedures to screen Principal Investigators and
sponsored institutions for such studies to ensure that personnel of a sponsored
institution (including Principal Investigators) are under no contractual or
other legal obligations or restrictions which are inconsistent with Wyeth's
obligations under this Agreement and do not have a financial or other conflict
of interest with Wyeth, AHP or the outcome of the studies which might interfere
with their independent judgment.
(d) ADMINISTRATION. Wyeth's administration of its
responsibilities under this Agreement and the studies are to be supervised by
the Wyeth Project Director and the respective Wyeth members of the Project Team
in the pre-clinical and clinical areas. Wyeth has or will obtain customary and
reasonable agreements with each sponsored institution which impose
confidentiality obligations on its personnel and effectively vests in Wyeth
(for the benefit of the Partnership) sufficient rights in the results of their
work and which are adequate to permit Wyeth to license (under customary and
reasonable terms) those rights to the Partnership under this Agreement.
(e) INSTITUTIONAL REVIEW BOARDS. Wyeth will not release Licensed
Products for use in clinical studies until its or any applicable sponsored
institution's institutional review board, ethics committee, or the equivalent,
has approved the applicable clinical protocol in writing and a copy of this
approval has been received by Wyeth. Clinical studies shall be carried out
under the
-i-
<PAGE> 25
supervision of the an institutional review board or ethics committee, and the
Principal Investigator will be required to keep the institutional review board
or ethics committee fully informed of the progress of the clinical study(ies)
under its jurisdiction, and shall prepare such reports as may be required to
maintain approval of such institutional review board or ethics committee.
Wyeth shall cause its sponsored institutions and Principal Investigators to
exercise independent medical judgment in compliance with the applicable
protocol as to the suitability of each prospective patient for enrollment in a
clinical. Prior to enrollment in a clinical study, Wyeth shall cause each
Principal Investigator to obtain a written informed consent from each patient
in a form acceptable to the institutional review board or ethics committee, and
to the U.S. Food and Drug Administration (the "FDA"), the Committee for
Proprietary Medicinal Products for the European Community (the "CPMP")or other
applicable regulatory authorities.
(f) ENROLLMENT. Wyeth will use reasonable and diligent efforts to
cause its sponsored institutions and Principal Investigators to enroll, the
requisite number of patients in the clinical studies.
(g) DATA MANAGEMENT. Clinical data management will be conducted by
the party assigned that responsibility by the Partnership and not necessarily
the party managing a clinical study. If Wyeth is not handling data management
for a particular clinical study, Wyeth will have the right to be copied on all
data queries issued from the sites in a study or to review the case report
forms prior to data entry. Wyeth shall cause its Principal Investigators and
sponsored institutions to complete and allow the Partnership access to Wyeth's
case report forms ("CRFs"), which shall be in a form reasonably acceptable to
the Partnership, for all patients enrolled in the clinical studies it is
managing. At the Partnerships's request, Wyeth shall, or shall cause its
Principal Investigators to, promptly correct any errors and/or omissions to the
CRFs in a manner consistent with the GCPs (as defined below) and Wyeth's
standard operating procedures, and will make available to the Partnership the
corrected CRFs for further audit. Wyeth will provide any necessary translation
from native language to English and supply both the original and translated
CRFs to the Partnership.
(h) LICENSED PRODUCT RECORDS. Wyeth shall maintain and shall cause
each sponsored institution or Principal Investigator to keep records on the
receipt and disposition of all Licensed Products, including dates, quantity and
use by patients. If requested by Partnership, all empty or unused Licensed
Product vials will be retained and returned to the Partnership or its designee
by the Principal Investigators. Wyeth shall retain, or shall cause each
sponsored institution and Principal Investigator to retain on its behalf,
organized original patient, laboratory and drug inventory
-ii-
<PAGE> 26
records relating to each clinical study for not less than fifteen (15) years
following the later of notification by Wyeth that all investigations of a
Licensed Product have been discontinued or approved of an application to market
such Licensed Product. Thereafter, Wyeth, or the applicable sponsored
institution, will not destroy such records without giving the Partnership prior
written notice and the opportunity to further store such records, at the
Partnership's cost and expense.
(i) REGULATORY COMPLIANCE. Wyeth shall, and shall require each
sponsored institution and Principal Investigator to, adhere to all applicable
government laws and regulations, including without limitation, the rules and
regulations of the FDA, CPMP and other applicable regulatory authorities, the
FDA and CPMP guidelines on good clinical practices (the "GCPs"). Wyeth
acknowledges that it is the intention of the Partnership to harmonize study
requirements between the United States and the European Community and that both
FDA and CPMP compliance should be sought in a given study, even if not required
by the applicable regulatory authority for that country, if the Partnership
determines it is desirable to do so and that it is necessary to use the
clinical study results in the rest of the Territory.
(j) SITE VISITS; AUDITS. The Partnership shall have the right to
monitor the progress of each clinical study to ascertain that the study is
being performed in accordance with the requirements of this Agreement. The
Partnership shall have the right to make site visits with the Wyeth personnel
or to audit the sites or the files maintained by Wyeth pertaining to the
studies. Wyeth shall ensure that it and representatives of the Partnership are
permitted, during normal business hours and at mutually agreeable times, to
inspect the records kept or made by each Principal Investigator, including
original patient records and test reports, to the extent permitted by law. The
Partnership shall have the right to approve in advance any study sites where
inspection or audit is not permitted by law. Wyeth shall conduct such audits
of such information as are necessary to ensure their reliability, in accordance
with its standard operating procedures. Wyeth will cooperate with the
Partnership in any further review of such records by the Partnership and its
verification of the information contained in the CRFs. A Principal
Investigator will not be required to disclose information in the CRFs which
would permit identification of a patient enrolled in, or a candidate for, a
clinical study.
(k) STUDY RECORDS. Wyeth will keep, and shall cause its sponsored
institutions and Principal Investigators to keep, complete and accurate records
of the status and progress of the clinical studies, and, in any event, with
sufficient detail for use in reports to CPMP, FDA, and all other applicable
regulatory agencies. Wyeth shall maintain such records in accordance with the
GCPs, as implemented by Wyeth's standard operating procedures.
-iii-
<PAGE> 27
(l) SPECIAL NOTIFICATIONS. Wyeth shall, or shall cause its
sponsored institutions and Principal Investigators to, immediately notify the
Partnership of any (a) deviations from a clinical study protocol determined to
be necessary to protect the safety, rights or welfare of patients enrolled in
that clinical study, (b) serious and/or unexpected adverse patient reactions in
the course of the clinical studies or (c) communications with a regulatory
agency concerning (i) the clinical studies, including any requests to inspect,
examine, copy or remove records of the clinical studies or (ii) the
qualification of the Principal Investigator or other Wyeth personnel to perform
this or any other research.
-iv-
<PAGE> 1
EXHIBIT 23.1
------------
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports included in this Form 10-K, into the Company's previously
filed Registration Statements on Form S-8 (file Nos. 33-34629, 33-40766,
33-40767, 33-43655, 33-43651, 33-63052, 33-63054 and 33-53755) and
Form S-3 (file No. 33-53287).
ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 13, 1995
<PAGE> 1
EXHIBIT 23.2
------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of Genetics Institute, Inc. and subsidiaries on Form S-8 (File Numbers
33-34629, 33-40766, 33-40767, 33-43655, 33-43651, 33-63052, 33-63054 and
33-53755) and Form S-3 (File Number 33-53287) of our reports dated December
29, 1992, on our audits of the consolidated financial statements and financial
statement schedule of Genetics Institute, Inc. and subsidiaries as of November
30, 1992, and for the year ended November 30, 1992, which report is included in
this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 13, 1995
<TABLE> <S> <C>
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF THE GENETICS INSTITUTE, INC. AND
SUBSIDIARIES FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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<CASH> 21,793
<SECURITIES> 247,970
<RECEIVABLES> 16,127
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<INVENTORY> 18,673
<CURRENT-ASSETS> 309,838
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<COMMON> 266
0
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<OTHER-SE> 388,738
<TOTAL-LIABILITY-AND-EQUITY> 421,593
<SALES> 43,482
<TOTAL-REVENUES> 130,880
<CGS> 28,369
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<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (18,875)
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