<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
[ X ] SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
[ ] SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-15006
AVANT IMMUNOTHERAPEUTICS, INC.
(F/K/A T CELL SCIENCES, INC.)
(Exact name of registrant as specified in its charter)
DELAWARE 13-3191702
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
119 FOURTH AVENUE, NEEDHAM, MASSACHUSETTS 02494
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (781) 433-0771
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.001
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of common stock held by non-affiliates as of March
10, 2000 was $657,749,278 (excludes shares held by directors and executive
officers). Exclusion of 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 actions of the management or policies of the Registrant, or that such
person is controlled by or under common control with the Registrant. The number
of shares of common stock outstanding at March 10, 2000 was: 50,012,800 shares.
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SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: STATEMENTS CONTAINED IN THIS REPORT, INCLUDING PART II, ITEM 5: MARKET FOR
REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS, THAT ARE NOT
HISTORICAL FACTS MAY BE FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO A VARIETY
OF RISKS AND UNCERTAINTIES. THERE ARE A NUMBER OF IMPORTANT FACTORS THAT COULD
CAUSE THE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY
FORWARD-LOOKING STATEMENTS MADE BY THE REGISTRANT. THESE FACTORS INCLUDE, BUT
ARE NOT LIMITED TO: (I) THE REGISTRANT'S ABILITY TO SUCCESSFULLY COMPLETE
PRODUCT RESEARCH AND DEVELOPMENT, INCLUDING PRE-CLINICAL AND CLINICAL STUDIES,
AND COMMERCIALIZATION; (II) THE REGISTRANT'S ABILITY TO OBTAIN SUBSTANTIAL
ADDITIONAL FUNDING; (III) THE REGISTRANT'S ABILITY TO OBTAIN REQUIRED
GOVERNMENTAL APPROVALS; (IV) THE REGISTRANT'S ABILITY TO ATTRACT MANUFACTURING,
SALES, DISTRIBUTION AND MARKETING PARTNERS AND OTHER STRATEGIC ALLIANCES; AND
(V) THE REGISTRANT'S ABILITY TO DEVELOP AND COMMERCIALIZE ITS PRODUCTS BEFORE
ITS COMPETITORS.
PART I
ITEM 1. BUSINESS
A. GENERAL
AVANT Immunotherapeutics, Inc. (f/k/a "T Cell Sciences, Inc.," herein referred
to as "AVANT") is a biopharmaceutical company that uses novel applications of
immunology to prevent and treat diseases caused by both the enemy within
(autoimmune diseases, cardiovascular diseases, cancer and inflammation) and the
enemy without (infectious diseases and organ transplant rejection). Each of our
products address large market opportunities for which current therapies are
inadequate or non-existent.
We were incorporated in the state of Delaware in 1983. On August 21, 1998, we
acquired Virus Research Institute, Inc., a Delaware corporation ("VRI"),
pursuant to an Agreement and Plan of Merger dated as of May 12, 1998 by and
among AVANT, TC Merger Corp., a Delaware corporation and our wholly-owned
subsidiary, and VRI.
Our products derive from a broad set of complementary technologies with the
ability to inhibit the complement system, regulate T and B cell activity, and
enable the creation and delivery of preventative and therapeutic vaccines. We
are using these technologies to develop vaccines and immunotherapeutics that
prevent or treat disease caused by infectious organisms, and drugs and treatment
vaccines that modify undesirable activity by the body's own proteins or cells.
All of our products are in various stages of research and development. Below is
a table of our currently active programs:
CURRENT PROGRAMS AND PARTNERSHIPS
<TABLE>
<CAPTION>
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TECHNOLOGY PRODUCT INDICATION/FIELD PARTNER STATUS
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<S> <C> <C> <C> <C>
Complement Inhibition TP10 Transplantation Novartis Pharma Phase II
Cardiac Surgery -- Phase I/II
Heart Attacks -- Phase I
TP20 Stroke -- Preclinical
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Therapeutic Vaccines CETi-1 Vaccine Atherosclerosis -- Phase I
- ---------------------------- ------------------------- ----------------------------- --------------------- -----------------
Protective Vaccines Rotavirus Vaccine Rotavirus SmithKline Beecham Phase II
Cholera Vaccine Cholera US Army & NIH Phase IIb
- ---------------------------- ------------------------- ----------------------------- --------------------- -----------------
Vaccines and Adjumer(R)-RSV Vaccine Respiratory Syncytial Virus Aventis Pasteur Phase I/II
Immunotherapeutic Delivery -Cat Scratch Cat Scratch Disease Heska Corporation Clinical testing
Systems -Lyme Disease Lyme Disease Aventis Pasteur Preclinical
Therapore(TM) Viral Infection -HIV US Army Preclinical
-Hepatitis -- Preclinical
Cancer -- Preclinical
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</TABLE>
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B. STRATEGY
AVANT'S strategy is to utilize our expertise to design and develop vaccine and
therapeutic products that have significant and growing market potential; to
establish governmental and corporate alliances to fund development; and to
commercialize our products either through corporate partners or, in appropriate
circumstances, by our own direct selling efforts. Implementation of this
strategy is exemplified by the following lead programs:
COMPLEMENT INHIBITORS: We are developing a new class of therapeutics that
inhibits the complement system, a key triggering mechanism for the inflammatory
response. Medical problems that result from excessive complement activation
represent multi-billion dollar market opportunities. These include reperfusion
injury, the vascular and tissue damage that occurs following a heart attack,
stroke or surgical procedure where the patient's blood supply is shut off and
then restored; hyperacute or chronic organ rejection following transplantation;
acute inflammatory injury to the lungs and autoimmune diseases. We have
developed a lead compound, TP10, through to early clinical trials before
licensing rights for organ transplant surgery to Novartis Pharma AG
("Novartis"), the world leader in organ transplant drugs. We have elected to
independently develop and commercialize TP10 for pediatric cardiac surgery,
initiating a Phase I/II trial in 1999 and aiming to commence a Phase III pivotal
trial in late 2000. We believe that this is an appropriate indication for a
small company to pursue for the following reasons:
- Orphan drug status has been sought because only 30,000 pediatric
cardiac surgeries are performed each year;
- Because the surgery is life-threatening, the TP10 compound may qualify
for priority review at the FDA; and
- Because such surgery is performed at a limited number of medical
centers, a targeted direct sales and marketing effort should be
manageable and effective.
We plan to initiate Phase II trials for adult cardiac surgery in 2000, with an
eye to partnering that program when additional clinical data are available.
ATHEROSCLEROSIS TREATMENT VACCINE: Atherosclerosis, the leading cause of
morbidity and mortality in the United States and most of the Western world, is
the accumulation of fatty deposits in the walls of blood vessels. Low blood
levels of high-density lipoprotein (HDL, the so-called "good" cholesterol) are
associated with increased risk of atherosclerosis, which in turn leads to heart
disease and stroke. We are developing a novel, treatment vaccine (CETi-1) aimed
at increasing levels of HDL. The vaccine stimulates the production of antibodies
to cholesteryl ester transfer protein ("CETP"), which mediates the balance
between HDL and LDL (low-density lipoprotein, or "bad" cholesterol). While
billions of dollars of drugs that lower LDL are sold each year, the few drugs
that increase HDL have failed to achieve market acceptance, largely due to
undesirable side effects. Thus, we believe that a therapeutic vaccine that
increases HDL with one or two injections a year would present a substantial
market opportunity. In preclinical studies in rabbits, the CETi-1 vaccine
increased HDL levels and significantly reduced atherosclerotic lesions in blood
vessels as compared to an untreated control group. Our preclinical work on the
vaccine was partially funded by almost $1 million in Small Business Innovation
Research ("SBIR") grants. The Company initiated a Phase I clinical trial in 1999
and plans to initiate a Phase II trial in 2000. As clinical data becomes
available, the Company plans to seek a corporate partner to complete development
and to commercialize the vaccine.
ROTAVIRUS VACCINE: Rotavirus is a major cause of diarrhea and vomiting in
infants and children. No vaccine against rotavirus is currently on the market.
We licensed from a non-profit institution an oral vaccine for rotavirus, and
initiated a Phase I clinical trial with the goal of licensing the vaccine to a
major vaccine company. After completing Phase I studies and commencing a Phase
II study, we licensed the vaccine to SmithKline Beecham plc ("SmithKline"); the
initial license fee from SmithKline partially funded the Phase II study. In
1999, after the study demonstrated 89% protection in a study involving 215
infants, SmithKline paid us an additional license fee and assumed full
responsibility for funding and performing all remaining clinical development.
Assuming product development and commercialization continues satisfactorily,
SmithKline will pay us additional milestones and a royalty based on sales.
CHOLERA VACCINE: We are developing a single dose, oral cholera vaccine using a
live, genetically attenuated cholera strain. Based on this technology, developed
in academia, we have developed the vaccine through early Phase II trials. We
then negotiated a collaboration agreement under which a Phase IIb trial will be
performed and funded by the Walter Reed Army Institute of Research ("WRAIR") and
the National Institutes of Health (the "NIH"). This trial, set to begin in 2000,
will test the safety, immunogenecity and protective capacity of the vaccine
against a challenge with live virulent
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cholera. We will then determine our commercialization strategy with respect to
the cholera vaccine based on clinical data from the trial.
VACCINE DELIVERY SYSTEMS: The vaccine industry is changing, with increased
emphasis on recombinant antigens, sophisticated attenuation strategies and use
of vaccines therapeutically to treat patients who are already infected. AVANT is
a leader in developing delivery systems that support these new approaches,
including:
- Adjumer(R), a water soluble polymer intended as an adjuvant to enhance
systemic immune response with fewer injections and lower antigen doses;
- Micromer(R), a polymer microsphere adjuvant designed to enhance
systemic and mucosal immune responses to oral or nasal administration;
- Therapore(TM), a genetically engineered bacterial protein vector
designed to induce cell-mediated immunity, believed to be particularly
important for therapeutic vaccines; and
- VibrioVec(TM), the attenuated bacterial strain used in the cholera
vaccine which we believe can be used to deliver other, non-cholera
bacterial antigens.
We expect to commercialize these vaccine delivery systems primarily through
commercial partners that have antigens in need of improved delivery, thereby
gaining us potential access to a wide range of antigens and shifting clinical
development expense to the partner. For example, we have licensed to Aventis
Pasteur ("Aventis"), the world's leading vaccine manufacturer, use of Adjumer(R)
and Micromer(R) in a variety of vaccines, including influenza, respiratory
syncytial virus ("RSV") and Lyme disease. Aventis has begun clinical trials on
both the influenza and RSV vaccines. In the case of Therapore(TM), the novelty
of the approach is such that partnering on commercially attractive terms would
best be done after the availability of clinical data. Thus, we have entered into
a collaborative agreement for WRAIR to fund and perform the first clinical trial
of Therapore(TM) beginning in 2000. Although we will focus on licensing vaccine
delivery systems to commercial partners, we will remain alert for opportunities
where we can develop complete vaccines, as was done with rotavirus.
Because AVANT's strategy ultimately depends on the commercial success of our
products, we assume, among other things, that end users of our products will be
able to pay for them. In the United States and other countries, in most cases,
the volume of sales of products like those we are developing depends on the
availability of reimbursement from third-party payors. These include national
health care agencies, private health insurance plans and health maintenance
organizations. Third-party payors increasingly challenge the prices charged for
medical products and services. Our success in generating revenues from sales of
products may depend on the availability of reimbursement from third-party payors
for the products. Accordingly, if we succeed in bringing products to market,
there is no means to assure their cost effectiveness or the availability of
reimbursement sufficient to sell the products on a profitable basis. If
reimbursement is not available or is insufficient, the level of market
acceptance of our products will suffer significantly.
The health care industry in the United States and in Europe is undergoing
fundamental changes as the result of political, economic and regulatory
influences. Reforms proposed from time to time include mandated basic health
care benefits, controls on health care spending through limitations on the
growth of private health insurance premiums and Medicare and Medicaid spending,
creation of large medical services and products purchasing groups and
fundamental changes to the health care delivery system.
We anticipate ongoing review and assessment of alternative health care delivery
systems and methods of payment in the United States and other countries. We
cannot predict whether any particular reform initiatives will result or, if
adopted, their impact on us. However, we expect that adoption of any reform
proposed will impair our ability to market products at acceptable prices.
Additional factors that may significantly harm our commercial success, and
ultimately the market price of our common stock, include announcements of
technological innovations or new commercial products by our competitors,
disclosure of unsuccessful results of clinical testing or regulatory proceedings
and governmental approvals, adverse developments in patent or other proprietary
rights, public concern about the safety of products developed by AVANT and
general economic and market conditions.
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C. THERAPEUTIC DRUG PROGRAMS
1. COMPLEMENT INHIBITION
We are developing a new class of therapeutics that inhibit a part of the immune
system called the complement system. The complement system is a series of
proteins that are important initiators of the body's acute inflammatory response
against disease, infection and injury. Excessive complement activation also
plays a role in some persistent inflammatory conditions. When complement is
activated, it helps to identify and eliminate infectious pathogens and damaged
tissue. In some situations, however, excessive complement activation may destroy
viable and healthy tissue and tissue which, though damaged, might recover. This
excessive response compounds the effects of the initial injury or introduces
unwanted tissue destruction in clinical situations such as organ transplants,
cardiovascular surgeries and treatment for heart attacks. Independent published
studies have reported that our lead compound, TP10, a soluble form of naturally
occurring Complement Receptor 1, effectively inhibits the activation of the
complement cascade in animal models. We believe that regulating the complement
system could have therapeutic and prophylactic applications in several acute and
chronic conditions, including reperfusion injury from surgery or ischemic
disease, organ transplant, multiple sclerosis, rheumatoid arthritis, and
myasthenia gravis. In the United States, several million people are afflicted
with these complement-mediated conditions.
We started the complement program in 1988. From 1989 through 1994, TP10 was
under development in a joint program with SmithKline and Yamanouchi
Pharmaceutical Co., Ltd. ("Yamanouchi"). During 1994, AVANT and SmithKline
negotiated various amendments to the agreement and, in 1995, the two companies
agreed to a mutual termination by which we regained all rights to the program
except for co-marketing rights in Japan, which were retained by SmithKline and
Yamanouchi. In December 1999, SmithKline and Yamanouchi returned the marketing
rights for Japan to us.
Under our direction, in 1995 the first Phase I clinical trial of TP10 in 24
patients at risk for acute respiratory distress syndrome ("ARDS") was completed.
Results of this trial were presented in October 1995 at The American College of
Chest Physicians meeting. A second Phase I safety trial for reperfusion injury
was completed in late 1995 in 25 patients with first-time myocardial
infarctions. This study was presented at the American Heart Association's Joint
Conference on Thrombosis, Arteriosclerosis and Vascular Biology in February
1996. In each trial, TP10 demonstrated excellent safety and pharmacokinetic
profiles, had a terminal phase half-life of at least 72 hours and was able to
inhibit complement activity in a dose-dependent manner.
Based on these favorable results, in early 1996, we initiated a Phase IIa trial
in patients with established ARDS. This trial was an open-label, single-dose
feasibility trial to determine the potential for efficacy of TP10 in reducing
neutrophil accumulation in the lungs and improved clinical outcome of patients
with ARDS. During the second half of 1996, we initiated a series of steps,
including broadening enrollment criteria, to modify this trial to improve the
rate of patient accrual. In late 1997, we completed this Phase IIa trial after
it had enrolled nine patients with ARDS arising from a number of different
medical conditions. The trial results showed that patients receiving TP10 tended
towards improved respiratory performance and improved blood oxygenation. Because
the trial included few patients and no placebo control was used, no definitive
claims about efficacy could be made.
In 1996, we began enrollment in a Phase I/II clinical trial in patients
undergoing lung transplantation. A goal of the trial was to determine the
ability of TP10 to reduce reperfusion injury and improve lung function in
patients with end-stage pulmonary disease who were undergoing lung transplant
surgery. This study was a randomized, placebo-controlled, double-blind trial
consisting of single dosages of 10 mg/kg of TP10 as an intravenous infusion over
30 minutes. The trial was conducted at multiple centers in North America and
included a total of 59 patients. In October 1997, we presented positive
preliminary results from the efficacy portion of the trial. In April 1998, we
presented final trial results at the International Society of Heart and Lung
Transplantation conference. The final results showed that TP10 therapy appeared
safe and well tolerated and demonstrated significant efficacy. Treated patients
undergoing cardiopulmonary by-pass as part of the transplantation procedure
showed significantly decreased intubation time and time on ventilation and a
trend toward reduced time in the intensive care unit.
In 1997, we entered into a collaborative agreement with Novartis relating to the
development of TP10 for use in xenotransplantation (animal organs into humans)
and allotransplantation (human to human organ transplantation). Under the
agreement, we received annual option fees and supplies of TP10 for clinical
trials in return for granting Novartis a two-year option to license TP10 with
exclusive worldwide (except Japan) marketing rights. In July 1999, Novartis
exercised its option to license TP10 for use in the field of transplantation. In
December 1999, the Novartis agreement
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was amended to include the marketing rights for Japan. The decision to license
TP10 resulted in a $6 million equity investment and license fee payment by
Novartis which was received by AVANT in January 2000. Under the agreement, we
may receive additional milestone payments based upon attainment of development
and regulatory goals, which have an approximate aggregate value of up to $14
million. We may also receive funding for research as well as royalty payments on
eventual product sales.
In September 1999, we initiated an open-label, Phase I/II trial of TP10 in
infants undergoing cardiac surgery for congenital heart defects. The trial will
evaluate the ability of TP10 to mitigate the injury to the heart and other
organs that occurs when patients are placed on cardiopulmonary bypass circuits.
If successful, we hope to initiate a Phase III pivotal trial in late 2000.
In addition to TP10, we have identified other product candidates to inhibit
activation of the complement system. The lead candidate under research
evaluation is a form of sCR1 (TP10) that has been modified by the addition of
sialyl Lewis x sLe(x) carbohydrate side chains yielding sCR1sLe(x) (TP20).
sLe(x) is a carbohydrate which mediates binding of neutrophils to selectin
proteins, which appear on the surface of activated endothelial cells and
platelets as an early inflammatory event. Selectin-mediated binding of
neutrophils to activated endothelial cells is a critical event in
inflammation. We have confirmed the presence of the desired carbohydrate
structures and confirmed the presence of both anti-complement and
selectin-binding functions in IN VITRO experiments. During 1997, we produced
additional TP20 material and began preclinical studies in disease-relevant
animal models. Research results published in the July 1999 issue of SCIENCE
showed that the TP20 molecule, which simultaneously blocks complement
activation and cell-mediated inflammatory events, can significantly limit
damage to cerebral tissue in a mouse model of ischemic stroke.
TP20 may create new and expanded opportunities for us in complement- and
selectin-dependent indications such as stroke and myocardial infarction. We
believe that TP20 has the ability to target the complement-inhibiting activity
of sCR1 to the site of inflammation and, at the same time, inhibit the
leukocyte/endothelial cell adhesion process.
2. ATHEROSCLEROSIS TREATMENT VACCINE
We are developing a therapeutic vaccine against endogenous cholesteryl ester
transfer protein ("CETP") which may be useful in reducing risks associated with
atherosclerosis. CETP is a key intermediary in the balance of HDL and LDL. We
are developing a vaccine (CETi-1) to stimulate an immune response against CETP
which we believe may improve the ratio of HDL to LDL cholesterol and reduce the
progression of atherosclerosis. We have conducted preliminary studies of rabbits
which had been administered the CETi-1 vaccine and fed a high-cholesterol,
high-fat diet. In these studies, vaccine-treated rabbits exhibited reduced
lesions in their blood vessels compared to a control group of untreated rabbits
which developed significant blood vessel lesions. These studies have
demonstrated, in animal models, the ability of CETi-1 vaccine to elevate HDL and
reduce the development of blood vessel lesions.
Atherosclerosis is one of the leading causes of morbidity and mortality in the
United States and most of the Western world. Current pharmacologic treatments
require daily administration and can result in high costs and poor patient
compliance. A vaccine directed at lowering CETP activity, such as the one we are
developing, may offer several advantages over conventional approaches, including
requiring less frequent dosing, lower costs, reduced side effects, and improved
patient compliance.
In 1996, the NIH awarded us a $100,000, Phase I SBIR grant for the development
of a novel transgenic rat atherosclerosis model, affording better comparison to
human atherosclerosis. In early 1997, the NIH awarded us a second $100,000 Phase
I SBIR grant to develop a novel plasmid-based vaccine to prevent or treat
atherosclerosis. In late 1997, the NIH awarded us a $678,000 Phase II SBIR grant
which provided funding over a two year period for the continued development of
the novel transgenic rat model of atherosclerosis. In 1998, we received a
$96,000 Phase I SBIR grant from the NIH for the development of a novel peptide
vaccine to prevent or treat atherosclerosis.
In June 1999, we initiated a double-blinded placebo controlled, Phase I clinical
trial of our CETi-1 vaccine in adult volunteers. The object of the study is to
demonstrate the safety of single administrations of the vaccine at four
different dosage strengths.
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3. T CELL REGULATORS
In early 1992, we entered into a joint development program with AstraZeneca plc
("Astra") to develop products resulting from our proprietary TCAR technology,
which utilizes T cell antigen receptor for selectively targeting T cells
involved in autoimmune diseases such as multiple sclerosis and rheumatoid
arthritis. The original agreement was modified in 1993 with Astra assuming all
responsibility for developing the lead antibody products and AVANT retaining
leadership of the first peptide product candidate. Under the original and
modified agreements, we received funding of approximately $15 million in the
early years with the potential of up to $17 million of additional funding based
on clinical progress. By the end of 1995, we had received substantially all of
the original funding payments.
In 1996, we amended the agreement with Astra to transfer some of our rights to
the TCAR technology, including two therapeutic products, ATM-027 and ATP-012, to
Astra, which is solely responsible for further clinical development and
commercialization. Under the amended agreement, we could receive royalties from
product sales, as well as milestone payments which may total up to $4 million as
specific clinical milestones are achieved.
In 1997, we received a milestone payment from Astra because one of the products
derived from our TCAR program entered clinical trials for the treatment of
multiple sclerosis. In 1998, Astra announced that Phase I data from these trials
had shown an effect on the target cells and that there had been no serious
adverse effects in the study to date, and initiated a Phase II study. In 1999,
we announced results of the Phase II study of the TCAR monoclonal antibody
(ATM-027) being developed by Astra for the treatment of multiple sclerosis. The
results showed that ATM-027 was safe and well tolerated, however, in the view of
Astra the reduction of disease activity in the study population did not reach a
level that would be of value for those patients. Therefore, Astra made the
decision to stop further development of ATM-027 for multiple sclerosis but is
reviewing development of the TCAR peptide, ATP-012, as a vaccine for multiple
sclerosis under the terms of the TCAR agreement.
D. VACCINES, VACCINE DELIVERY SYSTEMS AND IMMUNOTHERAPEUTICS
1. OVERVIEW
THE VACCINE MARKET: Vaccines have long been recognized as a safe and
cost-effective method to prevent infection caused by some bacteria and viruses.
The Centers for Disease Control and Prevention (the "CDC") have estimated that
every dollar spent on vaccination saves $16 in healthcare costs. There are
currently 22 vaccines in routine use in the United States against
life-threatening infectious organisms such as tetanus, diphtheria, poliovirus,
hepatitis A virus, hepatitis B virus, haemophilus influenzae B, measles, mumps
and rubella. From 1990 to 1999, annual worldwide vaccine sales increased from
$1.6 billion to $5.9 billion and the market is growing at about 12% a year. We
believe that this growth rate may accelerate as a result of advances in vaccine
technologies and formulations that address the shortcomings of existing
vaccines. Areas of potential improvement include enhancement of immune
responses, which could lead to a reduction in the number of doses required for
effective protection as well as effective immunization in a higher percentage of
the population, and delivery of vaccines through methods other than injection.
The vaccine market is expected to expand due to the introduction of new vaccines
utilizing purified antigens, produced as a result of advances in molecular
biology. We also believe that the growing awareness and incidence of infectious
diseases, such as H. pylori, hepatitis C virus, HIV1 and HSV2 infection,
together with the availability of new vaccines, could further expand the vaccine
market.
THE IMMUNE SYSTEM AND VACCINES: The function of the human immune system is to
respond to pathogens, including infectious bacteria and viruses, that enter the
body. However, a pathogen may establish an infection and cause disease before it
is eliminated by an immune response. Antibodies are produced as part of the
immune response to antigens, which are components of the pathogen. These
antibodies can continue to be present in the human body for many years,
providing continued protection against reinfection by the same pathogen.
Protective antibodies can be produced in both the systemic and mucosal branches
of the immune system. The systemic immune system produces IgG antibodies to
protect against infection occurring in blood and deep tissue. The mucosal immune
system produces IgA antibodies that protect against infection occurring in the
mucosal layer lining the digestive, respiratory and genitourinary tracts.
Mucosal immunity may act as a first line of defense by attacking pathogens at
the
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point of entry into the body, prior to systemic penetration, as well as by
targeting pathogens such as H. pylori, influenza and rotavirus that propagate
exclusively at the mucosal layer.
Vaccines are a pre-emptive means of generating a protective antibody response. A
vaccine consists of either a weakened pathogen or pathogen-specific,
non-replicating antigens which are deliberately administered to induce the
production of antibodies. When weakened pathogens are used as a vaccine, they
replicate in the body, extending presentation to the immune system and inducing
the production of antibodies without causing the underlying disease. When
non-replicating antigens are used as a vaccine, they must be delivered in
sufficient quantity and remain in the body long enough to generate an effective
antibody response. To achieve this goal, many vaccines require multiple
administrations. Of the 22 vaccines currently in routine use, 20 are delivered
by injection and stimulate only systemic immunity. Only polio and typhoid
vaccines can be administered orally and induce both a mucosal and a systemic
immune response. Both of these vaccines are live, weakened pathogens that
localize in the intestines and do not require a separate vaccine delivery
system.
There is considerable research activity in developing vaccines to treat patients
already infected with the target disease. Referred to generally as
immunotherapy, this effort is directed to designing vaccines that will mobilize
the immune system in various ways to curtail or eliminate the pathogen.
Immunotherapy may have the most promise in treating cancer and chronic disease
such as HIV and HCV.
ADJUVANTS AND OTHER DELIVERY SYSTEMS: The antigens contained in many injectable
vaccines alone will not produce an immune response sufficient to protect against
infection and require the use of an adjuvant to sustain the presentation of the
antigens to the human immune system. Aluminum-based adjuvants ("alum") are the
only adjuvants currently approved by the United States Food and Drug
Administration (the "FDA") for commercial use in humans. While alum has gained
widespread use, it does not sufficiently enhance the immune response to permit
administration of many existing injected vaccines in a single dose. In the case
of some vaccines, such as influenza, alum is ineffective as an adjuvant.
We believe that alum may not be sufficiently effective for use with a number of
the new purified recombinant antigens being developed. Further, alum cannot be
used for mucosal delivery of vaccines. Therapeutic vaccines may require entirely
different systems to enhance deliver and maximize the immune response.
Accordingly, we believe that there is a significant need for new adjuvants that
are safe, work with a wide variety of antigens, and induce a protective immune
response with only one or two administrations. These attributes could result in
benefits, including cost savings and improved patient compliance.
2. VACCINE DEVELOPMENT PROGRAMS
ROTAVIRUS VACCINE: We are developing a novel vaccine against rotavirus
infection. Rotavirus, a major cause of diarrhea and vomiting in infants, affects
approximately 80% of the approximately 4 million infants born each year in the
United States. As a result, on an annual basis, about 500,000 infants require
medical attention and 50,000 are hospitalized. The economic burden in the United
States is estimated at over $1 billion in direct medical and indirect societal
costs. We anticipate that in the United States a vaccine against rotavirus
disease will become a universal pediatric vaccine. We have completed Phase I
clinical trials of the orally delivered live human rotavirus vaccine selected to
elicit a broadly protective immune response to the most prevalent strains of
rotavirus. During 1997, we completed a Phase I/II clinical trial designed to
define the optimal vaccine dose and optimal age for immunization. Based on the
assessment of the safety and immunogenicity of the vaccine, we initiated a Phase
II efficacy study in 1997. This trial, conducted at four U.S. medical centers,
was designed to examine the vaccine's ability to prevent rotavirus disease and
to further study the safety of the vaccine. A total of 215 infants were enrolled
in the study and have been immunized with the vaccine. In 1998, we announced
positive results from this trial, which were published in LANCET in July 1999.
The results showed that approximately 90 percent of the vaccinated infants were
protected from rotavirus disease and demonstrated a statistical significance at
p LESS THAN 0.001. Examination of the safety data revealed only mild transient
symptoms in a small number of infants.
AVANT and SmithKline are currently collaborating on the development and
commercialization of our oral rotavirus vaccine. As discussed under "E.
Collaborative Agreements", with the successful completion of the Phase II
clinical trial and the development by SmithKline of a viable manufacturing
process, SmithKline has assumed financial responsibility for all subsequent
clinical and development activities and paid us a milestone payment of $500,000.
Provided that
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clinical progress continues, we will be entitled to additional milestones and
royalties based on net sales of the rotavirus vaccine.
CHOLERA VACCINE: We are developing an attenuated form of the bacterium VIBRIO
CHOLERAE as a potential cholera vaccine. In several Phase I/II clinical studies,
single oral doses of the cholera vaccine, Peru-15, were administered to more
than 100 subjects and shown to be safe, immunogenic and protective against
infection with the virulent organism. In 1999, we announced the collaboration on
a Phase IIb clinical trial of the Peru-15 vaccine with WRAIR and the NIH. AVANT
and the National Institute of Allergy and Infectious Disease ("NIAID") of the
NIH also signed a Clinical Trial Agreement that allows for the clinical
evaluation of the Peru-15 vaccine formulation at Children's Hospital in
Cincinnati. The Phase IIb trial will test the safety, immunogenicity and
protective capacity of the vaccine against a challenge with live virulent
cholera. AVANT and WRAIR have successfully manufactured clinical supplies of the
vaccine at WRAIR's facility for use in the study.
OTHER VACCINE PROGRAMS: We have successfully completed early clinical studies
with a single dose oral vaccine against typhoid fever and have done preclinical
work in vaccines for genital herpes and anthrax infections. We have temporarily
reduced resources devoted to these programs to focus on more advanced projects.
3. VACCINE AND IMMUNOTHERAPEUTIC DELIVERY SYSTEMS
AVANT is developing a portfolio of proprietary vaccine delivery systems designed
to improve the efficacy of existing vaccines, and permit the development of new
vaccines and immunotherapeutics for the prevention and/or treatment of
infectious diseases and some forms of cancer.
The following table summarizes important characteristics of our two main vaccine
delivery systems and Therapore(TM):
<TABLE>
<CAPTION>
DELIVERY DELIVERY POTENTIAL
SYSTEM COMPOSITION METHOD BENEFITS (1) STATUS (1)
------ ----------- ------ ------------------- ----------
<S> <C> <C> <C> <C> <C>
Adjumer(R) Water Soluble Injectable Enhanced systemic Phase II influenza
Polymer immune response; conducted; under
fewer injections; review at Aventis
lower antigen doses Phase I/II RSV in process
Phase I HIV; analysis of
results ongoing
B. HENSELAE (Cat Scratch
Disease); clinical testing
Preclinical research in Lyme
Disease and other vaccine
targets
Micromer(R) Polymer Intranasal or oral Systemic and mucosal Preclinical research in
Microparticles immune response; no influenza and other
injection vaccine targets
Therapore(TM) Genetically Injectable Induction of cell-mediated Preclinical research in
Engineered immunity hepatitis, HIV and
Bacterial Protein cancer Vector
</TABLE>
(1) The summary information included in the above table is qualified
in its entirety by the detailed discussion of each of the vaccine
and immunotherapeutic delivery systems that follows.
ADJUMER(R): We are developing Adjumer(R), a proprietary vaccine delivery system,
as an adjuvant to enhance the immune response to injected vaccines. The water
soluble nature of Adjumer(R), which utilizes a polyphosphazene polymer ("PCPP"),
facilitates a simple aqueous-based manufacturing process for vaccines, thereby
preserving the integrity of the antigen.
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In preclinical studies conducted by AVANT, Adjumer(R) demonstrated sustained
presentation of influenza, hepatitis B, HSV2, HIV1 and tetanus antigens to the
immune system. In those preclinical studies, single intramuscular injections of
Adjumer(R)-formulated vaccines elicited a higher immune response than both
alum-formulated vaccines and non-adjuvanted vaccines as measured by resulting
IgG antibody levels. In additional preclinical studies, an Adjumer(R)-formulated
influenza vaccine using lower antigen doses sustained higher antibody levels
over a longer time period than both alum-formulated vaccines and non-adjuvanted
vaccines. In other preclinical studies Adjumer(R)-formulated vaccines produced
an effective immune response in a higher percentage of animals than in animals
receiving existing vaccine formulations. Furthermore, in these studies, as well
as tests conducted using Adjumer(R) alone, we observed no material adverse
reactions when Adjumer(R) was administered at effective levels.
Based on these preclinical results, we believe that an Adjumer(R)-formulated
vaccine may provide a number of benefits over existing injected vaccines. These
benefits include reducing the number of doses required for an effective immune
response, thereby improving compliance; providing cost savings as a result of
the reduction in the number of doses and the amount of antigen required; and
increasing the time period over which immune protection can be sustained. In
addition, based on the results of these preclinical studies, we believe that an
Adjumer(R)-formulated vaccine may be able to induce an immune response in a
number of subjects who would not otherwise respond to existing vaccines. The
first human clinical trials of a vaccine using Adjumer(R) as a delivery system
commenced in 1996.
AVANT and Aventis, the leading worldwide supplier of influenza vaccine, are
currently collaborating on the development of an Adjumer(R)-formulated vaccine
for influenza. Aventis completed Phase I human clinical trials of the
Adjumer(R)-formulated influenza vaccine in France during 1997. Based on the
results of the study, which showed the Adjumer(R)-formulated vaccine was well
tolerated and elicited improved responses, a Phase II safety and immunogenicity
study was initiated in Peru by Aventis during 1997. Preliminary results of the
Phase II clinical trial confirmed that the Adjumer(R)-formulated vaccine was
well tolerated. However, results of the Phase II study appear to be inconsistent
in some respects with Phase I results. The degree of improvement in immune
responses elicited by the Adjumer(R) influenza vaccine was less in comparison to
the control group than was elicited in the Phase I study. In the Phase II study
the control group receiving the unadjuvanted vaccine generated higher immune
responses than observed in the Phase I study control group. AVANT and Aventis
are currently analyzing and assessing the results of the Phase II study to
determine the appropriate next steps to take with the clinical development of
the product.
Aventis is continuing to investigate the use of Adjumer(R) in other vaccines.
During the fourth quarter of 1998, Aventis initiated a Phase I/II trial of an
Adjumer(R)-formulated vaccine for RSV. RSV, the major cause of lower respiratory
tract infections in infants and children, hospitalizes 90,000 children and
causes 4,500 deaths annually in the United States. Initiation of the trial
resulted in a milestone payment by Aventis.
MICROMER(R): Micromer(R) is a proprietary vaccine delivery system designed to
facilitate the mucosal (intranasal or oral) delivery of antigens and stimulate
both the systemic and mucosal branches of the immune system.
In preclinical studies conducted by AVANT, several Micromer(R)-formulated
antigens delivered intranasally elicited both a mucosal ("IgA") immune response
and a systemic ("IgG") immune response. IgA antibodies were detected at all
mucosal sites, and the level of IgG antibodies was comparable to the level
obtained through Adjumer(R)-formulated injections of the same antigen. A
Micromer(R)-formulated influenza vaccine required only a single, intranasal dose
to provide an immune response sufficient to protect the animals against
subsequent infection by the influenza virus. We have currently suspended efforts
on Micromer(R) to focus on more advanced programs.
THERAPORE(TM): During 1997, we received an exclusive worldwide license to
Therapore(TM) from Harvard College. In 1998, we received a non-exclusive license
from the NIH to further secure our Therapore(TM) technology rights. We believe
that Therapore(TM) will be the core of a novel technology for the development of
immunotherapeutics. We are conducting preclinical research to evaluate this
system for the treatment of persistent viral infections, such as Hepatitis B,
Hepatitis C and HIV, and some forms of cancer.
Therapore(TM) is composed of two bacterial proteins that IN IN VIVO tests have
delivered peptides to induce potent cell-mediated immune responses. These
responses include the generation of long-lived cytotoxic T-lymphocytes ("CTL")
and alterations in the amounts of cellular cytokines produced, which may lead to
the effective treatment of persistent viral infections and the resolution of
some forms of cancer. Potential products utilizing Therapore(TM) technology
could include peptides or proteins from viruses such as Hepatitis B, Hepatitis C
and HIV, all of which cause persistent infections, and
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from a range of cancers, including breast, ovarian, melanoma and prostate. Each
of these indications represents a large market with a need for safe and
effective treatments.
Early stage preclinical research studies indicate that Therapore(TM) may be
distinguished from other delivery systems. We believe that the therapeutic and
preventative potential of Therapore(TM) is significant for two reasons: (i) the
targeting of Therapore(TM) is highly efficient, such that IN IN VIVO tests
potent cell-mediated immune responses have been induced by the delivery of
minute quantities of Therapore(TM) constructs; and (ii) Therapore(TM) has the
potential to deliver large peptides and proteins for processing by normal
cellular mechanisms, which may permit broad immune coverage in humans. As a
result of these characteristics, we believe that Therapore(TM)-delivered
antigens will be capable of producing an enhanced cell-mediated response more
efficiently and safely than other products currently under development by our
competitors.
We plan to employ Therapore(TM) to develop novel immunotherapeutics for the
treatment of chronic viral infections and cancers. We expect to initiate a human
clinical trial of our first Therapore(TM)-based product, a vaccine candidate
under development by the U.S. Army against the Human Immunodeficiency Virus
("HIV"), in the second half of 2000.
E. COLLABORATIVE AGREEMENTS
NOVARTIS: In 1997, we entered into a collaborative agreement with Novartis
relating to the development of TP10 for use in xenotransplantation (animal
organs into humans) and allotransplantation (human to human organ
transplantation). Under the agreement, we received annual option fees and
supplies of TP10 for clinical trials in return for granting Novartis a two-year
option to license TP10 with exclusive worldwide (except Japan) marketing rights.
In July 1999, Novartis exercised its option to license TP10 for use in the field
of transplantation. The decision to license TP10 resulted in a $6 million equity
investment and license fee payment by Novartis which was received by AVANT in
January 2000. Under the agreement, we may receive additional milestone payments
based upon attainment of development and regulatory goals, which has an
approximate aggregate value of up to $14 million. We may also receive funding
for research as well as royalty payments on eventual product sales.
YAMANOUCHI: We started our complement program in 1988. From 1989 through 1994,
TP10 was under development in a joint program pursuant to an agreement with
SmithKline and Yamanouchi. During 1994, AVANT and SmithKline negotiated various
amendments to the agreement and, in February 1995, the two companies agreed to a
mutual termination by which we regained all rights to the program except for
co-marketing rights in Japan, which were retained by SmithKline and Yamanouchi.
In December 1999, SmithKline and Yamanouchi returned the marketing rights for
Japan to us.
AVENTIS: We are a party to two license agreements entered into in 1994 and 1995
with Aventis relating to Adjumer(R)- and Micromer(R)-formulated vaccines,
respectively, for the prevention of a variety of infectious diseases. Under the
agreements, Aventis has been granted the exclusive right to make, use and sell
Adjumer(R)- and Micromer(R)-formulated vaccines for prevention of influenza,
Lyme disease and diseases caused by meningococcus and the co-exclusive right
(exclusive, except for the right of AVANT or one other person licensed by us) to
make, use and sell Adjumer(R)- and Micromer(R)-formulated vaccines directed
against five other pathogens, including pneumococcus and RSV. The licenses to
Aventis apply to specified territories, including North and South America,
Europe, Africa, Thailand and the countries of the former Soviet Union. We have
retained rights to make, use, sell and license Adjumer(R)- and
Micromer(R)-formulated vaccines against the subject infections in most of the
Far East, including China and Japan, subject to geographical extension rights
available to Aventis.
Aventis made a $3.0 million equity investment in AVANT in 1994 upon the
execution of the agreement relating to Adjumer(R). In addition, in connection
with this collaboration, in 1996 Aventis made milestone payments of $4.5 million
and an additional equity investment of $1.0 million in AVANT. During 1998,
Aventis made a further milestone payment to us upon initiation of a Phase I
trial using an Adjumer(R)-formulated vaccine for RSV. Contingent upon our
achieving specified milestones, Aventis has agreed to pay AVANT up to an
additional $6.2 million in connection with the development of
Adjumer(R)-formulated vaccines for influenza and Lyme disease and to make
payments, on a product by product basis with respect to the development of other
Adjumer(R)- and Micromer(R)-formulated vaccines. Aventis must fund all costs
associated with the development and commercialization, including the costs of
clinical trials, of any vaccines it elects to develop utilizing our technology.
In addition, we will be entitled to royalties based on net sales of any vaccine
products developed and sold by Aventis pursuant to these agreements.
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In connection with our agreement relating to Micromer(R), Aventis sponsored
research at AVANT into Micromer(R)-formulated vaccines directed against
influenza and parainfluenza virus ("PIV"). This arrangement, pursuant to which
we received $2.5 million, covered a two-year period that ended in 1997.
Under the agreement relating to Adjumer(R), we were required to use commercially
reasonable efforts to establish a process capable of yielding quantities of
clinical grade PCPP for use by Aventis in clinical studies. We have satisfied
this requirement. In addition, we have facilitated the production of commercial
grade PCPP in a contractor's current Good Manufacturing Practice ("cGMP")
compliant manufacturing facility according to agreed upon specifications. The
Aventis agreement, while reserving to Aventis the right to manufacture PCPP,
anticipates that we will supply PCPP under a cost-plus supply agreement.
PASTEUR MERIEUX-ORAVAX: We have a collaborative arrangement with Pasteur
Merieux-Oravax ("PM-O") for the use of our VibrioVec(TM) bacterial delivery
system. The agreement grants to PM-O a worldwide license to use VibrioVec(TM)
for the delivery of specific H. pylori antigens. A license issue fee as well as
research support payments totaling $1.0 million, has been paid to us under this
agreement. The agreement also provides for future milestone payments and
royalties on net sales of any future products developed by PM-O using
VibrioVec(TM). An option previously granted to PM-O for the use of PCPP in the
delivery of H. pylori vaccines has expired.
SMITHKLINE: During 1997, we entered into an agreement with SmithKline to
collaborate on the development and commercialization of our oral rotavirus
vaccine. Under the terms of the agreement, SmithKline received an exclusive
worldwide license to commercialize our rotavirus vaccine. We were responsible
for continuing the Phase II clinical efficacy study of the rotavirus vaccine,
which was completed in August 1998. Subject to the development by SmithKline of
a viable manufacturing process, SmithKline must assume responsibility for all
subsequent clinical trials and all other development activities. SmithKline made
an initial license payment in 1997 upon execution of the agreement and has
agreed to make further payments upon the achievement of specified milestones. In
addition, we will be entitled to royalties based on net sales of the rotavirus
vaccine. In June 1999, the Company received a milestone payment of $500,000 from
SmithKline for successfully completing the Phase II clinical efficacy study and
establishing a commercially viable process to manufacture the vaccine.
HESKA CORPORATION: In 1998, we entered into an agreement with Heska Corporation
("Heska") whereby Heska was granted the right to use PCPP in specified animal
health vaccines. The agreement provides for the payment of license fees,
milestone and royalties based on net sales of PCPP-formulated animal vaccines.
In September 1999, we received a payment from Heska for achieving a major
milestone in efforts to develop and utilize the PCPP polymer as an adjuvant in
Heska's animal health vaccine against B. HENSELAE, the bacterium that causes Cat
Scratch Disease ("CSD") in humans.
We depend on our collaborative relationships and may enter into more of them in
the future. Some of the above referenced agreements give our collaborator
substantial responsibility to commercialize a product and to make decisions
about the amount and timing of resources that are devoted to developing and
commercializing a product. As a result, we do not have complete control over how
resources are used toward some of our products.
In addition, some of these agreements relate to products in the early stages of
research and development. Others require AVANT and our collaborator to jointly
decide on the feasibility of developing a particular product using our
technologies. In either case, these agreements may terminate without benefit to
us if the underlying products are not fully developed. Moreover, once specific
products are chosen for development, the agreements relating to them may require
AVANT to meet specified milestones, to invest money and other resources in the
development process or to negotiate additional licenses and other agreements,
which may not be possible or advantageous. If we fail to meet our obligations
under those agreements, they could terminate and we might need to enter into
relationships with other collaborators and to spend additional time, money, and
other valuable resources in the process.
Moreover, we cannot predict whether our collaborators will continue their
development efforts or, if they do, whether their efforts will achieve success.
Many of our collaborators face the same kinds of risks and uncertainties in
their business that we face. A delay or setback to a collaborator will, at a
minimum, delay the commercialization of any affected products, and may
ultimately prevent it. Moreover, any collaborator could breach its agreement
with us or otherwise not use best efforts to promote our products. A
collaborator may choose to pursue alternative technologies or products that
compete with our technologies or products. In either case, if a collaborator
failed to successfully develop
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one of our products, we would need to find another collaborator. Our ability to
do so would depend on our legal right to do so at the time and whether the
product remained commercially viable.
F. RISK FACTORS
You should consider carefully these risk factors together with all of the
information included or incorporated by reference in this Annual Report. This
section includes some forward-looking statements.
OUR HISTORY OF LOSSES AND UNCERTAINTY OF FUTURE PROFITABILITY MAKE OUR COMMON
STOCK A HIGHLY SPECULATIVE INVESTMENT
We have had no commercial revenues to date from sales of our products and cannot
predict when we will. We have accumulated net operating losses since inception
of approximately $133.3 million, as of December 31, 1999. We expect to spend
substantial funds to continue research and product testing of the following
products we have in the pre-clinical and clinical testing stages of development:
<TABLE>
<CAPTION>
Product Use Stage
- ------------------------------------------ ---------------------------------------- -------------------------
<S> <C> <C>
TP10 Organ transplantation clinical phase II
TP10 Pediatric cardiac surgery clinical phase I/II
TP10 Heart attacks clinical phase I
TP20 Stroke preclinical
CETi-1 vaccine Atherosclerosis clinical phase I
Rotavirus vaccine Rotavirus infection clinical phase II
Cholera vaccine Cholera infection clinical phase II
Adjumer(R) Influenza clinical phase II
Adjumer(R) Respiratory syncytial virus clinical phase I/II
Adjumer(R) Lyme disease preclinical
Therapore(TM) Hepatitis preclinical
Therapore(TM) HIV preclinical
Therapore(TM) Cancer preclinical
TCAR Multiple sclerosis clinical phase II
</TABLE>
If and when any of these products receive Food and Drug Administration approval,
we will need to make substantial investments to establish sales, marketing,
quality control, and regulatory compliance capabilities. We cannot predict how
quickly our lead products will progress through the regulatory approval process.
As a result, we may continue to lose money for several years. We will disclose
the progress each product is making through pre-clinical and clinical testing,
and the preparations we are making for products that are nearing approval for
sale in our periodic reports under the Securities Exchange Act of 1934.
IF WE CANNOT SELL CAPITAL STOCK TO RAISE NECESSARY FUNDS, IT MAY FORCE US TO
LIMIT OUR RESEARCH, DEVELOPMENT AND TESTING PROGRAMS
We will need to raise more capital from investors to advance our lead products
through the clinical testing and pre-commercialization stages of development
before they generate revenues for us. However, based on our history of losses,
we may have difficulty attracting sufficient investment interest. We may also
try to obtain funding through research grants and agreements with commercial
collaborators. This kind of funding is at the discretion of other organizations
and companies which have limited funds and many companies compete with us for
those funds. As a result, we may not receive any research grants or funds from
collaborators. We will provide specific information about the sources and
adequacy of funding for our active research and development programs in our
periodic reports under the Securities Exchange Act of 1934.
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IF SELLING STOCKHOLDERS CHOOSE TO SELL SHARES IN LARGE VOLUME, THE TRADING PRICE
OF OUR COMMON STOCK COULD SUFFER
In September 1999, we sold 5,459,375 shares of our common stock in a private
placement at $1.92 per share. This was the latest of several private placements
of our common stock. Those shares plus among others, 2,043,494 shares we sold in
a March 1998 private placement at $1.90 per share, 1,433,750 shares we issued in
June 1998 in settlement of a contract dispute with a landlord, and 3,138,559
shares that employees may purchase under stock options at prices ranging from
$0.30 to $7.81 per share, can be resold in the public securities markets without
restriction. These shares in total account for approximately 27.4 % of our total
common stock outstanding as of December 31, 1999. If large numbers of shares are
sold over a short period of time, the price of our stock may decline rapidly or
fluctuate widely.
IF OUR PRODUCTS DO NOT PASS REQUIRED TESTS FOR SAFETY AND EFFECTIVENESS, WE WILL
NOT BE ABLE TO DERIVE COMMERCIAL REVENUE FROM THEM
For AVANT to succeed, we will need to derive commercial revenue from the
products we have under development. The FDA has not approved any of our lead
products for sale to date. Our lead drug, TP10, is undergoing phase II clinical
testing for use in pediatric cardiac surgery and organ transplantation. TP10 has
also undergone phase I clinical testing for use in treating heart attacks. Other
products in our vaccine programs are in various stages of preclinical and
clinical testing. Preclinical tests are performed at an early stage of a
product's development and provide information about a product's effectiveness on
laboratory animals. Preclinical tests can last years. If a product passes its
preclinical tests satisfactorily, we file an investigational new drug
application for the product with the FDA, and if the FDA gives its approval we
begin phase I clinical tests. Phase I testing generally lasts between six and 12
months. If phase I test results are satisfactory and the FDA gives its approval,
we can begin phase II clinical tests. Phase II testing generally lasts between
six and 18 months. If phase II test results are satisfactory and the FDA gives
its approval, we can begin phase III pivotal studies. Phase III studies
generally last between 12 and 36 months. Once clinical testing is completed and
a new drug application is filed with the FDA, it may take several more years to
receive FDA approval. We will disclose the progress of our ongoing tests and any
FDA action on our products in our periodic reports under the Securities Exchange
Act of 1934.
In all cases we must show that a pharmaceutical product is both safe and
effective before the FDA, or drug approval agencies of other countries where we
intend to sell the product, will approve it for sale. Our research and testing
programs must comply with drug approval requirements both in the United States
and in other countries, since we are developing our lead products with
companies, including Novartis Pharma AG, Yamanouchi Pharmaceutical and Aventis
Pasteur, which intend to commercialize them both in the U.S. and abroad. A
product may fail for safety or effectiveness at any stage of the testing
process. The key risk we face is that none of our products under development
will come through the testing process to final approval for sale, with the
result that we cannot derive any commercial revenue from them after investing
significant amounts of capital in multiple stages of pre-clinical and clinical
testing.
PRODUCT TESTING IS CRITICAL TO THE SUCCESS OF OUR PRODUCTS BUT SUBJECT TO DELAY
OR CANCELLATION IF WE HAVE DIFFICULTY ENROLLING PATIENTS
As our portfolio of potential products moves from pre-clinical testing to
clinical testing, and then through progressively larger and more complex
clinical trials, we will need to enroll an increasing number of patients with
the appropriate characteristics. At times we have experienced difficulty
enrolling patients and we may experience more difficulty as the scale of our
clinical testing program increases. The factors that affect our ability to
enroll patients are largely uncontrollable and include principally the
following:
- the nature of the clinical test
- the size of the patient population
- the distance between patients and clinical test sites
- the eligibility criteria for the trial
As clinical tests currently in progress continue and new tests begin, we will
disclose in our periodic reports under the Securities Exchange Act of 1934 our
progress in enrolling sufficient patients to keep our various programs moving
forward, including any specific difficulties we face from time to time and their
expected consequences on the affected program. If we cannot enroll patients as
needed, our costs may increase or it could force us to delay or terminate
testing for a product.
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WE DEPEND GREATLY ON THE INTELLECTUAL CAPABILITIES AND EXPERIENCE OF OUR KEY
EXECUTIVES AND SCIENTISTS AND THE LOSS OF ANY OF THEM COULD AFFECT OUR ABILITY
TO DEVELOP OUR PRODUCTS
The loss of Dr. Una S. Ryan, our president and chief executive officer, or other
key members of our staff could harm us. We have an employment agreement with Dr.
Ryan. We do not have any key-person insurance coverage. We also depend on our
scientific collaborators and advisors, all of whom have outside commitments that
may limit their availability to us. In addition, we believe that our future
success will depend in large part upon our ability to attract and retain highly
skilled scientific, managerial and marketing personnel, particularly as we
expand our activities in clinical trials, the regulatory approval process and
sales and manufacturing. We face significant competition for this type of
personnel from other companies, research and academic institutions, government
entities and other organizations. We cannot predict our success in hiring or
retaining the personnel we require for continued growth.
WE RELY ON THIRD PARTIES TO PLAN, CONDUCT, MONITOR AND SUPPLY OUR CLINICAL
TESTS, AND THEIR FAILURE TO PERFORM AS REQUIRED WOULD INTERFERE WITH OUR PRODUCT
DEVELOPMENT
We rely on third parties, including Duke University Medical Center, The Chicago
Center for Clinical Research and SmithKline Beecham to conduct our clinical
tests. If any one of those third parties fails to perform as we expect or if
their work fails to meet regulatory standards, our testing could be delayed,
cancelled or rendered ineffective. We also depend on third party suppliers,
including Walter Reed Army Institute of Research, Marathon Biopharmaceuticals,
Inc., and Multiple Peptide Systems, to provide us with suitable quantities of
materials necessary for clinical tests. If these materials are not available in
suitable quantities of appropriate quality, in a timely manner, and at a
feasible cost, our clinical tests will face delays.
WE DEPEND GREATLY ON THIRD PARTY COLLABORATORS TO LICENSE, DEVELOP AND
COMMERCIALIZE SOME OF OUR PRODUCTS, AND THEY MAY NOT MEET OUR EXPECTATIONS
We have agreements with other companies, including Heska Corporation,
Innogenetics, Inc., Novartis Pharma AG, Aventis Pasteur, SmithKline Beecham, and
Yamanouchi Pharmaceutical, for the licensing, development and ultimate
commercialization of most of our products. Some of those agreements give
substantial responsibility over the products to the collaborator. Some
collaborators may be unable or unwilling to devote sufficient resources to
develop our products as their agreements require. They often face business risks
similar to ours, which could interfere with their efforts. Also, collaborators
may choose to devote their resources to products that compete with ours. If a
collaborator does not successfully develop any one of our products, we will need
to find another collaborator to do so. Our search for a new collaborator will
depend on our legal right to do so at the time and whether the product remains
commercially viable.
WE MAY FACE DELAYS, DIFFICULTIES OR UNANTICIPATED COSTS IN ESTABLISHING SALES,
DISTRIBUTION AND MANUFACTURING CAPABILITIES FOR OUR COMMERCIALLY READY PRODUCTS
We have chosen to retain, rather than license, all rights to some of our lead
products, such as TP10 for pediatric cardiac surgery. If we proceed with this
strategy, we will have full responsibility for commercialization of these
products if and when they are approved for sale. We currently lack the
marketing, sales and distribution capabilities that we will need to carry out
this strategy. To market any of our products directly, we must develop a
substantial marketing and sales force with technical expertise and a supporting
distribution capability. We have little expertise in this area, and we may not
succeed. We may find it necessary to enter into strategic partnerships on
uncertain but potentially unfavorable terms to sell, market and distribute our
products when they are approved for sale.
We do not currently plan to develop internal manufacturing capabilities to
produce any of our products if they are approved for sale. To the extent that we
choose to market and distribute products ourselves, this strategy will make us
dependent on other companies to produce our products in adequate quantities, in
compliance with regulatory requirements, and at a competitive cost. We may not
find third parties capable of meeting those manufacturing needs.
OUR RELIANCE ON THIRD PARTIES REQUIRES US TO SHARE OUR TRADE SECRETS, WHICH
INCREASES THE POSSIBILITY THAT A COMPETITOR WILL DISCOVER THEM
Because we rely on third parties to develop our products, we must share trade
secrets with them. We seek to protect our proprietary technology in part by
confidentiality agreements and, if applicable, inventor's rights agreements with
our collaborators, advisors, employees and consultants. If these agreements are
breached, our competitors may discover our
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trade secrets. A competitor's discovery of our trade secrets would impair our
competitive position. Moreover, we conduct a significant amount of research
through academic advisors and collaborators who are prohibited from entering
into confidentiality or inventor's rights agreements by their academic
institutions.
WE LICENSE TECHNOLOGY FROM OTHER COMPANIES TO DEVELOP OUR PRODUCTS, AND THOSE
COMPANIES COULD RESTRICT OUR USE OF IT
Companies that license to us technologies we use in our research and development
programs may require us to achieve milestones or devote minimum amounts of
resources to develop products using those technologies. They may also require us
to make significant royalty and milestone payments, including a percentage of
any sublicensing income, as well as payments to reimburse them for patent costs.
The number and variety of our research and development programs require us to
establish priorities and to allocate available resources among competing
programs. From time to time we may choose to slow down or cease our efforts on
particular products. If in doing so we fail to perform our obligations under a
license fully, the licensor can terminate the licenses or permit our competitors
to use the technology. Moreover, we may lose our right to market and sell any
products based on the licensed technology.
WE HAVE MANY COMPETITORS IN OUR FIELD AND THEY MAY DEVELOP TECHNOLOGIES THAT
MAKE OURS OBSOLETE
Biotechnology, pharmaceuticals and therapeutics are rapidly evolving fields in
which scientific and technological developments are expected to continue at a
rapid pace. We have many competitors in the U.S. and abroad, including Alexion
Pharmaceutical, Bayer, Merck, Pfizer, Immune Response and Wyeth-Lederle. Our
success depends upon our ability to develop and maintain a competitive position
in the product categories and technologies on which we focus. Many of our
competitors have greater capabilities, experience and financial resources than
we do. Competition is intense and is expected to increase as new products enter
the market and new technologies become available. Our competitors may:
- develop technologies and products that are more effective than ours,
making ours obsolete or otherwise noncompetitive
- obtain regulatory approval for products more rapidly or effectively
than us
- obtain patent protection or other intellectual property rights that
would block our ability to develop competitive products
WE RELY ON PATENTS, PATENT APPLICATIONS AND OTHER INTELLECTUAL PROPERTY
PROTECTIONS TO PROTECT OUR TECHNOLOGY AND TRADE SECRETS; THEY ARE EXPENSIVE AND
MAY NOT PROVIDE SUFFICIENT PROTECTION
Our success depends in part on our ability to obtain and maintain patent
protection for technologies that we use. Biotechnology patents involve complex
legal, scientific and factual questions and are highly uncertain. To date, there
is no consistent policy regarding the breadth of claims allowed in biotechnology
patents, particularly in regard to patents for technologies for human uses like
those we use in our business. We cannot predict whether the patents we seek will
issue. If they do issue, a competitor may challenge them and limit their scope.
Moreover, our patents may not afford effective protection against competitors
with similar technology. A successful challenge to any one of our patents could
result in a third party's ability to use the technology covered by the patent.
We also face the risk that others will infringe, avoid or circumvent our
patents. Technology that we license from others is subject to similar risks,
which could harm our ability to use that technology. If we, or a company that
licenses technology to us, were not the first creator of an invention that we
use, our use of the underlying product or technology will face restrictions,
including elimination.
If we must defend against suits brought against us or prosecute suits against
others involving intellectual property rights, we will incur substantial costs.
In addition to any potential liability for significant monetary damages, a
decision against us may require us to obtain licenses to patents or other
intellectual property rights of others on potentially unfavorable terms. If
those licenses from third parties are necessary but we cannot acquire them, we
would attempt to design around the relevant technology, which would cause higher
development costs and delays, and may ultimately prove impracticable.
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OUR BUSINESS REQUIRES US TO USE HAZARDOUS MATERIALS, WHICH INCREASES OUR
EXPOSURE TO DANGEROUS AND COSTLY ACCIDENTS
Our research and development activities involve the use of hazardous chemicals,
biological materials and radioactive compounds. Although we believe that our
safety procedures for handling and disposing hazardous materials comply with the
standards prescribed by applicable laws and regulations, we cannot completely
eliminate the risk of accidental contamination or injury from these materials.
In the event of an accident, an injured party will likely sue us for any
resulting damages with potentially significant liability. The ongoing cost of
complying with environmental laws and regulations is significant and may
increase in the future. In addition, in connection with our merger with Virus
Research Institute, Inc. in 1998, we assumed the real property lease at Virus
Research Institute, Inc.'s former site. We understand that this property has a
low level of oil-based and other hazardous material contamination. We believe
that the risks posed by this contamination are low, but we cannot predict
whether additional hazardous contamination exists at this site, or that changes
in applicable law will not require us to clean up the current contamination of
the property.
G. COMPETITION
Competition in the biotechnology and vaccine industries is intense. We face
competition from many companies in the United States and abroad, including a
number of large pharmaceutical companies, firms specialized in the development
and production of vaccines, adjuvants and vaccine and immunotherapeutic delivery
systems and major universities and research institutions. Most of our
competitors have substantially greater resources, more extensive experience in
conducting preclinical studies and clinical testing and obtaining regulatory
approvals for their products, greater operating experience, greater research and
development and marketing capabilities and greater production capabilities than
those of AVANT. There can be no assurance that our competitors will not develop
technologies and products that are safer or more effective than any which are
being developed by us or which would render our technology and products obsolete
and noncompetitive, and our competitors may succeed in obtaining FDA approval
for products more rapidly than AVANT. There can be no assurance that the
vaccines and immunotherapeutic products under development by us and our
collaborators will be able to compete successfully with existing products or
products under development by other companies, universities and other
institutions or that they will obtain regulatory approval in the United States
or elsewhere. We believe that the principal competitive factors in the vaccine
and immunotherapeutic market are product quality, measured by efficacy and
safety, ease of administration and price.
Our competitive position will also depend upon our ability to attract and retain
qualified personnel, obtain patent protection or otherwise develop proprietary
products or processes and secure sufficient capital resources for the often
lengthy period between technological conception and commercial sales. We will
require substantial capital resources to complete development of some or all of
our products, obtain the necessary regulatory approvals and successfully
manufacture and market its products. In order to secure capital resources, we
anticipate having to sell additional capital stock, which would dilute existing
stockholders. We may also attempt to obtain funds through research grants and
agreements with commercial collaborators. However, these types of fundings are
uncertain because they are at the discretion of the organizations and companies
that control the funds. As a result, we may not receive any funds from grants or
collaborations. Alternatively, we may borrow funds from commercial lenders,
likely at high interest rates, which would increase the risk of any investment
in AVANT.
H. MANUFACTURING
We have no manufacturing facilities, no experience in volume manufacturing and
plan to rely upon collaborators or contractors to manufacture our proposed
products for both clinical and commercial purposes. We believe that there is
currently sufficient capacity worldwide for the production of our potential
products by our collaborators or through contract manufacturers.
To date, we have been arranging with contract manufacturers for the manufacture
of PCPP in quantities sufficient for preclinical and clinical studies, and for
clinical trial supplies of our rotavirus vaccine candidate. Future manufacture
of our rotavirus vaccine is the responsibility of SmithKline, which has received
from us a world-wide exclusive license to commercialize this vaccine.
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We have contracted for the development and initial supply of the starting
materials for PCPP but do not yet have a written contract with a manufacturer
for commercial production of PCPP. We have facilitated the production of
commercial grade PCPP in a contractor's cGMP manufacturing facility according to
agreed upon specifications. The Aventis agreement, while reserving to Aventis
the right to manufacture PCPP, anticipates that we may supply PCPP under a
cost-plus supply agreement. We have also entered into a collaborative
arrangement with WRAIR for the manufacture of a Therapore(TM) -HIV product.
WRAIR will manufacture the HIV-specific component for this product and we have
contracted with Marathon Biopharmaceuticals, Inc. to manufacture the other
component. WRAIR has made Cholera Peru-15 and Bengal-15 vaccines under a
collaborative agreement with us. The CETi-1 vaccine is made under contracts with
Multiple Peptide Services and Bioconcepts, Inc. The manufacturing processes for
our other vaccine and immunotherapeutic delivery systems and vaccines utilize
known technologies. We believe that the products we currently have under
development can be readily scaled up to permit manufacture in commercial
quantities. However, there can be no assurance that we will not encounter
difficulties in scaling up the manufacturing processes.
Use of third party manufacturers limits our control over and ability to monitor
the manufacturing process. As a result, we may not be able to detect a variety
of problems that may arise. If third party manufacturers fail to meet our
manufacturing needs in an acceptable manner, we would face delay and additional
costs while it develops internal manufacturing capabilities or finds alternative
third party manufacturers.
We intend to establish manufacturing arrangements with manufacturers that comply
with the FDA's requirements and other regulatory standards, although there can
be no assurance that we will be able to do so. In the future, we may, if it
becomes economically attractive to do so, establish our own manufacturing
facilities to produce any vaccine products that we may develop. In order for us
to establish a manufacturing facility, we will require substantial additional
funds and will be required to hire and retain significant additional personnel
and comply with the extensive cGMP regulations of the FDA applicable to such
facility. The product manufacturing facility would also need to be licensed for
the production of vaccines by the FDA.
I. MARKETING
Under the terms of existing and future collaborative agreements, we rely and
expect to continue to rely on the efforts of our collaborators for the sale and
marketing of our products. There can be no assurance that our collaborators will
market vaccine products incorporating our technologies, or, if marketed, that
such efforts will be successful. The failure of our collaborators to
successfully market products would harm our business.
We have retained, and in the future intend to retain, marketing rights to some
of our product candidates, including vaccine and immunotherapeutic delivery
systems and vaccine candidates, in selected geographic areas and for specified
indications. We intend to seek marketing and distribution agreements and/or
co-promotion agreements for the distribution of our products in these geographic
areas and for these indications. We believe that these arrangements could enable
us to generate greater financial return than might be obtained from early stage
licensing and collaboration agreements. We have no marketing and sales staff and
limited experience relating to marketing and distribution of commercial
products, including vaccines. If we determine in the future to engage in direct
marketing of our products, we will be required to recruit an experienced
marketing group, develop a supporting distribution capability and incur
significant additional expenditures. There can be no assurance that we will be
able to establish a successful marketing force. We may choose or find it
necessary to enter into strategic partnerships on uncertain, but potentially
unfavorable, terms to sell, market and distribute our products. Any delay in the
marketing or distribution of our products, whether it results from problems with
internal capabilities or with a collaborative relationship, could harm the value
of an investment in AVANT.
J. PATENTS, LICENSES AND PROPRIETARY RIGHTS
AVANT's policy is to protect our technology by filing patent applications and
obtaining patent rights covering our own technology, both in the United States
and in foreign countries. In addition, we have acquired and will seek to acquire
as needed or desired, exclusive rights of others through assignment or license
to complement our portfolio of patent rights. We also rely on trade secrets,
unpatented know-how and technological expertise and innovation to develop and
maintain our competitive position.
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PATENTS: The successful development and marketing of products by AVANT will
depend in part on our ability to create and maintain intellectual property,
including patent rights. We have established a proprietary patent position in
the areas of complement inhibitor technology, vaccine technologies and
diagnostic technologies, and we are the owner or exclusive licensee of numerous
patents and pending applications around the world. Although we continue to
pursue patent protection for our products, no assurance can be given that any
pending application will issue as a patent, that any issued patent will have a
scope that will be of commercial benefit, or that we will be able to
successfully enforce our patent position against competitors.
In the area of complement molecules, we are co-owner with The Johns Hopkins
University and Brigham & Women's Hospital, whose rights AVANT has exclusively
licensed, of patents and applications covering inventions relating to complement
receptor type 1 (CR1). These rights are based in part on the work of Dr. Douglas
Fearon and include U.S. and foreign patents which claim nucleic acid sequences
encoding CR1, sCR1 and active fragments; purification methods; and therapeutic
uses of sCR1. We also own or have rights to a number of other issued patents and
patent applications relating to sCR1, sCR1sLe x and other complement inhibitor
molecules and their uses.
In 1996, we licensed portions of our patent and technology rights regarding CR1
to CytoTherapeutics, Inc. ("CytoTherapeutics") for use in protecting
CytoTherapeutics' proprietary cell-encapsulation products for the delivery of
therapeutic substances to the central nervous system.
In 1996, we amended our agreement with Astra to transfer some of our patent
rights and licenses to the TCAR technology to Astra. This transfer includes
patent applications which have resulted to date in U.S. patents covering the
DNA, proteins, protein fragments and antibodies relating to the Alpha TCAR and
the DNA, full-length proteins and antibodies relating to Beta TCAR, and two
European patents covering Beta TCAR inventions. In addition, we have transferred
filings on T cell antigen receptor inventions resulting from the partnership
with Astra.
In July 1999, we entered into a transfer and sale agreement with Innogenetics,
Inc. ("Innogenetics") in which we conveyed to Innogenetics our rights in the
TRAx(R) technology for detection of cell surface markers, such as CD4 and CD8 on
T cells. This agreement gave Innogenetics the exclusive rights to sell the
TRAx(R) CD4 and CD8 diagnostic products worldwide, with AVANT receiving payments
and the rights to receive future royalties on sales.
In the area of vaccine technology, we own issued U.S. patents and corresponding
foreign applications directed to the use of vaccines incorporating our
Adjumer(R) vaccine delivery technology, and directed to the use of vaccines
incorporating our Micromer(R) vaccine delivery technology. Further, we own and
have licensed other U.S. patents and patent applications, and corresponding
foreign applications, directed to technology that may be useful for our
Micromer(R) and Adjumer(R) vaccine delivery systems. We have an exclusive
license to a United States patent application, and corresponding foreign
applications, directed to a vector construct that is used in our VibrioVec(TM)
vaccine delivery system; we have an exclusive license to an issued U.S. patent
directed to a rotavirus strain antigen which forms the basis of our rotavirus
vaccine; and we have an exclusive license to a U.S. patent application, and
corresponding foreign applications, directed to a defective HSV2 virus for use
in our vaccine directed against genital herpes. We also have an exclusive
license to U.S. patent applications and a non-exclusive license to US and
foreign patents and applications directed to technology that may be useful for
our Therapore(TM) system. We have two issued patents in foreign countries and
additional pending patent applications in the U.S. and selected foreign
countries relating to control of CETP activity through vaccination.
There can be no assurance that patent applications owned by or licensed to AVANT
will result in granted patents or that, if granted, the resultant patents will
afford protection against competitors with similar technology. It is also
possible that third parties may obtain patent or other proprietary rights that
may be necessary or useful to AVANT. In cases where third parties are first to
invent a particular product or technology, it is possible that those parties
will obtain patents that will be sufficiently broad to prevent us from using
important technology or from further developing or commercializing important
vaccine and immunotherapeutic systems and vaccine candidates. If licenses from
third parties are necessary but cannot be obtained, commercialization of the
covered products might be delayed or prevented. Even if these licenses can be
obtained, they would probably require us to pay ongoing royalties and other
costs, which could be substantial.
Although a patent has a statutory presumption of validity in the United States,
the issuance of a patent is not conclusive as to validity or as to the
enforceable scope of the patent claims. The validity or enforceability of a
patent after its issuance by the Patent and Trademark Office can be challenged
in litigation. As a business that uses a substantial amount of intellectual
property, we face a heightened risk of intellectual property litigation. If the
outcome of the litigation is
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adverse to the owner of the patent, third parties may then be able to use the
invention covered by the patent without payment. There can be no assurance that
our issued patents or any patents subsequently issued to or licensed by us will
not be successfully challenged in the future. In addition, there can be no
assurance that our patents will not be infringed or that the coverage of our
patents will not be successfully avoided by competitors through design
innovation.
We are aware that others, including universities and companies, have filed
patent applications and have been granted patents in the United States and other
countries which claim subject matter potentially useful or necessary to the
commercialization of our products. The ultimate scope and validity of existing
or future patents which have been or may be granted to third parties, and the
availability and cost of acquiring rights in those patents necessary to the
manufacture, use or sale of our products presently cannot be determined by
AVANT.
We use a mutated Vibrio cholerae in our VibrioVec(TM) vaccine delivery system.
We are aware of an issued U.S. patent which claims a culture of mutated Vibrio
cholerae. We believe that only one claim (the "Claim") of the patent may be
pertinent to our VibrioVec(TM) system. The remaining claims of the patent cover
other cultures which we believe are not pertinent to VibrioVec(TM). We have
received an opinion of counsel from Fish & Richardson, P.C. that, based on the
analysis set forth in their opinion and the facts known to them, the Claim is
invalid. It should be noted that a party challenging validity of a patent has
the burden of proving invalidity and that the outcome of any litigation cannot
be predicted with certainty. Accordingly, there can be no assurance that, if
litigated, a court would conclude that the Claim is invalid.
In addition, we are aware of a foreign patent with claims that could conflict
with AVANT's vaccine candidates and vaccine delivery systems. We believe that
the relevant claims under this patent do not extend to or restrict our
activities, however there can be no assurance that a foreign court would reach
the same conclusion. We are also aware of an issued U.S. patent relating to the
same technology covered by a patent application to which we have been granted an
exclusive license, and in January 2000, an interference was declared in the U.S.
Patent and Trademark Office to determine who is entitled to a U.S. patent on the
herpes vaccine technology.
In addition to the patents referred to in the previous two paragraphs, there may
be other patent applications and issued patents belonging to competitors that
may require us to alter our vaccine candidates and vaccine and immunotherapeutic
delivery systems, pay licensing fees or cease some of our activities. If our
product candidates conflict with patents that have been or may be granted to
competitors, universities or others, the patent owners could bring legal actions
against us claiming damages and seeking to enjoin manufacturing and marketing of
the patented products. If any of these actions are successful, in addition to
any potential liability for damages, we could be required to obtain a license in
order to continue to manufacture or market the affected products. There can be
no assurance that we would prevail in any such action or that any license
required under any such third party patent would be made available on acceptable
terms or at all. We believe that there may be significant litigation in the
biotechnology and vaccine industries regarding patent and other intellectual
property rights. If we become involved in that litigation, we could consume
substantial resources.
LICENSES: We have entered into several significant license agreements relating
to technology that is being developed by AVANT and/or its collaborators,
including licenses from: Massachusetts Institute of Technology covering
proprietary technologies for vaccine delivery related to PCPP microparticles;
Penn State Research Foundation covering the production of polyphosphazene
polymer; Harvard College relating to proprietary technology involving
genetically altered Vibrio cholera and Salmonella strains; Cincinnati Children's
Hospital involving proprietary rights and technologies relating to an attenuated
rotavirus strain for a rotavirus vaccine; Harvard College and the Dana Farber
Cancer Institute relating to a genetically-altered HSV2 virus for use in a
genital herpes virus vaccine; and Harvard College and the NIH for the
proprietary technology related to Therapore(TM), a novel immunotherapy delivery
system to be developed for delivery of products for the treatment of persistent
viral infections and some forms of cancer. In general, these institutions
(except the NIH) have granted us an exclusive worldwide license (with right to
sublicense) to make, use and sell products embodying the licensed technology,
subject to the reservation by the licensor of a non-exclusive right to use the
technologies for non-commercial purposes. Generally, the term of each license is
through the expiration of the last of the patents issued with respect to the
technologies covered by the license. We have generally agreed to use reasonable
efforts to develop and commercialize licensed products and to achieve specified
milestones and pay license fees, milestone payments and royalties based on the
net sales of the licensed products or to pay a percentage of sublicense income.
If we breach our obligations, the licensor has the right to terminate the
license, and, in some cases, convert the license to a non-exclusive license.
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PROPRIETARY RIGHTS: We also rely on unpatented technology, trade secrets and
confidential information, and no assurance can be given that others will not
independently develop substantially equivalent information and techniques or
otherwise gain access to our know-how and information, or that we can
meaningfully protect our rights in such unpatented technology, trade secrets and
information. We require each of our employees, consultants and advisors to
execute a confidentiality agreement at the commencement of an employment or
consulting relationship with AVANT. The agreements generally provide that all
inventions conceived by the individual in the course of employment or in
providing services to AVANT and all confidential information developed by, or
made known to, the individual during the term of the relationship shall be the
exclusive property of AVANT and shall be kept confidential and not disclosed to
third parties except in limited specified circumstances. There can be no
assurance, however, that these agreements will provide meaningful protection for
our information in the event of unauthorized use or disclosure of such
confidential information.
K. GOVERNMENT REGULATION
Our activities and products are significantly regulated by a number of
governmental entities, including the FDA in the United States and by comparable
authorities in other countries and by the USDA with respect to products
developed by Heska. These entities regulate, among other things, the
manufacture, testing, safety, effectiveness, labeling, documentation,
advertising and sale of our products. We must obtain regulatory approval for a
product in all of these areas before we can commercialize the product. Product
development within this regulatory framework takes a number of years and
involves the expenditure of substantial resources. Many products that initially
appear promising ultimately do not reach the market because they are found to be
unsafe or ineffective when tested. Our inability to commercialize a product
would impair our ability to earn future revenues.
In the United States, vaccines and immunotherapeutics for human use are subject
to FDA approval as "biologics" under the Public Health Service Act and "drugs"
under the Federal Food, Drug and Cosmetic Act. The steps required before a new
product can be commercialized include: preclinical studies in animals, clinical
trials in humans to determine safety and efficacy and FDA approval of the
product for commercial sale.
Data obtained at any stage of testing is susceptible to varying interpretations
which could delay, limit or prevent regulatory approval. Moreover, during the
regulatory process, new or changed drug approval policies may cause
unanticipated delays or rejection of our product. We may not obtain necessary
regulatory approvals within a reasonable period of time, if at all, or avoid
delays or other problems in testing its products. Moreover, even if we received
regulatory approval for a product, the approval may require limitations on use,
which would restrict the size of the potential market for the product.
The FDA provides that human clinical trials may begin thirty (30) days after
receipt and review of an Investigational New Drug ("IND") application, unless
the FDA requests additional information or changes to the study protocol within
that period. An IND must be sponsored and filed by AVANT for each of our
proposed products. Authorization to conduct a clinical trial in no way assures
that the FDA will ultimately approve the product. Clinical trials are usually
conducted in three sequential phases; in a Phase I trial, the product is given
to a small number of healthy volunteers to test for safety (adverse effects).
Phase II trials are conducted on a limited group of the target patient
population; safety, optimal dosage and efficacy are studied. A Phase III trial
is performed in a large patient population over a wide geographic area to prove
that significant efficacy exists. The FDA has ongoing oversight over all these
trials and can order a temporary or permanent discontinuation if that action is
warranted. Such an action could materially harm AVANT. Clinical tests are
critical to the success of our products but are subject to unforeseen and
uncontrollable delay, including delay in enrollment of patients. Any delay in
clinical trials could delay our commercialization of a product.
A product's safety and effectiveness in one test does not necessarily indicate
its safety and effectiveness in any other test, including more advanced ones.
Moreover, we may not discover all potential problems with a product even after
completing testing on it. Some of our products and technologies have undergone
only preclinical testing. As a result, we do not know whether they are safe or
effective for humans. Also, regulatory authorities may decide, contrary to our
findings, that a product is unsafe or not as effective in actual use as its test
results indicated. This could prevent the product's widespread use, require its
withdrawal from the market or expose us to liability.
The results of the clinical trials and all supporting data are submitted to the
FDA for approval. A Biologics License Application ("BLA") is submitted for a
biologic product; a New Drug Application (an "NDA") for a drug product. The
interval between IND filing and BLA/NDA filing is usually at least several years
due to the length of the clinical trials;
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and the BLA/NDA review process can take over a year. During this time the FDA
may request further testing, additional trials or may turn down the application.
Even with approval, the FDA frequently requires post-marketing safety studies
(known as Phase IV trials) to be performed.
The FDA requires that the manufacturing facility that produces a licensed
product meet specified standards, undergo an inspection and obtain an
establishment license prior to commercial marketing. Subsequent discovery of
previously unknown problems with a product or its manufacturing process may
result in restrictions on the product or the manufacturer, including withdrawal
of the product from the market. Failure to comply with the applicable regulatory
requirements can result in fines, suspensions of regulatory approvals, product
recalls, operating restrictions and criminal prosecution.
The Advisory Committee on Immunization Practices ("ACIP") of the CDC has a role
in setting the public market in the United States for the vaccine products we
intend to develop. The ACIP makes recommendations on the appropriate use of
vaccines and related products and the CDC develops epidemiologic data relevant
to vaccine requirements and usage.
To market our products abroad, we are subject to varying foreign regulatory
requirements. Although international efforts are being made to harmonize these
requirements, applications must currently be made in each country. The data
necessary and the review time varies significantly from one country to another.
Approval by the FDA does not ensure approval by the regulatory bodies of other
countries.
Our collaborators are subject to all of the above-described regulations in
connection with the commercialization of products utilizing our technology.
L. PRODUCT LIABILITY
The risk of product liability claims, product recalls and associated adverse
publicity is inherent in the testing, manufacturing, marketing and sale of
medical products. If and when we manufacture vaccines that are recommended for
routine administration to children, we will be required to participate in the
National Vaccine Injury Compensation Program. This program compensates children
having adverse reactions to some routine childhood immunizations with funds
collected through an excise tax from the manufacturers of these vaccines.
We have clinical trial liability insurance coverage in the amount of $5 million.
However, there can be no assurance that such insurance coverage is or will
continue to be adequate or available. We may choose or find it necessary under
our collaborative agreements to increase our insurance coverage in the future.
We may not be able to secure greater or broader product liability insurance
coverage on acceptable terms or at reasonable costs when needed. Any liability
for mandatory damages could exceed the amount of our coverage. A successful
product liability claim against us could require us to pay a substantial
monetary award. Moreover, a product recall could generate substantial negative
publicity about our products and business and inhibit or prevent
commercialization of other product candidates.
M. EMPLOYEES; SCIENTIFIC CONSULTANTS
As of March 10, 2000, we employed 50 full time persons, 16 of whom have doctoral
degrees. Of these employees, 36 were engaged in or directly support research and
development activities.
We have also retained a number of scientific consultants and advisors in various
fields and have entered into consulting agreements with each of them. These
consultants include the following members of the Scientific Advisory Board: Dr.
Mark Davis, Stanford University; Dr. Tak Mak, Ontario Cancer Institute; Dr.
Peter Ward, University of Michigan School of Medicine; Dr. Hans Wigzell,
Karolinska Institute; Dr. Peter Henson, National Jewish Center for Immunology
and Respiratory Medicine; Dr. Peter Libby, Brigham and Women's Hospital; and Dr.
Robert Langer, Massachusetts Institute of Technology.
ITEM 2. PROPERTIES
We lease approximately 54,000 square feet of laboratory and office space in
Needham, Massachusetts, of which we sublease approximately 13,000 square feet of
excess laboratory and office space to a tenant. The lease has an initial
six-year term which expires in April 2002. Under the lease agreement, the
Company is obligated to pay a base annual rent of
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$756,400 until the end of the initial term. The sublease relating to the 13,000
square feet of excess space has an initial four-year term which expires in April
2000 with an option to extend the lease to April 2002. Under the sublease
agreement, which was extended by the subtenant to April 2002, we will receive
base annual sub-rental income of $134,500 until the end of the initial term.
Aggregate net base rental payments for the years ended December 31, 1999 and
1998 for this facility were $580,600 and $662,000, respectively.
We also lease approximately 17,800 square feet of laboratory and office space in
Cambridge, Massachusetts. The lease has a five-year term, which commenced on
December 1, 1996. Under the lease agreement, we are obligated to pay a base
annual rent of $293,700 until the end of the lease term. Effective February 1,
1999, we sublet the entire Cambridge, Massachusetts facility through the end of
the lease term. Under the sublease agreement, we will receive base annual
sub-rental income of $431,700 of which approximately $36,000 will be payable to
the landlord as additional rent.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The common Stock of AVANT Immunotherapeutics, Inc. ("AVANT") began trading on
the Nasdaq National Market (the "Nasdaq") under the symbol "AVAN" on August 24,
1998. Prior to that date, we were traded on the Nasdaq under the symbol "TCEL".
The following table sets forth for the periods indicated the high and low
closing sales prices for our common stock as reported by Nasdaq.
<TABLE>
<CAPTION>
FISCAL PERIOD HIGH LOW
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998
1Q (Jan. 1- March 31, 1998) $ 2.94 $ 1.81
2Q (April 1 - June 30, 1998) 4.50 2.38
3Q (July 1 - Sept. 30, 1998) 2.81 1.19
4Q (Oct. 1 - Dec. 31, 1998) 1.78 1.06
YEAR ENDED DECEMBER 31, 1999
1Q (Jan. 1- March 31, 1999) $ 2.41 $ 1.06
2Q (April 1 - June 30, 1999) 2.13 1.13
3Q (July 1 - Sept. 30, 1999) 3.13 1.69
4Q (Oct. 1 - Dec. 31, 1999) 2.47 1.50
</TABLE>
As of March 10, 2000, there were approximately 671 shareholders of record of our
common stock. The price of the common stock was $14.44 as of the close of the
market on March 10, 2000. We have not paid any dividends on our common stock
since our inception and do not intend to pay any dividends in the foreseeable
future. Declaration of dividends will depend, among other things, upon the
operating and future earnings of AVANT, our capital requirements and general
business conditions.
On September 22, 1999, we closed a private placement of approximately 5.5
million shares of common stock at $1.92 per share for a total amount of $10.5
million. Nomura was the placing agent for the offering that included several
European and U.S. institutional investors. The transaction was not registered
under the Securities Act of 1933, as amended, in reliance on an exemption from
registration provided by Rule 506 of that Act, which was available because,
among other things, there were fewer than thirty five purchasers of common stock
and more than six months had elapsed from the date of any previous offerings.
Proceeds from the private placement are being used to support clinical
development of our lead complement inhibitor, TP10, in infants undergoing
cardiac surgery on cardiopulmonary bypass and other company activities.
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<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data presented below for the years ended
December 31, 1999, 1998, 1997, 1996 and 1995 have been derived from the audited
consolidated financial statements of AVANT. The results of operations for 1999
and 1998 include the operating results of Virus Research Institute, Inc. ("VRI")
from August 21, 1998, the date on which AVANT acquired VRI, through the present
(see Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations"). All amounts are in thousands except per share data.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS
OF OPERATIONS DATA Year Ended December 31,
- -------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
OPERATING REVENUE:
Product Sales, Product Development
and Licensing Agreements $ 1,484 $ 2,150 $ 1,192 $ 1,115 $ 3,963
- -------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSE:
Research and Development 7,872 5,703 5,257 6,036 8,005
Charge for Purchased In-Process
Research & Development -- 44,630 -- -- --
Legal Settlement -- (166) 6,109 -- (2,900)
Other Operating Expense 5,556 4,377 3,494 6,549 7,821
- -------------------------------------------------------------------------------------------------------------------------
Total Operating Expense 13,428 54,544 14,860 12,585 12,926
- -------------------------------------------------------------------------------------------------------------------------
Non-Operating Income, Net 635 594 560 680 705
- -------------------------------------------------------------------------------------------------------------------------
Net Loss $ (11,309) $ (51,800) $ (13,108) $ (10,790) $ (8,258)
=========================================================================================================================
Basic and Diluted Net Loss Per
Common Share $ (0.26) $ (1.56) $ (0.52) $ (0.50) $ (0.47)
=========================================================================================================================
Weighted Average Common
Shares Outstanding 44,076 33,177 25,140 21,693 17,482
=========================================================================================================================
<CAPTION>
CONSOLIDATED BALANCE
SHEET DATA December 31,
- -------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Working Capital $ 12,289 $ 12,298 $ 4,629 $ 11,673 $ 11,208
Total Assets 19,883 22,650 9,827 17,224 18,532
Other Long Term Obligations 269 563 750 -- 182
Accumulated Deficit (133,345) (122,036) (70,237) (57,129) (46,339)
Total Stockholders' Equity 17,413 18,770 6,316 15,619 16,000
</TABLE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In January 1997, the Securities and Exchange Commission issued Financial
Reporting Release No. 48, which expands the disclosure requirements for certain
derivatives and other financial instruments. We do not utilize derivative
financial instruments. See Notes 1 and 2 to the Consolidated Financials
Statements for a description of our use of other financial instruments.
-25-
<PAGE>
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: STATEMENTS CONTAINED IN THE FOLLOWING, ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, THAT ARE NOT
HISTORICAL FACTS MAY BE FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO A VARIETY
OF RISKS AND UNCERTAINTIES. THERE ARE A NUMBER OF IMPORTANT FACTORS THAT COULD
CAUSE THE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY
FORWARD-LOOKING STATEMENTS MADE BY AVANT. THESE FACTORS INCLUDE, BUT ARE NOT
LIMITED TO: (I) OUR ABILITY TO SUCCESSFULLY COMPLETE PRODUCT RESEARCH AND
DEVELOPMENT, INCLUDING PRE-CLINICAL AND CLINICAL STUDIES, AND COMMERCIALIZATION;
(II) OUR ABILITY TO OBTAIN SUBSTANTIAL ADDITIONAL FUNDING; (III) OUR ABILITY TO
OBTAIN REQUIRED GOVERNMENTAL APPROVALS; (IV) OUR ABILITY TO ATTRACT
MANUFACTURING, SALES, DISTRIBUTION AND MARKETING PARTNERS AND OTHER STRATEGIC
ALLIANCES; AND (V) OUR ABILITY TO DEVELOP AND COMMERCIALIZE ITS PRODUCTS BEFORE
ITS COMPETITORS.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
AVANT's principle activity since our inception has been research and product
development conducted on our own behalf, as well as through joint development
programs with several pharmaceutical companies. We were incorporated in the
State of Delaware in December 1983.
A significant portion of AVANT's revenue has consisted of payments by others to
fund sponsored research, milestone payments under joint development agreements,
license fees, payments for material produced for preclinical and clinical
studies, and sales of test kits and antibodies. Certain portions of the
collaborative payments are received in advance, recorded as deferred revenue and
recognized when earned in later periods.
Inflation and changing prices have not had a significant effect on continuing
operations and are not expected to have any in the near future.
OVERVIEW
We are engaged in the discovery, development and commercialization of products
that harness the human immune response to prevent and treat disease. Our
products derive from a broad set of complementary technologies with the ability
to inhibit the complement system, regulate T and B cell activity, and enable the
creation and delivery of preventative and therapeutic vaccines. We are using
these technologies to develop vaccines and immunotherapeutics that prevent or
treat disease caused by infectious organisms, and drugs and treatment vaccines
that modify undesirable activity by the body's own proteins or cells.
ACQUISITION
On August 21, 1998 AVANT acquired VRI, a company engaged in the discovery and
development of systems for the delivery of vaccines and immunotherapeutics, and
novel vaccines for adults and children. We issued 14,036,400 shares of AVANT's
common stock and warrants to purchase 1,811,200 shares of AVANT's common stock
in exchange for all of the outstanding common stock of VRI, on the basis of 1.55
shares of our common stock and .20 of an AVANT warrant for each share of VRI
common stock. The acquisition has been accounted for as a purchase.
Consequently, the purchase price was allocated to the acquired assets and
assumed liabilities based upon their fair value at the date of acquisition. The
excess of the purchase price over the tangible assets acquired was assigned to
collaborative relationships, work force and goodwill and is being amortized on a
straight line basis over 12 to 60 months. An allocation of $44,630,000 was made
to in-process research and development ("IPR&D") which represented purchased
in-process technology which had not yet reached technological feasibility and
had no alternative future use. The amount was charged as an expense in our
financial statements during the third quarter of 1998.
As of the date of acquisition, VRI was engaged in the following six significant
research and development projects:
1. Adjumer(R) -- a vaccine delivery system being developed with a
collaborator, Aventis, as an adjuvant to enhance the immune response to
injected vaccines.
2. Micromer(R) -- a vaccine delivery system designed to facilitate the mucosal
(intranasal or oral) delivery of antigens and stimulate both the systemic
and mucosal branches of the immune system.
3. Vibrio Vec(TM)-- a vaccine and immunotherapeutic system that uses a \
bacterial vector for the oral delivery of antigens.
4. Rotavirus vaccine -- a vaccine against rotavirus infection being developed
with a collaborator, SmithKline.
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<PAGE>
5. Herpes vaccine - a vaccine for the prevention of genital herpes.
6. Therapore(TM) - a novel technology for the development of
immunotherapeutics.
As of the acquisition date, the IPR&D value assigned to each project, the
estimated cost to reach technological feasibility and the projected product
release date was as set forth below:
<TABLE>
<CAPTION>
Project Adjumer(R) Micromer(R) Vibrio Vec(TM) Rotavirus Herpes Therapore(TM)
- ------- ---------- ----------- -------------- --------- ------ -------------
<S> <C> <C> <C> <C> <C> <C>
Value Assigned $15,450,000 $ 3,260,000 $ 2,450,000 $ 3,120,000 $ 2,240,000 $18,110,000
Estimated
Cost to
Complete $ 9,500,000 $ 3,300,000 $ 900,000 $ 1,200,000 $ 1,600,000 $41,200,000
Estimated
Project
Release Date 2001-2004 2002-2004 2003 2002 2007 2004
</TABLE>
As of December 31, 1999, technological feasibility had not yet been reached on
any of the major projects acquired, and no significant departures from the
assumptions included in the valuation analysis had occurred. Substantial
additional research and development will be required prior to reaching
technological feasibility. In addition, each project will need to successfully
complete a series of clinical trials and will need to receive Food & Drug
Administration ("FDA") approval prior to commercialization. There can be no
assurance these projects will ever reach feasibility or develop into products
that can be marketed profitably, nor can there be assurance that AVANT and our
collaborators will be able to develop and commercialize these products before
our competitors. If these products are not successfully developed and do not
become commercially viable, our financial condition and results of operations
could be harmed.
The acquisition of VRI represents the only purchase of historical IPR&D by
AVANT. As of December 31, 1999, we have no immediate plans to acquire additional
IPR&D, although we expect to raise additional capital, as required, through
licensing of technology programs with existing or new collaborative partners,
possible business combinations, or issuance of common stock via private
placement and public offering.
NEW DEVELOPMENTS
Positive Phase I/II results of AVANT's lead drug candidate, TP10, in patients
undergoing lung transplantation were presented in April 1998. Results in these
patients showed that TP10 therapy appears safe and well tolerated and
demonstrated significant efficacy. TP10 is our product name for sCR1, a
therapeutic compound which inhibits the complement system, a key triggering
mechanism for the inflammatory response. In 1997, we entered into an agreement
with Novartis relating to the development of TP10 for use in xenotransplantation
(animal organs into humans) and allotransplantation (human organs into humans).
We granted Novartis a two-year option to license TP10 with exclusive worldwide
marketing rights (except Japan) in the fields of xenotransplantation and
allotransplantation. We received our second option fee payment in November 1998
which initiated year two of the option agreement. In July 1999, Novartis
exercised its option to license TP10 for use in the field of transplantation. In
December 1999, the Novartis agreement was amended to include marketing rights
for Japan. The decision to license TP10 resulted in a $6 million equity
investment and license payment by Novartis which was received by AVANT in
January 2000. Under the agreement, we may receive additional milestone payments
of up to $14 million upon attainment of certain development and regulatory
goals. We will also be entitled to royalties on product sales under the
agreement.
In September 1999, we initiated an open-label, Phase I/II trial of TP10 in
infants undergoing cardiac surgery for congenital heart defects. The trial will
evaluate the ability of TP10 to mitigate the injury to the heart and other
organs that occurs when patients are placed on cardiopulmonary bypass circuits.
In August 1998, AVANT announced positive results of our Phase II efficacy study
of our vaccine for the prevention of rotavirus disease in infants. Rotavirus is
a major cause of acute diarrhea and dehydration in infants for which there are
currently no approved vaccines, although several are under development. The
rotavirus vaccine is being developed and commercialized in collaboration with
SmithKline. Following successful completion of the Phase II trial, SmithKline
has assumed responsibility for and funds all subsequent clinical and other
development activities. In June 1999, we received
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<PAGE>
a milestone payment of $500,000 for the successful completion of the Phase II
clinical efficacy study and the establishment of a commercially viable process
for manufacture of the vaccine. We will be entitled to receive additional
milestone payments and royalties on vaccine sales under the agreement which
grants SmithKline exclusive worldwide marketing rights to the rotavirus vaccine.
AVANT is a party to two license agreements with Aventis pursuant to which
Aventis has been granted the exclusive and co-exclusive right (exclusive, except
for the right of AVANT or one other person licensed by AVANT) to make, use and
sell certain of our vaccines. We received a milestone payment of $600,000 from
our collaborator Aventis in the fourth quarter of 1998. The milestone payment
relates to a Phase I clinical trial using our Adjumer(R)-formulated RSV vaccine
initiated by Aventis in 1998.
Based on encouraging results from a Phase I clinical trial of the humanized
monoclonal antibody, ATM-027, in patients with multiple sclerosis, our
collaborator Astra initiated a Phase II clinical trial for ATM-027 in patients
with multiple sclerosis in 1998. ATM-027 is one of the products derived from our
T cell antigen receptor (TCAR) program, now under development by Astra. In
December 1999, we announced results of the Phase II study of ATM-027 which
showed that ATM-027 was safe and well tolerated, however, in the view of Astra
the reduction of disease activity in the study population did not reach a level
that would be of value for those patients. Therefore, Astra made the decision to
stop further development of ATM-027 for multiple sclerosis but is reviewing
development of the TCAR peptide as a vaccine for multiple sclerosis under the
terms of the TCAR agreement.
RESULTS OF OPERATIONS
FISCAL YEAR ENDED DECEMBER 31, 1999 COMPARED WITH FISCAL YEAR ENDED DECEMBER 31,
1998
AVANT reported a net loss of $11,309,100, or $0.26 per share, for the year ended
December 31, 1999, compared to a net loss of $51,799,700, or $1.56 per share,
for the year ended December 31, 1998. The net loss for the year ended December
31, 1998, includes a charge of $44,630,000 for purchased in-process research and
development related to the acquisition of VRI in August 1998. Excluding the
charge for purchased in-process research and development in 1998, the net loss
for 1999 increased 57.7% to $11,309,100, or $0.26 per share, compared to a net
loss of $7,169,700, or $0.22 per share, for 1998. The weighted average common
shares outstanding used to calculate the net loss per common share was
44,076,400 in 1999 and 33,177,200 in 1998.
OPERATING REVENUE
Total operating revenue decreased $666,900, or 31.0%, to $1,483,500 in 1999 from
$2,150,400 in 1998.
Product development and licensing revenue decreased $611,000, or 29.2%, to
$1,483,500 in 1999 from $2,094,500 in 1998. Product development and licensing
revenue in 1999 consisted primarily of a $750,000 nonrefundable option fee
associated with our agreement with Novartis, a milestone payment of $500,000
from SmithKline and $193,500 received in connection with our SBIR grants. In
1998, we recognized $1,000,000 of a nonrefundable option fee from Novartis in
product development and licensing revenue, milestone payments totaling $600,000
from Aventis and $494,500 received in connection with our SBIR grants.
There were no product sales recorded in 1999. Product sales for 1998 totaled
$55,900 and were derived from sales of our TRAx(R) test kits. In August 1999,
AVANT sold the TRAx(R) line of diagnostic products and the TRAx(R) technology.
OPERATING EXPENSE
Total operating expense for 1999 was $13,427,800 compared to $54,544,300 for
1998. Operating expense for 1998 included a charge of $44,630,000 for purchased
in-process research and development in connection with the acquisition of VRI in
August 1998. Excluding the purchased in-process research and development charge
in 1998, operating expense increased $3,513,500, or 35.4%, to $13,427,800 for
1999 compared to $9,914,300 for 1998. The increase in total operating expense
for 1999 compared to 1998 is primarily due to: (i) a full year of operations of
VRI in 1999 versus four months in 1998, combined with an increase of goodwill
amortization expense of $729,400; (ii) an increase in clinical trials cost; and
(iii) an increase in expense associated with the manufacture of clinical
materials for AVANT-funded clinical studies.
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<PAGE>
Research and development expense increased $2,168,700, or 38.0%, to
$7,871,800 in 1999 from $5,703,100 in 1998. The increase in 1999 compared to
1998 is primarily due to a full year of operations of VRI in 1999 versus four
months in 1998, costs associated with conducting the Phase I clinical trial
of CETi-1 vaccine and the Phase I/II clinical trial of TP10, both ongoing in
1999, and an increase in expense associated with the manufacture of clinical
materials.
General and administrative expense increased $472,100, or 12.4%, to $4,280,200
in 1999 compared to $3,808,100 in 1998. Included in general and administrative
expense in 1999 and 1998 are charges of $105,900 and $294,500 for the write-off
of certain capitalized patent costs associated with our SMIR program and our
TRAx(R) technology, respectively. Excluding the writeoff of patent costs in 1999
and 1998, general and administrative expense increased $660,700, or 18.8%, to
$4,174,300 for 1999 compared to $3,513,600 for 1998. The increase in 1999
compared to 1998 is primarily due to a full year of operations of VRI in 1999
versus four months in 1998.
NON-OPERATING INCOME, NET
Non-operating income, net increased $41,000, or 6.9%, to $635,200 for 1999
compared to $594,200 in 1998. Interest income increased $63,300, or 11.1%, to
$635,200 for 1999 compared to $571,900 for 1998. The increase in interest income
is primarily due to higher average cash balances in 1999.
FISCAL YEAR ENDED DECEMBER 31, 1998 COMPARED WITH FISCAL YEAR ENDED DECEMBER 31,
1997
AVANT reported a net loss of $51,799,700, or $1.56 per share, for the year ended
December 31, 1998, compared to a net loss of $13,108,000, or $0.52 per share,
for the year ended December 31, 1997. The net loss for the year ended December
31, 1998, includes a charge of $44,630,000 for purchased in-process research and
development related to the acquisition of VRI in August 1998. The net loss for
the year ended December 31, 1997 includes a charge of $6,108,800 for the
settlement of litigation with our former landlord and the landlord's mortgagee.
Excluding the charge for purchased in-process research and development in 1998
and the charge for the settlement of our litigation in 1997, the net loss for
1998 increased 2.4% to $7,169,700, or $0.22 per share, compared to $6,999,200,
or $0.28 per share, for 1997. The weighted average common shares outstanding
used to calculate the net loss per common share was 33,177,200 in 1998 and
25,139,900 in 1997.
OPERATING REVENUE
Total operating revenue increased $958,300, or 80.4%, to $2,150,400 in 1998 from
$1,192,100 in 1997.
Product development and licensing revenue increased $946,900 in 1998, or 82.5%,
to $2,094,500 from $1,147,600 in 1997. Product development and licensing revenue
in 1998 consisted primarily of a $1,000,000 nonrefundable option fee associated
with our agreement with Novartis, a milestone payment of $600,000 from Aventis
and $494,500 received in connection with our SBIR grants. In 1997, we recognized
$250,000 of a nonrefundable option fee from Novartis in product development and
licensing revenue, milestone payments totaling $650,000 from Astra and $247,600
received in connection with our SBIR grants.
Product sales for 1998 and 1997 totaled $55,900 and $44,500, respectively, and
were derived from sales of our TRAx(R) test kits.
OPERATING EXPENSE
Operating expense of $54,544,300 for 1998 included a charge of $44,630,000 for
purchased in-process research and development in connection with the acquisition
of VRI in August 1998. In May 1998, we used cash as collateral for a $750,000
note due November 15, 1999 issued in connection with a settlement agreement with
its former landlord and the landlord's mortgagee. In accordance with the
settlement agreement, 66,250 shares of our common stock issued to secure the
note were returned to AVANT. The common stock was valued at $165,600 as of
October 31, 1997 and its return is included as a reduction of operating expense
in 1998. Operating expense of $14,859,600 for 1997 included a charge of
$6,108,800 for the settlement of litigation with our former landlord and the
landlord's mortgagee. Excluding the purchased in-process research and
development charge in 1998 and the legal settlement in 1997, operating expense
increased $1,163,500, or 13.3%, to $9,914,300 for 1998 compared to $8,750,800
for 1997. The increase in operating
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<PAGE>
expense for 1998 compared to 1997 is primarily due to four months of operations
of VRI combined with goodwill amortization expense of $546,400 and the write-off
of certain capitalized patent costs relating to our TRAx(R) technology.
Research and development expense increased $446,200, or 8.5%, to $5,703,100 in
1998 from $5,256,900 in 1997. The increase in 1998 compared to 1997 is primarily
due to four months of operations of VRI, partially offset by costs associated
with Phase I and Phase I/II clinical trials of TP10 ongoing in 1997.
General and administrative expense increased $335,200, or 9.7%, to $3,808,100 in
1998 compared to $3,472,900 in 1997. Included in general and administrative
expense in 1998 is a charge of $294,500 for the write-off of certain capitalized
patent costs associated with our TRAx(R) technology. Reductions in legal costs
in 1998 primarily due to the settlement of litigation in 1997 and lower
consulting costs in 1998 compared to 1997 were offset by certain general and
administrative costs associated with four months of operations of VRI.
NON-OPERATING INCOME, NET
Non-operating income, net increased $34,700, or 6.2%, to $594,200 for 1998
compared to $559,500 in 1997. Interest income decreased $5,400, or 0.9%, to
$571,900 for 1998 compared to $577,300 for 1997. The reductions in interest
income are primarily due to lower cash balances combined with lower interest
rates in 1998.
LIQUIDITY AND CAPITAL RESOURCES
AVANT's cash, cash equivalents and marketable securities at December 31, 1999
was $13,619,000 compared to $13,840,300 at December 31, 1998. Cash used in
operations was $8,539,100 in 1999 compared to $8,852,000 in 1998 and $7,695,400
in 1997.
In July 1999, Novartis exercised its option to license TP10 for use in the field
of transplantation. The decision to license TP10 resulted in a $6 million
payment by Novartis which was received by AVANT in January 2000.
In September 1999, we completed a private placement of 5,459,400 shares of
common stock to institutional investors at a price of $1.92 per share. Net
proceeds from the common stock issuance totaled approximately $9,838,900. In
March 1998, we completed a private placement of 2,043,500 shares of common stock
to institutional investors at a price of $1.90 per share. Net proceeds from the
common stock issuance totaled approximately $3,699,800.
In November 1997, AVANT reached a settlement of the litigation with our former
landlord and the landlord's mortgagee. As part of the settlement, we agreed to
pay $858,800 in cash on November 17, 1997 and issue a total of 1,500,000 shares
of our common stock. In addition, we signed a note for $750,000, due on November
16, 1998 secured by $750,000 cash and a note for $750,000 due November 15, 1999
secured by 132,500 shares of common stock. The total settlement, valued at
$6,108,800, is comprised of the cash and notes totaling $2,358,800 and common
stock valued at $3,750,000 as of October 31, 1997. The common stock is subject
to restrictions on transfer in accordance with the settlement agreement and
limits the number of shares that may be sold over a given period of time. In May
1998, in accordance with the settlement agreement, we elected to secure the note
for $750,000 due November 15, 1999 by $750,000 cash in exchange for the return
of 66,250 shares or one half of the common stock originally used to secure the
note. The cash collateral is recorded as short-term restricted cash at December
31, 1998. In November 1999, the note was paid in full.
During 1994, we entered into an agreement providing AVANT with the right to
lease up to $2,000,000 of equipment for up to a five-year term. The lease
arrangement contains certain restrictive covenants, determined at the end of
each fiscal quarter which, for the quarter ended September 30, 1995 included a
minimum cash, cash equivalents and short-term investments balance of
$10,000,000. At September 30, 1995 our cash, cash equivalents and short-term
investment balance was below $10,000,000. As a result, in accordance with the
lease agreement, we pledged as collateral cash equal to the amount outstanding
on the lease which is to remain in a certificate of deposit until the end of the
lease, or as otherwise agreed by the lessor and AVANT. At December 31, 1999, we
had $217,000 pledged as collateral recorded as long-term restricted cash.
AVANT believes that cash inflows from existing collaborations, interest income
on invested funds and our current cash and cash equivalents, net of restricted
amounts, will be sufficient to meet estimated working capital requirements and
fund operations beyond December 31, 2000 and into the first half of 2001. The
working capital requirements of AVANT are dependent on several factors
including, but not limited to, the costs associated with research and
development programs, preclinical and clinical studies and the scope of
collaborative arrangements. During 2000, we expect to take steps to raise
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<PAGE>
additional capital including, but not limited to, licensing of technology
programs with existing or new collaborative partners, possible business
combinations, or issuance of common stock via private placement and public
offering.
THE STATEMENTS IN THE FOLLOWING SECTION INCLUDE THE "YEAR 2000 READINESS
DISCLOSURE" WITHIN THE MEANING OF THE YEAR 2000 INFORMATION AND READINESS
DISCLOSURE ACT.
YEAR 2000
The "Year 2000" issue affects computer systems that have date sensitive programs
that may not properly recognize the year 2000. Systems that do not properly
recognize such information could generate data or cause a system to fail,
resulting in business interruption. Through the first ten weeks of the year
2000, AVANT's operations are fully functioning and have not experienced any
significant issues associated with the Year 2000 problem discussed above. Costs
associated with modifications made by AVANT to be Year 2000 compliant were
immaterial. There can be no assurance, however, that a failure by another
company's system to be Year 2000 compliant would not have a material adverse
affect on our business, operating results and financial condition.
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<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Page
<S> <C>
Index to Consolidated Financial Statements and Supplementary Schedules 32
Report of Independent Accountants 33
Consolidated Balance Sheet at December 31, 1999 and 34
December 31, 1998
Consolidated Statement of Operations for the Years Ended 35
December 31, 1999, December 31, 1998 and December 31, 1997
Consolidated Statement of Stockholders' Equity for the Years Ended 36
December 31, 1999, December 31, 1998 and December 31, 1997
Consolidated Statement of Cash Flows for the Years Ended 37
December 31, 1999, December 31, 1998, and December 31, 1997
Notes to Consolidated Financial Statements 38
</TABLE>
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<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of Directors and Shareholders of
AVANT Immunotherapeutics, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income and of cash flows present fairly, in all
material respects, the financial position of AVANT Immunotherapeutics, Inc. and
its subsidiaries at December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 14, 1999
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<PAGE>
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 13,619,000 $ 8,937,200
Marketable Securities -- 4,903,100
Current Portion Restricted Cash -- 750,000
Current Portion Lease Receivable 431,700 395,700
Prepaid and Other Current Assets, Net 439,000 629,700
- ------------------------------------------------------------------------------------------------------------------------
Total Current Assets 14,489,700 15,615,700
Property and Equipment, Net 1,256,800 1,111,400
Restricted Cash 217,000 365,000
Long-Term Lease Receivable 395,700 827,300
Other Assets 3,523,500 4,730,700
- ------------------------------------------------------------------------------------------------------------------------
Total Assets $ 19,882,700 $ 22,650,100
========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 575,300 $ 363,700
Accrued Expenses 1,331,500 1,184,700
Deferred Revenue -- 750,000
Short-Term Note Payable -- 750,000
Current Portion Lease Payable 293,700 269,200
- ------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 2,200,500 3,317,600
- ------------------------------------------------------------------------------------------------------------------------
Long-Term Lease Payable 269,200 562,900
- ------------------------------------------------------------------------------------------------------------------------
Commitments and Contingent Liabilities (Notes 3 and 13)
Stockholders' Equity:
Common Stock, $.001 Par Value 75,000,000 Shares Authorized; 48,127,400
Issued and Outstanding at December 31, 1999; 42,512,400 Issued and
42,508,600 Outstanding at
December 31, 1998 48,100 42,500
Additional Paid-In Capital 150,710,300 140,777,200
Less: 0 and 3,800 Common Treasury Shares at Cost at
December 31, 1999 and 1998, respectively -- (13,800)
Accumulated Deficit (133,345,400) (122,036,300)
- ------------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 17,413,000 18,769,600
- ------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 19,882,700 $ 22,650,100
========================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-34-
<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUE:
Product Development and
Licensing Agreements $ 1,483,500 $ 2,094,500 $ 1,147,600
Product Sales -- 55,900 44,500
--------------------------------------------------------------------------------------------------------------------------
Total Operating Revenue 1,483,500 2,150,400 1,192,100
--------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSE:
Research and Development 7,871,800 5,703,100 5,256,900
General and Administrative 4,280,200 3,808,100 3,472,900
Cost of Product Sales -- 22,300 21,000
Charge for Purchased In-Process Research & Development -- 44,630,000 --
Legal Settlement -- (165,600) 6,108,800
Amortization of Goodwill 1,275,800 546,400 --
--------------------------------------------------------------------------------------------------------------------------
Total Operating Expense 13,427,800 54,544,300 14,859,600
--------------------------------------------------------------------------------------------------------------------------
Operating Loss (11,944,300) (52,393,900) (13,667,500)
Non-Operating Income, Net 635,200 594,200 559,500
--------------------------------------------------------------------------------------------------------------------------
Net Loss $ (11,309,100) $ (51,799,700) $ (13,108,000)
==========================================================================================================================
Basic and Diluted Net Loss Per Common Share $ (0.26) $ (1.56) $ (0.52)
==========================================================================================================================
Weighted Average Common
Shares Outstanding 44,076,400 33,177,200 25,139,900
==========================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-35-
<PAGE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
Common Additional Treasury Total
Stock Paid-In Stock Accumulated Stockholders'
Shares Par Value Capital Cost Deficit Equity
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT 24,965,400 $ 25,000 $ 72,791,800 $(69,000) $ (57,128,600) $15,619,200
DECEMBER 31, 1996
Issuance at $1.81 to $2.13
per Share upon Exercise
of Stock Options 12,000 -- 22,400 -- -- 22,400
Employee Stock Purchase
Plan Issuance at $1.38 and
$1.39 per Share -- -- (20,700) 33,200 -- 12,500
Issuance at $2.50 per Share for
Settlement of Litigation 1,500,000 1,500 3,748,500 -- -- 3,750,000
Compensation Expense Associated
with Issuance at $1.94 per
Share 10,000 -- 19,400 -- -- 19,400
Net Loss for the Year
Ended December 31, 1997 -- -- -- -- (13,108,000) (13,108,000)
- -------------------------------------------------------------------------------------------------------------------------
BALANCE AT 26,487,400 $ 26,500 $ 76,561,400 $(35,800) $ (70,236,600) $ 6,315,500
DECEMBER 31, 1997
Issuance at $0.60 to $1.81
per Share upon Exercise
of Stock Options 11,400 -- 15,300 -- -- 15,300
Employee Stock Purchase
Plan Issuance at $1.65 and
$1.94 per Share -- -- (10,700) 22,000 -- 11,300
Returned Shares from Settlement
of Litigation at $2.50 per (66,300) -- (165,600) -- -- (165,600)
Share
Net Proceeds from Stock Issuance 2,043,500 2,000 3,697,800 -- -- 3,699,800
Share Issued for Acquisition of
Virus Research Institute, Inc. 14,036,400 14,000 60,679,000 -- -- 60,693,000
Net Loss for the Year
Ended December 31, 1998 -- -- -- -- (51,799,700) (51,799,700)
- -------------------------------------------------------------------------------------------------------------------------
BALANCE AT 42,512,400 $ 42,500 $ 140,777,200 $(13,800) $(122,036,300) $18,769,600
DECEMBER 31, 1998
Issuance at $0.10 to $1.81
per Share upon Exercise
of Stock Options 152,100 100 102,000 -- -- 102,100
Employee Stock Purchase
Plan Issuance at $1.46 to
$1.78 per Share 3,500 -- (2,200) 13,800 -- 11,600
Net Proceeds from Stock Issuance 5,459,400 5,500 9,833,300 -- -- 9,838,800
Net Loss for the Year
Ended December 31, 1999 -- -- -- -- (11,309,100) (11,309,100)
- -------------------------------------------------------------------------------------------------------------------------
BALANCE AT 48,127,400 $ 48,100 $ 150,710,300 $ -- $(133,345,400) $17,413,000
DECEMBER 31, 1999
=========================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-36-
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
Increase (Decrease) in Cash and Cash Equivalents 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (11,309,100) $ (51,799,700) $ (13,108,000)
Adjustments to Reconcile Net Loss to Cash
Used by Operating Activities:
Depreciation and Amortization 1,988,600 989,800 353,800
Write-off of Capitalized Patent Costs 105,900 337,000 51,100
Non-Cash Portion of Litigation Settlement -- (165,600) 5,250,000
Compensation Expense Associated with
Stock Issuance -- -- 19,400
Gain on Sale of Equipment -- (22,300) --
Charge for Purchased In-Process Research and
Development -- 44,630,000 --
Changes in Assets and Liabilities, Net of Acquisition:
Current Portion Restricted Cash 750,000 -- (750,000)
Prepaid and Other Current Assets 190,700 (1,529,900) 81,700
Accounts Payable and Accrued Expenses 358,400 (1,291,300) (343,400)
Deferred Revenue (750,000) -- 750,000
Lease Receivable 395,600 -- --
Lease Payable (269,200) -- --
- --------------------------------------------------------------------------------------------------------------------------
Net Cash Used by Operating Activities (8,539,100) (8,852,000) (7,695,400)
- --------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Property and Equipment (688,500) (294,800) (76,900)
Proceeds from the Sale of Equipment -- 25,200 --
Redemption of Marketable Securities 4,903,100 4,463,000 --
Increase in Patents and Licenses (344,200) (426,000) (381,200)
Decrease in Long-Term Restricted Cash, Net 148,000 160,000 160,000
Cash Received from Acquisition of Virus Research
Institute, Inc. -- 4,391,500 --
Payment of Notes Payable (750,000) (750,000) --
Payment Received on Convertible Note Receivable -- -- 1,802,700
Other -- 57,600 400
- --------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Investing Activities 3,268,400 7,626,500 1,505,000
- --------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Proceeds from Stock Issuance 9,850,400 3,711,100 12,500
Proceeds from Exercise of Stock Options 102,100 15,300 22,400
- --------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 9,952,500 3,726,400 34,900
- --------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents 4,681,800 2,500,900 (6,155,500)
Cash and Cash Equivalents at Beginning of Period 8,937,200 6,436,300 12,591,800
- --------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 13,619,000 $ 8,937,200 $ 6,436,300
==========================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-37-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 and 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) NATURE OF BUSINESS
AVANT Immunotherapeutics, Inc. ("AVANT") is a biopharmaceutical company engaged
in the discovery, development and commercialization of products that harness the
human immune response to prevent and treat disease. We develop and commercialize
products on a proprietary basis and in collaboration with established
pharmaceutical partners, including Novartis Pharma AG, AstraZeneca plc,
Yamanouchi Pharmaceutical Co., Ltd., Aventis Pasteur, SmithKline Beecham plc and
Heska Corporation.
In September 1999, we completed a private placement of 5,459,400 shares of
common stock to institutional investors at a price of $1.92 per share. Net
proceeds from the common stock issuance totaled approximately $9,838,800. In
March 1998, we completed a private placement of 2,043,500 shares of common stock
to institutional investors at a price of $1.90 per share. Net proceeds from the
common stock issuance totaled approximately $3,699,800. On August 21, 1998,
AVANT acquired all of the outstanding capital stock of Virus Research Institute,
Inc. ("VRI"), a company engaged in the discovery and development of (i) systems
for the delivery of vaccines and immunotherapeutics and (ii) novel vaccines (see
Note 14).
AVANT's cash and cash equivalents at December 31, 1999 was $13,619,000. Our
working capital at December 31, 1999 was $12,289,200. We incurred a loss of
$11,309,100 for the year ended December 31, 1999. AVANT believes that cash
inflows from existing grants and collaborations, interest income on invested
funds and our current cash, cash equivalents, and marketable securities will be
sufficient to meet estimated working capital requirements and fund operations
beyond December 31, 2000. The working capital requirements of AVANT are
dependent on several factors including, but not limited to, the costs associated
with research and development programs, preclinical and clinical studies and the
scope of collaborative arrangements. During 2000, we expect to take steps to
raise additional capital including, but not limited to, licensing of technology
programs with existing or new collaborative partners, possible business
combinations, or issuance of common stock via private placement and public
offering. There can be no assurances that such efforts will be successful.
In July 1999, Novartis exercised its option to license TP10 for use in the field
of transplantation. The decision to license TP10 resulted in a $6 million
payment by Novartis which was received by AVANT in January 2000. The payment
included an equity investment of $2,307,700 for 1,439,496 shares of our common
stock at $1.60 per share and a license fee of $3,692,300.
In March 1996, we sold substantially all of the assets of our wholly-owned
subsidiary, T Cell Diagnostics, Inc while retaining all rights to the TRAx(R)
product franchise. In August 1999, we sold the TRAx(R) line of diagnostic
products and the TRAx(R) technology to Innogenetics, Inc. for a combination of
cash and future royalty payments.
(B) BASIS OF PRESENTATION
The consolidated financial statements include the accounts of AVANT
Immunotherapeutics, Inc. and our wholly owned subsidiary Polmerix, Inc. All
intercompany transactions have been eliminated.
(C) CASH EQUIVALENTS AND INVESTMENTS
AVANT considers all highly liquid investments purchased with a maturity of three
months or less to be cash equivalents. Short-term investments are those with
maturities in excess of three months but less than one year. All cash
equivalents and short-term investments have been classified as available for
sale and are reported at fair market value with unrealized gains and losses
included in stockholders' equity.
In addition to cash equivalents, at December 31, 1998, we had investments in
corporate and municipal debt securities that are classified in the balance sheet
as held-to-maturity in accordance with the provisions of Statement of Financial
Accounting Standards No. 115 ("SFAS 115"), "Accounting for Certain Instruments
in Debt and Equity Securities."
-38-
<PAGE>
Held-to-maturity investments are securities we have the positive intent and
ability to hold to maturity. These securities are accounted for at amortized
cost, which approximates fair value.
We invest our non-operating cash in debt instruments of financial institutions,
government entities and corporations, and mutual funds. We have established
guidelines relative to credit ratings, diversification and maturities that
maintain safety and liquidity.
(D) FAIR VALUE OF FINANCIAL INSTRUMENTS
AVANT enters into various types of financial instruments in the normal course of
business. Fair values for cash, cash equivalents, short-term investments,
accounts and notes receivable, accounts and notes payable and accrued expenses
approximate carrying value at December 31, 1999 and 1998, due to the nature and
the relatively short maturity of these instruments.
(E) REVENUE RECOGNITION
AVANT has entered into various license and development agreements with
pharmaceutical and biotechnology companies. Nonrefundable revenue derived from
such agreements is recognized over the specified development period as research
and development or discovery activities are performed. Cash received in advance
of activities being performed is recorded as deferred revenue. Nonrefundable
milestone fees are recognized when they are earned in accordance with the
performance requirements and contractual terms. Revenues from product sales are
recorded when the product is shipped.
(F) RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred.
(G) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined using
the first-in, first-out (FIFO) method.
(H) PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and depreciated over the estimated
useful lives of the related assets using the straight-line method. Laboratory
equipment and office furniture and equipment are depreciated over a five year
period and computer equipment is depreciated over a three year period. Leasehold
improvements are amortized over the shorter of the estimated useful life or the
noncancelable term of the related lease.
(I) LICENSES, PATENTS AND TRADEMARKS
Included in other assets are some costs associated with purchased licenses and
some costs associated with patents and trademarks which are capitalized and
amortized over the shorter of the estimated useful lives or ten years using the
straight-line method. We periodically evaluate the recoverability of these
assets in accordance with Statement of Financial Accounting Standards No. 121
("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of".
(J) LOSS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per Share", which
changed the method of calculating earnings per share. SFAS 128, which we adopted
in the fourth quarter of 1997, requires the presentation of "basic" earnings per
share and "diluted" earnings per share. As a result of our net loss, both basic
and diluted earnings per share are computed by dividing the net loss available
to common shareholders by the weighted average number of shares of common stock
outstanding.
(K) STOCK COMPENSATION
AVANT's employee stock compensation plans are accounted for in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." The Company adopted the disclosure requirements of
-39-
<PAGE>
Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting
for Stock-Based Compensation" (see Note 7).
(L) USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts and disclosures. Actual results could
differ from those estimates.
2. SHORT-TERM INVESTMENTS AND RESTRICTED CASH
AVANT invests in high quality, short-term investments which are considered
highly liquid and are available to support current operations. We also invest in
high quality, debt securities which are classified as held-to-maturity. At
December 31, 1999 and 1998, our investments that met the definition of cash
equivalents were recorded at cost, which approximated fair value.
Pursuant to the terms of the settlement agreement between AVANT and our former
landlord, we pledged as collateral $750,000 at December 31, 1998 (see Note 13).
We also have $217,000 and $365,000 pledged as collateral at December 31, 1999
and 1998, respectively, in accordance with the terms of an operating lease (see
Note 3).
3. PROPERTY, EQUIPMENT AND LEASES
Property and equipment includes the following:
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
---------------------------------------
<S> <C> <C>
Laboratory Equipment $ 2,595,400 $ 2,480,000
Office Furniture and Equipment 1,176,800 1,148,200
Leasehold Improvements 938,100 393,600
---------------------------------------
Property and Equipment, Total 4,710,300 4,021,800
Less Accumulated Depreciation and Amortization (3,453,500) (2,910,400)
---------------------------------------
$ 1,256,800 $ 1,111,400
=======================================
</TABLE>
Depreciation expense related to equipment and leasehold improvements was
approximately $543,100, $267,600 and $224,000 for the years ended December 31,
1999, 1998 and 1997, respectively.
In May 1996, we entered into a six-year lease for laboratory and office space in
Needham, Massachusetts. The lease replaced two-year lease and sublease
agreements entered into in March 1995 for the same location and increased the
amount of office and laboratory space available.
In 1994, we entered into a lease agreement providing AVANT with the right to
lease up to $2,000,000 of equipment for up to a five-year term. The lease
agreement contains specified restrictive covenants determined at the end of each
fiscal quarter which, for the quarter ended September 30, 1995, included a
minimum cash, cash equivalents and short-term investments balance of
$10,000,000. At September 30, 1995 our cash and cash equivalents balance was
below $10,000,000. As a result, in accordance with the lease agreement, we
pledged cash as collateral to the lessor equal to the amount outstanding on the
lease which is to remain in a certificate of deposit until the end of the lease
or as otherwise agreed by the lessor and AVANT. We have recorded $217,000 and
$365,000 as long-term restricted cash at December 31, 1999 and 1998,
respectively.
-40-
<PAGE>
Obligations for base rent, net of sublease income, under these and other
noncancelable operating leases as of December 31, 1999 are approximately as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Year ending December 31, 2000 $ 741,200
2001 709,200
2002 252,100
------------------
Total minimum lease payments $ 1,702,500
==================
Our total rent for all operating leases (including rent expense net of sublease
income) was approximately $804,900, $909,500 and $851,400 for the years ended
December 31, 1999, 1998 and 1997, respectively.
4. OTHER ASSETS
Other assets include the following:
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
----------------------------------------
<S> <C> <C>
Capitalized Patent Costs $ 2,101,300 $ 1,890,300
Accumulated Amortization (715,300) (595,500)
----------------------------------------
Capitalized Patent Costs, Net 1,386,000 1,294,800
Goodwill and Other Intangible Assets, Net of
Accumulated Amortization of $1,822,200
and $546,400 2,013,500 3,289,300
Other Non Current Assets 124,000 146,600
----------------------------------------
$ 3,523,500 $ 4,730,700
========================================
In December 1999 and 1998, in accordance with SFAS 121, we evaluated and
subsequently wrote off approximately $105,900 and $294,500 of capitalized patent
costs relating to our SMIR program and our TRAx(R) test kit program,
respectively. These writeoffs were included in operating expense as general and
administrative expense for the years ended December 31, 1999 and 1998.
Amortization expense for the years ended December 31, 1999, 1998 and 1997
relating to the capitalized costs of purchased licenses, patents and trademarks
was approximately $169,700, $175,800 and $129,800, respectively. Goodwill
amortization expense for the years ended December 31, 1999 and 1998 was
approximately $1,275,800 and $546,400, respectively.
5. ACCRUED EXPENSES
Accrued expenses include the following:
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
---------------------------------------
<S> <C> <C>
Accrued License Fees $ 8,300 $ 60,000
Accrued Payroll and Employee Benefits 333,200 258,700
Accrued Clinical Trials 409,200 195,500
Accrued Legal 138,100 263,800
Other Accrued Expenses 442,700 406,700
---------------------------------------
$ 1,331,500 $ 1,184,700
=======================================
</TABLE>
-41-
<PAGE>
6. INCOME TAXES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
----------------------------------------------------------
<S> <C> <C> <C>
Income tax benefit:
Federal $ 3,628,500 $ 17,640,500 $ 4,539,100
State 189,000 3,141,500 529,000
----------------------------------------------------------
3,817,500 20,782,000 5,068,100
Deferred tax assets valuation allowance (3,817,500) (20,782,000) (5,068,100)
----------------------------------------------------------
$ -- $ -- $ --
==========================================================
Deferred tax assets are comprised of the following:
<CAPTION>
December 31, December 31,
1999 1998
------------------------------------------
<S> <C> <C>
Net Operating Loss Carryforwards $ 39,851,000 $ 36,821,000
Tax Credit Carryforwards 4,742,000 4,427,000
Other 645,000 172,000
------------------------------------------
Gross Deferred Tax Assets 45,238,000 41,420,000
Deferred Tax Assets Valuation Allowance (45,238,000) (41,420,000)
------------------------------------------
$ -- $ --
==========================================
Reconciliation between the amount of reported income tax expenses and the amount
computed using the U.S. Statutory rate of 35% follows:
<CAPTION>
1999 1998 1997
----------------------------------------------------------
<S> <C> <C> <C>
Loss at Statutory Rates $ (3,866,800) $ (17,612,200) $ (4,587,800)
Research and Development Credits (200,000) (218,700) (172,100)
State tax benefit, net of federal tax
liabilities (747,200) (514,000) (591,500)
Other 438,300 190,400 283,300
Expiration of State NOLS 558,200 170,800 --
In Process R&D -- 15,174,200 --
Benefit of losses and credits not
recognized, increase in valuation
allowance 3,817,500 2,809,500 5,068,100
----------------------------------------------------------
$ -- $ -- $ --
==========================================================
</TABLE>
AVANT has provided a full valuation allowance for deferred tax assets as
management has concluded that it is more likely than not that we will not
recognize any benefits from our net deferred tax asset. The timing and amount of
future earnings will depend on numerous factors, including our future
profitability. We will assess the need for a valuation allowance as of each
balance sheet date based on all available evidence.
At December 31, 1999, we had U.S. net operating loss carryforwards of
$104,000,000, U.S. capital loss carryforwards of $1,852,000, and U.S. tax
credits of $3,467,000 which expire at various dates through 2019.
-42-
<PAGE>
Under the Tax Reform Act of 1986, substantial changes in our ownership could
result in an annual limitation on the amount of net operating loss
carryforwards, research and development tax credits, and capital loss
carryforwards which could be utilized.
7. STOCKHOLDERS' EQUITY
(A) PUBLIC AND PRIVATE STOCK OFFERINGS
On September 22, 1999, we completed a private placement of 5,459,400 newly
issued shares of common stock. Net proceeds were approximately $9,838,800 after
deducting all associated expenses.
On March 24, 1998, we completed a private placement of 2,043,500 newly issued
shares of common stock. Net proceeds were approximately $3,699,800 after
deducting all associated expenses.
(B) PREFERRED STOCK
At December 31, 1999 and 1998, AVANT had authorized preferred stock comprised of
1,163,102 shares of convertible Class B and 3,000,000 shares of convertible
Class C of which 350,000 shares has been designated as Class C-1 Junior
Participating Cumulative, the terms of which are to be determined by our Board
of Directors. There was no preferred stock outstanding at December 31, 1999 and
1998.
(C) WARRANTS
AVANT has issued warrants to purchase common stock in connection with the
acquisition of VRI on August 21, 1998. The warrants are exercisable at $6.00 per
share and expire August 22, 2003. In connection with the acquisition of VRI, we
also assumed the obligations of VRI with respect to each outstanding warrant to
purchase VRI common stock (a "VRI Warrant"). Each VRI Warrant assumed by AVANT,
which will continue to have, and be subject to, the terms and conditions of the
applicable warrant agreements and warrant certificates, has been adjusted
consistent with the ratio at which our common stock was issued in exchange for
VRI common stock in the acquisition.
Warrants outstanding at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Exercise
Number of Price
Security Shares Per Share Expiration Date
-------------------------- ---------------- ----------------- ----------------------------------
<S> <C> <C> <C>
Common stock 35,657 $ .62 February 9, 2004
Common stock 76,842 1.26 December 14, 2005
Common stock 17,050 6.19 April 12, 2001
Common stock 1,811,843 6.00 August 22, 2003
</TABLE>
(D) STOCK COMPENSATION AND EMPLOYEE STOCK PURCHASE PLANS
STOCK COMPENSATION
On May 6, 1999, AVANT's 1999 Stock Option and Incentive Plan (the "1999 Plan")
was adopted. The 1999 Plan replaces the Amended and Restated 1991 Stock
Compensation Plan, which was an amendment and restatement of our 1985 Incentive
Option Plan. The 1999 Plan permits the granting of incentive stock options
(intended to qualify as such under Section 422A of the Internal Revenue Code of
1986, as amended), non-qualified stock options, stock appreciation rights,
performance share units, restricted stock and other awards of restricted stock
in lieu of cash bonuses to employees, consultants and outside directors.
-43-
<PAGE>
The 1999 Plan allows for a maximum of 2,000,000 shares of common stock to be
issued prior to May 6, 2009. The Board of Directors determines the term of each
option, option price, number of shares for which each option is granted and the
rate at which each option vests. All options vested either on the first
anniversary date or over a four year period and the term of each option cannot
exceed ten years (five years for options granted to holders of more than 10% of
the voting stock of AVANT). The exercise price of stock options shall not be
less than the fair market value of the common stock at the date of grant (110%
of fair market value for options granted to holders of more than 10% of the
voting stock of AVANT).
In connection with the acquisition of VRI, we assumed the obligations of VRI
under VRI's 1992 Equity Incentive Plan (the "VRI Plan") and each outstanding
option to purchase VRI common stock (a "VRI Stock Option") granted under the VRI
Plan. Each VRI Stock Option assumed by AVANT is deemed to constitute an option
to acquire, on the same terms and conditions as were applicable under the VRI
Plan, shares of AVANT's common stock which has been adjusted consistent with the
ratio at which our common stock was issued in exchange for VRI's common stock in
the acquisition. As of the date the acquisition was completed we assumed options
to acquire 1,532,055 shares of our common stock at a weighted average exercise
price of $2.34.
EMPLOYEE STOCK PURCHASE PLAN
The 1994 Employee Stock Purchase Plan (the "1994 Plan") was adopted on June 30,
1994. All full time employees of AVANT are eligible to participate in the 1994
Plan. A total of 150,000 shares of common stock are reserved for issuance under
this plan. Under the 1994 Plan, each participating employee may contribute up to
15% of his or her compensation to purchase up to 500 shares of common stock per
year in any public offering and may withdraw from the offering at any time
before stock is purchased. Participation terminates automatically upon
termination of employment. The purchase price per share of common stock in an
offering is 85% of the lower of its fair market value at the beginning of the
offering period or the applicable exercise date.
A summary of stock option activity for the years ended December 31, 1999, 1998
and 1997 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------- --------------------------- ---------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Price Price Price
Shares Per Share Shares Per Share Shares Per Share
- ----------------------------------- -------------- ------------ -------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1, 3,354,708 $ 2.65 1,773,242 $ 3.20 2,303,196 $ 5.94
Granted 557,500 1.60 638,250 1.99 492,750 1.77
Assumed in acquisition -- -- 1,532,055 2.34 -- --
Exercised (152,056) 0.67 (11,355) 1.34 (12,000) 1.86
Canceled (621,593) 3.76 (577,484) 2.82 (1,010,704) 8.78
- ----------------------------------- -------------- ------------ -------------- ------------ -------------- ------------
Outstanding at December 31, 3,138,559 $ 2.34 3,354,708 $ 2.65 1,773,242 $ 3.20
=================================== ============== ============ ============== ============ ============== ============
At December 31,
Options exercisable 2,091,562 2,542,950 1,039,437
Available for grant 2,833,818 1,095,206 1,296,716
Weighted average fair value of
options granted during year $ 0.83 $ 1.10 $ 0.92
</TABLE>
-44-
<PAGE>
The following tables summarize information about the stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding
-----------------------------------------------------------------------------------
Number Weighted Average Weighted Average
Outstanding at Remaining Exercise Price
Range of Exercise Prices December 31, 1999 Contractual Life per Share
- ---------------------------------- --------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
$ 0.30 - 0.64 556,062 4.46 $ 0.63
0.95 - 1.67 579,477 8.83 1.47
1.81 - 2.06 686,210 8.23 1.91
2.44 - 3.59 720,063 6.41 2.75
3.81 - 7.81 596,747 4.98 4.77
- ---------------------------------- --------------------------- --------------------------- ---------------------------
$ 0.30 - 7.81 3,138,559 6.64 $ 2.34
================================== =========================== =========================== ===========================
<CAPTION>
Options Exercisable
-------------------------------------------------------
Number Weighted Average
Exercisable at Exercise Price
Range of Exercise Prices December 31, 1999 per Share
- -------------------------------------------------------------- --------------------------- ---------------------------
<S> <C> <C>
$ 0.30 - 0.64 556,062 $ 0.63
0.95 - 1.67 115,291 1.58
1.81 - 2.06 225,711 1.88
2.44 - 3.59 597,751 2.79
3.81 - 7.81 596,747 4.77
- -------------------------------------------------------------- --------------------------- ---------------------------
$ 0.30 - 7.81 2,091,562 $ 2.62
============================================================== =========================== ===========================
FAIR VALUE DISCLOSURES
Had compensation costs for AVANT's stock compensation plans been determined
based on the fair value at the grant dates, consistent with SFAS 123, our net
loss, and net loss per share for the years ending December 31, 1999, 1998 and
1997 would be as follows:
<CAPTION>
1999 1998 1997
------------------------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
Net Loss:
As reported $ 11,309,100 $ 51,799,700 $ 13,108,000
Pro forma 11,416,700 52,150,800 13,514,100
Basic and Diluted Net Loss
Per Share:
As reported $ 0.26 $ 1.56 $ 0.52
Pro forma 0.26 1.57 0.54
The fair value of the option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions:
<CAPTION>
1999 1998 1997
------------------------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
Expected dividend yield 0% 0% 0%
Expected stock price volatility 63% 63% 57%
Risk-free interest rate 5.0% - 6.1% 4.5% - 5.6% 5.5% - 6.4%
Expected option term 2.5 Years 2.5 Years 2.7 Years
</TABLE>
-45-
<PAGE>
Because the determination of the fair value of all options granted includes an
expected volatility factor in addition to the factors detailed in the table
above, and because additional option grants are expected to be made each year,
the above pro forma disclosures are not representative of pro forma effects of
reported net income for future years.
(E) SHAREHOLDER RIGHTS PLAN
On November 10, 1994, AVANT's Board of Directors declared a dividend of one
preferred share purchase right for each share of common stock outstanding. Each
right entitles the holder to purchase from AVANT one-one thousandth of a share
of Series C-1 Junior Participating Cumulative Preferred Stock (a "Unit"), par
value $0.01 at a price of $16.00 per one-one thousandth of a share, subject to
specified adjustments. The Units are exercisable only if a person or a group
acquires 15% or more of the outstanding common stock of AVANT or commences a
tender offer which would result in the ownership of 15% or more of our
outstanding common stock. Once a Unit becomes exercisable, the plan allows our
shareholders to purchase common stock at a substantial discount. Unless earlier
redeemed, the Units expire on November 10, 2004. AVANT is entitled to redeem the
Units at $0.01 per Unit subject to adjustment for any stock split, stock
dividend or similar transaction.
As of December 31, 1999 and 1998, we have authorized the issuance of 350,000
shares of Series C-1 Junior Participating Cumulative Preferred Stock for use in
connection with the shareholder rights plan.
(F) ACQUISITION OF VIRUS RESEARCH INSTITUTE, INC.
AVANT issued 14,036,400 shares of our common stock and warrants to purchase
approximately 1,811,200 shares of our common stock on August 21, 1998, in
exchange for all of the outstanding common stock of VRI (see Note 14).
8. RESEARCH AND LICENSING AGREEMENTS
AVANT has entered into licensing agreements with several universities and
research organizations. Under the terms of these agreements, we have received
licenses or options to license technology, specified patents or patent
applications. We have made required payments of nonrefundable license fees and
royalties which amounted to approximately $221,500, $100,000 and $65,000 for the
years ended December 31, 1999, 1998 and 1997, respectively.
9. PRODUCT DEVELOPMENT AND DISTRIBUTION AGREEMENTS
AVANT's product development revenues were received from contracts with different
organizations. Total revenue received by us in connection with these contracts
for the years ended December 31, 1999, 1998 and 1997 were approximately
$1,483,500, $2,094,500 and $1,147,600, respectively. A summary of these
contracts follows:
(A) NOVARTIS PHARMA AG
In 1997, we entered into an option agreement with Novartis Pharma AG
("Novartis"), a worldwide pharmaceutical company headquartered in Basel,
Switzerland, relating to the development of TP10 for use in xenotransplantation
(animal organs into humans) and allotransplantation (human to human). Under the
agreement, we received annual option fees and supplies of TP10 for clinical
trials in return for granting Novartis a two-year option to license TP10 with
exclusive worldwide (except Japan) marketing rights. In July 1999, Novartis
exercised its option to license TP10 for use in the field of transplantation.
The decision to license TP10 resulted in a $6 million equity investment and
license fee payment by Novartis which was received by AVANT in January 2000.
Under the agreement, we may receive additional milestone payments based upon
attainment of specified development and regulatory goals, which has an
approximate aggregate value of up to $14 million. We may also receive funding
for research as well as royalty payments on eventual product sales.
-46-
<PAGE>
(B) SMITHKLINE BEECHAM
During 1997, AVANT entered into an agreement with SmithKline Beecham plc
("SmithKline") to collaborate on the development and commercialization of our
oral rotavirus vaccine. Under the terms of the agreement, SmithKline received an
exclusive worldwide license to commercialize AVANT's rotavirus vaccine. We were
responsible for continuing the Phase II clinical efficacy study of the rotavirus
vaccine, which was completed in August 1998. Subject to the development by
SmithKline of a viable manufacturing process, SmithKline is required to assume
responsibility for all subsequent clinical trials and all other development
activities. SmithKline made an initial license payment in 1997 upon execution of
the agreement and has agreed to make further payments upon the achievement of
specified milestones. In addition, we will be entitled to royalties based on net
sales of the rotavirus vaccine. In June 1999, we received a milestone payment of
$500,000 from SmithKline for the successful completion of the Phase II clinical
efficacy study and the establishment of a commercially viable process for
manufacture of the vaccine.
(C) ASTRAZENECA
In 1992, we entered into a product development and distribution agreement with
AstraZeneca plc ("Astra"), a worldwide pharmaceutical company headquartered in
Sodertalje, Sweden, for the joint development and marketing of therapeutic
products using our proprietary T cell antigen receptor ("TCAR") technology. The
products developed exclusively and jointly with Astra were monoclonal antibodies
and protein-derived immunomodulators that may have efficacy in treating
autoimmune diseases such as multiple sclerosis, Crohn's disease, and rheumatoid
arthritis.
In 1996, we suspended further internal funding of the research and development
of the TCAR program and further amended our agreement with Astra to transfer
some of our rights to the TCAR technology to Astra in addition to sole
responsibility for further development and commercialization of the TCAR
technology. Under the amended agreement, we received an initial signing fee of
$100,000 and could receive future milestone and royalty payments upon Astra's
successful development and commercialization of the TCAR technology. In 1997, we
recognized revenue from milestone payments from Astra of $650,000. In December
1999, we announced results of a Phase II study of the TCAR monoclonal antibody
(ATM-027) being developed by Astra for the treatment of multiple sclerosis. The
results showed that ATM-027 was safe and well tolerated, however, in the view of
Astra, the reduction of disease activity in the study population did not reach a
level that would be of value for those patients. Therefore, Astra made the
decision to stop further development of ATM-027 for multiple sclerosis but is
reviewing development of the TCAR peptide as a vaccine for multiple sclerosis
under the terms of the TCAR agreement.
(D) AVENTIS PASTEUR
In 1994, AVANT entered into a license agreement with Aventis Pasteur ("Aventis")
which granted Aventis the exclusive right to make, use and sell
Adjumer(R)-formulated vaccines for prevention of influenza, Lyme disease and
diseases caused by meningococcus and the co-exclusive right (exclusive, except
for the right of AVANT or one other person licensed by AVANT) to make, use and
sell Adjumer(R)-formulated vaccines directed against five other pathogens,
including pneumococcus and RSV. We have retained rights to make, use, sell and
license Adjumer(R)-formulated vaccines against the subject infections in most of
the Far East, including China and Japan, subject to geographical extension
rights available to Aventis. In December 1998, we received a milestone payment
of $600,000 from Aventis upon commencement of the first Phase I clinical trial
of the Adjumer(R)-formulated vaccine for RSV.
(E) HESKA CORPORATION
In January 1998, AVANT entered into an agreement with Heska Corporation
("Heska") whereby Heska was granted the right to use PCPP in specified animal
health vaccines. The agreement provides for the payment of license fees,
milestone and royalties based on net sales of PCPP-formulated animal vaccines.
In September 1999, we received a payment from Heska for the achievement of a
major milestone in efforts to develop and utilize the PCPP polymer as an
adjuvant in Heska's animal health vaccine against B. HENSELAE, the bacterium
that causes Cat Scratch Disease in humans.
-47-
<PAGE>
10. NON-OPERATING INCOME
Non-operating income includes the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
------------------------------------------------
<S> <C> <C> <C>
Interest and Dividend Income $ 635,200 $ 571,900 $ 577,300
Gain on Sale of Equipment -- 22,300 --
Loss on Sale of Investments -- -- (17,800)
------------------------------------------------
$ 635,200 $ 594,200 $ 559,500
================================================
11. DEFERRED SAVINGS PLAN
Under section 401(k) of the Internal Revenue Code of 1986, as amended, the Board
of Directors adopted, effective May 1990, a tax-qualified deferred compensation
plan for employees of AVANT. Participants may make tax deferred contributions up
to 15%, or $10,000, of their total salary in 1999. AVANT may, at its discretion,
make contributions to the plan each year matching up to 1% of the participant's
total annual salary. AVANT contributions amounted to $30,100, $20,100 and
$20,600 for the years ended December 31, 1999, 1998 and 1997, respectively.
12. FOREIGN SALES
Product sales were generated geographically as follows:
<CAPTION>
NET PRODUCT SALES FOR THE
TWELVE MONTHS ENDED EUROPE USA ASIA OTHER TOTAL
- ----------------------------------------- ------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
December 31, 1999 $ -- $ -- $ -- $ -- $ --
December 31, 1998 5,000 31,000 -- 20,000 56,000
December 31, 1997 5,000 29,000 -- 11,000 45,000
</TABLE>
13. LITIGATION
In December 1994, AVANT filed a lawsuit in the Superior Court of
Massachusetts against the landlord of our former Cambridge, Massachusetts
headquarters to recover the damages incurred by AVANT resulting from the
evacuation of the building due to air quality problems, which caused skin and
respiratory irritation to a significant number of employees. The landlord
defendant filed counterclaims, alleging we breached our lease obligations. The
court ordered a limited trial between AVANT and the landlord on factual issues
which began on November 20, 1996. Closing arguments for the limited trial were
heard on January 13, 1997. In a separate lawsuit, the landlord's mortgagee filed
claims against AVANT for payment of the same rent alleged to be owed. A motion
for summary judgment filed by the bank was denied by the court. In August 1997,
the Superior Court of Massachusetts entered findings of fact and conclusions of
law on the limited trial of AVANT's lawsuit against the landlord. In its
findings, the Court concluded that we had not proved, as alleged by us, that any
fireproofing fibers contaminated our space, our space was not uninhabitable
because of contamination from fireproofing fibers and we were not justified in
terminating its lease on the grounds that our office and laboratories were
uninhabitable. In November 1997, AVANT reached a settlement of the litigation
with our former landlord and the landlord's mortgagee. We agreed to pay $858,800
in cash on November 17, 1997 and issue a total of
-48-
<PAGE>
1,500,000 shares of our common stock. In addition, we signed a note for $750,000
payable on November 16, 1998 secured by $750,000 cash collateral and a note for
$750,000 due November 15, 1999, secured by 132,500 shares of common stock. The
total settlement, valued at $6,108,800, is comprised of the cash and notes
totaling $2,358,800 and common stock valued at $3,750,000 as of October 31, 1997
and is included in operating expense for the year ended December 31, 1997. The
common stock issued is subject to restrictions on transfer per the settlement
agreement. The settlement agreement also provides for specific registration
rights for the shares of common stock to become effective no later than
September 30, 1998. Upon such registration, however, the settlement agreement
limits the number of shares that may be sold over a given period of time.
In May 1998, we used cash as collateral for a $750,000 note due November 15,
1999 issued in connection with a settlement agreement with our former landlord
and the landlord's mortgagee. In accordance with the settlement agreement,
66,250 shares of our common stock issued to secure the note were returned to
AVANT. The common stock was valued at $165,600 as of October 31, 1997 and its
return is included as a reduction of operating expense in 1998. In November
1999, the note was paid in full.
14. ACQUISITION OF VIRUS RESEARCH INSTITUTE, INC.
On August 21, 1998, AVANT acquired all of the outstanding capital stock of VRI,
a company engaged in the discovery and development of (i) systems for the
delivery of vaccines and immunotherapeutics and (ii) novel vaccines. We issued
approximately 14,036,400 shares of AVANT's common stock and warrants to
purchase approximately 1,811,200 shares of AVANT's common stock in exchange for
all of the outstanding common stock of VRI, on the basis of 1.55 shares of
AVANT's common stock and .20 of an AVANT warrant for each share of VRI common
stock. The purchase price of $63,004,700 consisted of (i) the issuance of
14,036,400 shares of AVANT common stock valued at $51,686,800 and 1,811,200
AVANT warrants valued at $4,980,700 for all outstanding VRI capital stock, (ii)
the issuance of AVANT warrants valued at $387,600 in exchange for all of the
outstanding VRI warrants, (iii) the issuance of options to purchase AVANT
common stock valued at $3,637,900 for all of the outstanding options to
purchase VRI common stock assumed by us, and (iv) severance and transaction
costs totaling $2,311,700. As of the date of the acquisition of VRI, the
Company had already begun to formulate a plan to assess which activities of VRI
to continue and to identify all significant actions to be taken to terminate a
number of VRI employees and to relocate the remaining employees from the VRI
facility in Cambridge, MA (which was to be closed) to our facility in Needham,
MA. The costs associated with this plan, including severance costs of
approximately $243,000, were recognized upon consummation of the merger and are
included in the $2,311,700 referenced above. The plan was finalized and
implemented during 1998 and the first quarter of 1999. Actual costs were not
materially different from those accrued at the acquisition date and were paid
in 1998 and early 1999.
The acquisition has been accounted for as a purchase. Consequently, the
operating results of VRI from the acquisition date have been included in our
consolidated results of operations. The purchase price was allocated to the
acquired assets and assumed liabilities, based upon their fair value at the
date of acquisition, as follows:
<TABLE>
<S> <C>
Net tangible assets acquired $ 14,539,000
Intangible assets acquired:
Work force 470,000
Collaborative relationships 1,090,000
Goodwill 2,275,700
In-process technology 44,630,000
---------------------------------------------------------------------------------------
Total $ 63,004,700
=======================================================================================
</TABLE>
The values assigned to the intangible assets acquired, including the IPR&D, were
determined based on fair market value using a risk adjusted discounted cash flow
approach. VRI was a development stage biotechnology enterprise and its resources
were substantially devoted to research and development at the date of
acquisition. Management is responsible for determining the fair value of the
acquired IPR&D.
-49-
<PAGE>
Each of VRI's six research and development projects in-process was valued
through detailed analysis of product development data concerning the stage of
development, time and resources needed to complete the project, expected
income-generating ability and associated risks. The significant assumptions
underlying the valuations included potential revenues, costs of completion, the
timing of product releases and the selection of an appropriate discount rate.
None of VRI's projects have reached technological feasibility nor do they have
any alternative future use. Consequently, in accordance with generally accepted
accounting principles, the amount allocated to IPR&D was charged as an expense
in the AVANT consolidated financial statements for the year ended December 31,
1998. The remaining intangible assets arising from the acquisition are being
amortized on a straight line basis over 12 months and 60 months.
A discussion of the in-process research and development projects identified at
the time of acquisition follows. The projected costs to complete the projects
represent costs to be incurred by AVANT and do not include any costs to be
expended by our collaborators. (i) ADJUMER(R) VACCINE DELIVERY SYSTEM.
Adjumer(R) is being developed as an adjuvant to enhance the immune response to
injected vaccines. AVANT and our collaborator, Aventis, are conducting research
on the development of Adjumer(R)-formulated vaccines utilizing a variety of
Aventis' antigens, including influenza, lyme disease, pneumococcus,
meningococcus, RSV and hepatitis B. As of the acquisition date, with projected
release dates ranging from 2001 to 2004, the estimated cost to complete the
project for all antigens exceeded $9,500,000. In addition, substantial
additional work is required by Aventis prior to commercialization. Discount
rates ranging from 42.5% to 47.5% were used in determining the IPR&D value of
$15,450,000 which was assigned to the Adjumer(R) vaccine delivery system. (ii)
MICROMER(R) VACCINE DELIVERY SYSTEM. Micromer(R) is a proprietary vaccine
delivery system designed to facilitate the mucosal (intranasal or oral)
delivery of antigens and stimulate both the systemic and mucosal branches of
the immune system. AVANT is conducting research on a number of
Micromer(R)-formulated vaccines, including influenza and RSV. As of the
acquisition date, the estimated cost to complete the development of
Micromer(R)-formulated vaccines for influenza and RSV exceeded $3,300,000 with
projected release dates of 2002 and 2004, respectively. A discount rate of 45%
was utilized in determining the IPR&D value of $3,260,000 which was assigned to
Micromer(R). (iii) VIBRIO VEC(TM) VACCINE DELIVERY SYSTEM. Vibrio Vec(TM) is a
proprietary vaccine and immunotherapeutic system that uses A bacterial vector
for the oral delivery of antigens. AVANT is conducting research on a number of
antigens proposed to be delivered by Vibrio Vec(TM), including, in conjunction
with our collaborators, Pasteur Merieux-Oravax and CSL, Ltd., a vaccine
targeting H. pylori. At the acquisition date, the projected product release
date was 2003 and the approximate research and development cost required to
complete the Vibrio Vec(TM) project totaled approximately $900,000. A discount
rate of 45% was used in determining the IPR&D value of $2,450,000 which was
assigned to Vibrio Vec(TM) at the time of acquisition. (iv) ROTAVIRUS VACCINE.
A collaboration with SmithKline was established by AVANT to develop and
commercialize our novel, proprietary vaccine against rotavirus infection, a
major cause of diarrhea and vomiting in infants. At the acquisition date, a
project release date was projected of 2002, with $1,200,000 in additional
research and development expenditures anticipated. In addition, substantial
work is required to be completed by SmithKline prior to commercialization of
the rotavirus vaccine. An IPR&D value of $3,120,000 was assigned to the
rotavirus vaccine utilizing a discount rate of 45%. (v) HERPES VACCINE. The
herpes vaccine is a proprietary vaccine for the prevention of genital herpes
("HSV2"). At the time of acquisition, the vaccine was in a preclinical
development stage with a projected product release date of 2007 and an
estimated cost to complete of $1,600,000. A discount rate of 45% was utilized
in determining the IPR&D value of $2,240,000 which was assigned to the herpes
vaccine. (vi) THERAPORE(TM). AVANT was granted an exclusive worldwide license
from Harvard for Therapore(TM), a novel technology for the development of
immunotherapeutics. We are conducting preclinical research to evaluate this
system for the treatment of persistent viral infections, such as Hepatitis B,
Hepatitis C and HIV, and some forms of cancer including melanoma. The first
release date for a Therapore(TM) product is estimated to be in 2004 and the
projected research and development cost to complete all indications of
Therapore(TM) approximated $41,200,000 at the acquisition date. A discount rate
of 50% was utilized in determining the IPR&D value of $18,110,000 which was
assigned to Therapore(TM).
As of December 31, 1999, the technological feasibility of the projects had not
yet been reached and no significant departures from the assumptions included in
the valuation analysis had occurred. Substantial additional research and
development will be required prior to reaching technological feasibility. In
addition, each product needs to successfully complete a series of clinical
trials and to receive FDA approval prior to commercialization. We are also
dependent upon the activities of our collaborators in developing and marketing
our products. There can be no assurance that these projects will ever reach
feasibility or develop into products that can be marketed profitably, nor can
there be assurance
-50-
<PAGE>
AVANT and our collaborators will be able to develop and commercialize these
products before our competitors. If these products are not successfully
developed and do not become commercially viable, our financial condition and
results of operations could be materially affected.
The following unaudited pro forma financial summary is presented as if the
operations of AVANT and VRI were combined as of January 1, 1998 and 1997,
respectively. The unaudited pro forma combined results are not necessarily
indicative of the actual results that would have occurred had the acquisition
been consummated at that date, or of the future operations of the combined
entities. Nonrecurring charges, such as the acquired in-process research and
development charge of $44,630,000, are not reflected in the following pro forma
financial summary.
<TABLE>
<CAPTION>
Year Ended December 31, 1998 1997
-------------------------------------------- --------------------- -------------------- ---------------------
<S> <C> <C>
Operating Revenue $ 2,206,500 $ 3,697,600
Net Loss (13,389,800) (21,311,500)
Basic and diluted net loss per share (0.32) (0.54)
</TABLE>
-51-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information under the Sections "Proposal 1 - Election of Directors" and
"Management" in the Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held on May 8, 2000, is hereby incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information under the Section "Management" of the Registrant's Proxy
Statement for the Annual Meeting of Stockholders to be held on May 8, 2000, is
hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the Section "Beneficial Ownership of Common Stock" of the
Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held
on May 8, 2000, is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the Sections "Proposal 1 - Election of Directors" and
"Management" of the Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held on May 8, 2000, is hereby incorporated by reference.
-52-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) The following documents are filed as part of this Form 10-K:
(1) FINANCIAL STATEMENTS:
See "Index to Consolidated Financial Statements" at Item 8.
(2) FINANCIAL STATEMENT SCHEDULES:
Schedules are omitted since the required information is not applicable or
is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the
Consolidated Financial Statements or Notes thereto.
(3) EXHIBITS:
<TABLE>
<CAPTION>
No. Description Page No.
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of May 12, Incorporated by reference to Exhibit 2.1 of the
1998, by and among the Company, TC Merger Corp., Company's Registration Statement on Form S-4 (Reg.
Virus Research Institute, Inc. No. 333-59215)
3.1 Third Restated Certificate of Incorporation of the Incorporated by reference to Exhibit 3.1 of the
Company Company's Registration Statement on Form S-4 (Reg.
No. 333-59215)
3.2 Certificate of Amendment of Third Restated Incorporated by reference to Exhibit 3.1 of the
Certificate of Incorporation of the Company Company's Registration Statement on Form S-4 (Reg.
No. 333-59215)
3.3 Certificate of Designation for series C-1 Junior Incorporated by reference to Exhibit 3.1 of the
Participating Cumulative Preferred Stock Company's Registration Statement on Form S-4 (Reg.
No. 333-59215)
3.4 Second Certificate of Amendment of Third Restated Incorporated by reference to Exhibit 3.2 of the
Certificate of Incorporation of the Company Company's Registration Statement on Form S-4 (Reg.
No. 333-59215)
3.5 Amended and Restated By-Laws of the Company as of Incorporated by reference to Exhibit 3.3 of the
November 10, 1994 Company's Registration Statement on Form S-4 (Reg.
No. 333-59215)
4.1 Shareholder Rights Agreement dated November 10, Filed herewith
1994 between the Company and State Street Bank and
Trust Company as Rights Agent
4.2 Form of Stock Purchase Agreement dated March 20, Incorporated by reference to Exhibit 4.1 of the
1998 relating to the Company's private placement Company's Registration Statement on Form S-3 (Reg.
of Common Stock No. 333-56755)
10.1 Amended and Restated 1991 Stock Compensation Plan Incorporated by reference to the Company's Annual
dated as of April 1, 1995 Report on Form 10K for the fiscal year ended
December 31, 1995
10.2 1994 Employee Stock Purchase Plan Incorporated by reference to the Company's
Registration Statement on Form S-8 filed June 8,
1994
10.3 AVANT Immunotherapeutics, Inc. 1999 Stock Option Incorporated by reference to Exhibit A to the
and Incentive Plan Company's Proxy Statement on Schedule 14A filed on
April 1, 1999
10.4 Virus Research Institute, Inc. 1992 Equity Filed herewith
Incentive Plan as amended and restated
10.5 Performance Plan of the Company Filed herewith
10.6 Form of Agreement relating to Change of Control Filed herewith
10.7 Termination Agreement between the Company and Incorporated by reference to the Company's report
SmithKline Beecham p.l.c. relating to sCR1 dated on Form 8-K filed April 27, 1995
April 7, 1995, portions of which are subject to
confidential treatment
</TABLE>
-53-
<PAGE>
<TABLE>
<S> <C>
10.8 Pledge Agreement between the Company and Fleet Incorporated by reference to the Company's report
Credit Corporation dated October 24, 1995 on Form 10-Q for the quarter period ended September
30, 1995
10.9 Amended and Restated Employment Agreement between Incorporated by reference to the Company's Annual
the Company and Una S. Ryan, Ph.D. dated August Report on Form 10-K for the fiscal year ended
20, 1998. December 31, 1998
10.10 Second Amended and Restated Product Development Incorporated by reference to the Company's Annual
and Distribution Agreement between Astra AB and Report on Form 10-K for the fiscal year ended
the Company dated May 1, 1996, portions of which December 31, 1996 are
subject to confidential treatment
10.11 Commercial Lease Agreement of May 1, 1997 between Incorporated by reference to the Company's report
the Company and Fourth Avenue Ventures Limited on Form 10-Q for the quarterly period ended
September 30, 1996
10.12 Option Agreement by and between the Company and Incorporated by reference to the Company's report
Novartis Pharma AG dated as of October 31, 1997, on Form 10-Q/A for the quarterly period ended
portions of which are subject to confidential September 30, 1997
treatment
10.13 Settlement Agreement between the Company and Incorporated by reference to the Company's Annual
Forest City 38 Sidney Street, Inc.; Forest City Report on Form 10-K for the fiscal year ended
Management, Inc.; and Forest City Enterprises, Inc. December 31, 1997
10.14 Lease dated December 1, 1996 between Virus Filed herewith.
Research institute, Inc. and Moulton Realty
Company as amended.
10.15 License Agreement dated as of May 1, 1992 between Filed herewith.
Virus Research Institute, Inc. and the President
and Fellows of Harvard College ("Harvard") as
amended.
10.16 License and Clinical Trials Agreement dated as of Filed herewith.
February 27, 1995 between Virus Research Institute,
Inc. and The James N. Gamble Institute of Medical
Research (assigned to Children's Hospital of
Cincinnati).
10.17 License Agreement dated December 6, 1991 between Filed herewith.
Section Virus Research Institute, Inc. and Massachusetts
Institute of Technoloby
10.18 License Agreement dated as of December 13, 1994 Filed herewith.
Section between Virus Research Institute, Inc. and Pasteur
Merieux Serums & Vaccins S.A. ("Pasteur Merieux").
10.19 License Agreement dated as of August 2, 1995 Filed herewith.
Section between Virus Research Institute, Inc. and Pasteur
Merieux.
10.20 License Agreement dated as of December 1, 1997 Filed herewith.
Section between Virus Research Institute, Inc. and
SmithKline Beecham PLC.
10.21 License Agreement dated as of March 28, 1997 among Filed herewith.
Section Virus Research Institute, Inc. and Harvard.
21.0 List of Subsidiaries Filed herewith
23.0 Consent of Independent Accountants Page 333
27.0 Financial Data Schedule Page 334
</TABLE>
Section Confidential treatment requested.
(B) Reports on Form 8-K.
AVANT did not file any current reports on Form 8-K during the last quarter of
the period covered by this Form 10-K.
-54-
<PAGE>
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.
AVANT IMMUNOTHERAPEUTICS, INC. Date
by: s/UNA S. RYAN March 15, 2000
-------------
Una S. Ryan
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
s/J. BARRIE WARD Chairman March 15, 2000
----------------
(J. Barrie Ward)
s/UNA S. RYAN President, Chief Executive Officer, March 15, 2000
-------------
(Una S. Ryan) and Director
s/AVERY W. CATLIN Senior Vice President, Chief Financial March 15, 2000
-----------------
(Avery W. Catlin) Officer and Treasurer
s/FREDERICK W. KYLE Director March 15, 2000
-------------------
(Frederick W. Kyle)
s/JOHN W. LITTLECHILD Director March 15, 2000
---------------------
(John W. Littlechild)
s/THOMAS R. OSTERMUELLER Director March 15, 2000
------------------------
(Thomas R. Ostermueller)
s/HARRY H. PENNER, JR. Director March 15, 2000
----------------------
(Harry H. Penner, Jr.)
s/PETER A. SEARS Director March 15, 2000
----------------
(Peter A. Sears)
</TABLE>
-55-
<PAGE>
Exhibit 4.1
- --------------------------------------------------------------------------------
T CELL SCIENCES, INC.
and
STATE STREET BANK AND TRUST COMPANY,
as Rights Agent
----------
Shareholder Rights Agreement
Dated as of November 10, 1994
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
1. Certain Definitions ................................................... 1
2. Appointment of Rights Agent ........................................... 5
3. Issue of Right Certificates ........................................... 5
4. Form of Right Certificates ............................................ 7
5. Countersignature and Registration ..................................... 8
6. Transfer, Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates ............... 9
7. Exercise of Rights; Exercise Price; Expiration Date of Rights ......... 9
8. Cancellation and Destruction of Right Certificates ....................11
9. Reservation and Availability of Preferred Stock .......................12
10. Preferred Stock Record Date ...........................................13
11. Adjustment of Exercise Price, Number and Kind of Shares or
Number of Rights ......................................................13
12. Certificate of Adjusted Exercise Price or Number of Shares ............21
13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power ..21
14. Fractional Rights and Fractional Shares ...............................24
15. Rights of Action ......................................................24
16. Agreement of Right Holders ............................................25
17. Right Certificate Holder Not Deemed a Shareholder .....................25
18. Concerning the Rights Agent ...........................................26
19. Merger or Consolidation or Change of Name of Rights Agent .............26
20. Duties of Rights Agent ................................................27
i
<PAGE>
21. Change of Rights Agent ................................................29
22. Issuance of New Right Certificates ....................................30
23. Redemption and Termination ............................................31
24. Exchange ..............................................................31
25. Notice of Certain Events ..............................................33
26. Notices ...............................................................34
27. Supplements and Amendments ............................................34
28. Successors ............................................................35
29. Determinations and Actions by the Board of Directors ..................35
30. Benefits of this Agreement ............................................35
31. Severability ..........................................................35
32. Governing Law .........................................................36
33. Counterparts ..........................................................36
34. Descriptive Headings ..................................................36
ii
<PAGE>
Exhibit A -- Certificate of Designation of
Series C-1 Junior Participating
Cumulative Preferred Stock
Exhibit B -- Form of Right Certificate
iii
<PAGE>
SHAREHOLDER RIGHTS AGREEMENT
Agreement, dated as of November 10, 1994, between T Cell Sciences, Inc., a
Delaware corporation (the "Company"), and State Street Bank and Trust Company, a
Massachusetts trust company (the "Rights Agent").
W I T N E S S E T H
WHEREAS, the Board of Directors of the Company desires to provide
shareholders of the Company with the opportunity to benefit from the long-term
prospects and value of the Company and to ensure that shareholders of the
Company receive fair and equal treatment in the event of any proposed takeover
of the Company; and
WHEREAS, on November 10, 1994, the Board of Directors of the Company
authorized and declared a dividend distribution of one Right (as such term is
hereinafter defined) for each outstanding share of Common Stock, par value
$0.001 per share, of the Company (the "Common Stock") outstanding as of the
close of business on November 29, 1994 (the "Record Date"), and contemplates the
issuance of one Right for each share of Common Stock of the Company issued
(whether originally issued or sold from the Company's treasury) between the
Record Date and the earlier of the Distribution Date or the Expiration Date (as
such terms are hereinafter defined), each Right initially representing the right
to purchase one one-thousandth of a share of Series C-1 Junior Participating
Cumulative Preferred Stock of the Company having the rights, powers and
preferences set forth on Exhibit A hereto, upon the terms and subject to the
conditions hereinafter set forth (the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as hereinafter
defined) who or which, together with all Affiliates (as such term is hereinafter
defined) and Associates (as such term is hereinafter defined) of such Person,
shall be the Beneficial Owner (as such term is hereinafter defined) of 15% or
more of the shares of Common Stock then outstanding, but shall not include (i)
the Company, (ii) any Subsidiary (as such term is hereinafter defined) of the
Company, (iii) any employee benefit plan or compensation arrangement of the
Company or any Subsidiary of the Company or (iv) any Person holding shares of
Common Stock organized, appointed or established by the Company or any
Subsidiary of the Company for or pursuant to the terms of any such employee
benefit plan or compensation arrangement (the Persons described in clauses (i)
through (iv) above are referred to herein as "Exempt Persons").
Notwithstanding the foregoing, no Person shall become an "Acquiring
Person" as the result
<PAGE>
of an acquisition of Common Stock by the Company which, by reducing the number
of shares outstanding, increases the proportionate number of shares beneficially
owned by such Person to 15% or more of the shares of Common Stock then
outstanding; provided, however, that if a Person shall become the Beneficial
Owner of 15% or more of the shares of Common Stock of the Company then
outstanding by reason of share purchases by the Company and shall, after such
share purchases by the Company, become the Beneficial Owner of any additional
shares (other than pursuant to a stock split, stock dividend or similar
transaction) of Common Stock of the Company and immediately thereafter be the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding,
then such Person shall be deemed to be an "Acquiring Person."
In addition, notwithstanding the foregoing, a Person shall not be an
"Acquiring Person" if the Board of Directors of the Company determines that a
Person who would otherwise be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this Section 1(a), has become such inadvertently, and
such Person divests as promptly as practicable a sufficient number of shares of
Common Stock so that such Person would no longer be an "Acquiring Person," as
defined pursuant to the foregoing provisions of this Section 1(a).
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations (the
"Rules") under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as in effect on the date of this Agreement; provided, however, that no
Person who is a director or officer of the Company shall be deemed an Affiliate
or an Associate of any other director or officer of the Company solely as a
result of his or her position as director or officer of the Company.
(c) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, beneficially owns (as determined
pursuant to Rule 13d-3 of the Rules under the Exchange Act, as in effect
on the date of this Agreement);
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has:
(A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time or upon the
satisfaction of any conditions or both) pursuant to any agreement,
arrangement or understanding (whether or not in writing) (other than
customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities) or
upon the exercise of conversion rights, exchange rights, rights
(other than the Rights), warrants or options, or otherwise; provided,
however, that a Person shall not be deemed the "Beneficial Owner" of,
or to "beneficially own," (1) securities tendered pursuant to a
tender or exchange offer made by or on behalf of such Person or any
of such Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange; (2) securities
issuable upon
2
<PAGE>
exercise of these Rights at any time prior to the occurrence of a
Triggering Event; or (3) securities issuable upon exercise of Rights
from and after the occurrence of a Triggering Event, which Rights
were acquired by such Person or any of such Person's Affiliates or
Associates prior to the Distribution Date or pursuant to Sections
3(a), 11(i) or 22 hereof; or
(B) the right to vote pursuant to any agreement,
arrangement or understanding (whether or not in writing); provided,
however, that a Person shall not be deemed the "Beneficial Owner" of,
or to "beneficially own," any security under this clause (B) if the
agreement, arrangement or understanding to vote such security (1)
arises solely from a revocable proxy given in response to a public
proxy or consent solicitation made pursuant to, and in accordance
with, the Rules of the Exchange Act and (2) is not also then
reportable by such person on Schedule 13D under the Exchange Act (or
any comparable or successor report); or
(C) the right to dispose of pursuant to any agreement,
arrangement or understanding (whether or not in writing) (other than
customary arrangements with and between underwriters and selling
group members with respect to a bona fide public offering of
securities); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such
Person or any of such Person's Affiliates or Associates has any agreement,
arrangement or understanding (whether or not in writing) (other than
customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities) for the
purpose of acquiring, holding, voting (except pursuant to a revocable
proxy as described in clause (B) of Section 1(d)(ii) hereof) or disposing
of any securities of the Company;
provided, however, that (1) no Person engaged in business as an underwriter of
securities shall be deemed the Beneficial Owner of any securities acquired
through such Person's participation as an underwriter in good faith in a firm
commitment underwriting until the expiration of 40 days after the date of such
acquisition, and (2) no Person who is a director or an officer of the Company
shall be deemed, as a result of his or her position as director or officer of
the Company, the Beneficial Owner of any securities of the Company that are
beneficially owned by any other director or officer of the Company.
(d) "Business Day" shall mean any day other than a Saturday, Sunday,
or a day on which banking institutions in the Commonwealth of Massachusetts are
authorized or obligated by law or executive order to close.
(e) "Close of business" on any given date shall mean 5:00 P.M.,
Boston, Massachusetts time, on such date; provided, however, that if such date
is not a Business Day it shall mean 5:00 P.M., Boston, Massachusetts time, on
the next succeeding Business Day.
(f) "Common Stock" shall mean the Common Stock, par value $0.00l per
3
<PAGE>
share, of the Company, except that "Common Stock" when used with reference to
any Person other than the Company shall mean the capital stock with the greatest
voting power, or the equity securities or other equity interests having power to
control or direct the management, of such Person or, if such Person is a
Subsidiary of another Person, the Person which ultimately controls such
first-mentioned Person and which has issued and outstanding such capital stock,
equity securities or equity interests.
(g) "Distribution Date" shall have the meaning defined in Section
3(a) hereof.
(h) "Exercise Price" shall have the meaning defined in Section 4(a)
hereof.
(i) "Expiration Date" and "Final Expiration Date" shall have the
meanings set forth in Section 7(a) hereof.
(j) "Fair Market Value" of any securities or other property shall be
as determined in accordance with Section 11(d) hereof.
(k) "Person" shall mean an individual, a corporation, a partnership,
an association, a joint stock company, a trust, a business trust, a government
or political subdivision, any unincorporated organization, or any other
association or entity.
(l) "Preferred Stock" shall mean shares of Series C-1 Junior
Participating Cumulative Preferred Stock, par value $0.01 per share, of the
Company having the rights and preferences set forth in the form of Certificate
of Designation attached hereto as Exhibit A.
(m) "Principal Party" shall have the meaning defined in Section
13(b) hereof.
(n) "Redemption Price" shall have the meaning defined in Section 23
hereof.
(o) "Section 11(a)(ii) Event" shall have the meaning defined in
Section 11(a)(ii) hereof.
(p) "Section 13 Event" shall mean any event described in clauses (x),
(y) or (z) of Section 13(a) hereof.
(q) "Stock Acquisition Date" shall mean the date of the first public
announcement (which for purposes of this definition shall include, without
limitation, the issuance of a press release or the filing of a
publicly-available report or other document with the Securities and Exchange
Commission or any other governmental agency) by the Company or an Acquiring
Person that an Acquiring Person has become such.
(r) "Subsidiary" shall mean, with respect to any Person, any other
Person of which a majority of the voting power of the voting equity securities
or voting interests is owned, directly or indirectly, by such Person, or which
is otherwise controlled by such Person.
4
<PAGE>
(s) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date (as
hereinafter defined in Section 3(a)) also be the holders of the Common Stock) in
accordance with the terms and conditions hereof and the Rights Agent hereby
accepts such appointment. The Company may from time to time appoint such
Co-Rights Agents as it may deem necessary or desirable. In the event the Company
appoints one or more Co-Rights Agents, the respective duties of the Rights Agent
and any Co-Rights Agents shall be as the Company shall determine.
Section 3. Issue of Right Certificates.
(a) From the date hereof until the earlier of (i) the close of
business on the tenth Business Day after the Stock Acquisition Date or (ii) the
close of business on the tenth Business Day (or such other Business Day, if any,
as the Board of Directors may determine in its sole discretion) after the date
of the commencement by any Person, other than an Exempt Person, of a tender or
exchange offer if, upon consummation thereof, such Person would be the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding
(including any such date which is after the date of this Agreement and prior to
the issuance of the Rights) (the earliest of such dates being herein referred to
as the "Distribution Date"), (x) the Rights will be evidenced (subject to the
provisions of Section 3(b) hereof) by the certificates for the Common Stock
registered in the names of the holders of the Common Stock (which certificates
for Common Stock shall be deemed also to be certificates for Rights) and not by
separate certificates, and (y) the Rights will be transferable only in
connection with the transfer of the underlying shares of Common Stock. As soon
as practicable after the Company has notified the Rights Agent of the occurrence
of the Distribution Date, the Rights Agent will, at the Company's expense send,
by first-class, insured, postage prepaid mail, to each record holder of the
Common Stock as of the close of business on the Distribution Date, at the
address of such holder shown on the records of the Company, one or more
certificates, in substantially the form of Exhibit B hereto (the "Right
Certificates"), evidencing one Right for each share of Common Stock so held. In
the event that an adjustment in the number of Rights per share of Common Stock
has been made pursuant to Section 11(o) hereof, the Company shall make the
necessary and appropriate rounding adjustments (in accordance with Section 14(a)
hereof) at the time of distribution of the Right Certificates, so that Right
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after the close of business
on the Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(b) With respect to certificates for the Common Stock issued prior to
the close of business on the Record Date, the Rights will be evidenced by such
certificates for the Common Stock on or until the Distribution Date (or the
earlier redemption, expiration or termination of the Rights), and the registered
holders of the Common Stock also shall be the registered holders of the
associated Rights. Until the Distribution Date (or the earlier redemption,
expiration or termination of the Rights), the transfer of any of the
certificates for the
5
<PAGE>
Common Stock outstanding prior to the date of this Agreement shall also
constitute the transfer of the Rights associated with the Common Stock
represented by such certificate.
(c) Certificates for the Common Stock issued after the Record Date,
but prior to the earlier of the Distribution Date or the redemption, expiration
or termination of the Rights, shall be deemed also to be certificates for
Rights, and shall bear a legend, substantially in the form set forth below:
This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in a Shareholder Rights
Agreement between T Cell Sciences, Inc. and State Street Bank
and Trust Company, as Rights Agent, dated as of November 10,
1994 (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on
file at the principal offices of T Cell Sciences, Inc. Under
certain circumstances, as set forth in the Rights Agreement,
such Rights will be evidenced by separate certificates and
will no longer be evidenced by this certificate. T Cell
Sciences, Inc. may redeem the Rights at a redemption price of
$0.01 per Right, subject to adjustment, under the terms of the
Rights Agreement. T Cell Sciences, Inc. will mail to the
holder of this certificate a copy of the Rights Agreement, as
in effect on the date of mailing, without charge promptly
after receipt of a written request therefor. Under certain
circumstances, Rights issued to or held by Acquiring Persons
or any Affiliates or Associates thereof (as defined in the
Rights Agreement), and any subsequent holder of such Rights,
may become null and void.
With respect to such certificates containing the foregoing legend, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone until the Distribution Date (or the earlier
redemption, expiration or termination of the Rights), and the transfer of any of
such certificates shall also constitute the transfer of the Rights associated
with the Common Stock represented by such certificates. In the event that the
Company purchases or acquires any shares of Common Stock after the Record Date
but prior to the Distribution Date, any Rights associated with such Common Stock
shall be deemed cancelled and retired so that the Company shall not be entitled
to exercise any Rights associated with the shares of Common Stock which are no
longer outstanding. The failure to print the foregoing legend on any such Common
Stock certificate or any defect therein shall not affect in any manner
whatsoever the application or interpretation of the provisions of Section 7(e)
hereof.
Section 4. Form of Right Certificates.
(a) The Right Certificates (and the forms of election to purchase
shares and of
6
<PAGE>
assignment and certificate to be printed on the reverse thereof) shall each be
substantially in the form of Exhibit B hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law, rule or regulation or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed, or to conform to
customary usage. The Rights Certificates shall be in a machine printable format
and in a form reasonably satisfactory to the Rights Agent. Subject to the
provisions of Section 11 and Section 22 hereof, the Right Certificates, whenever
distributed, shall be dated as of the Record Date, shall show the date of
countersignature, and on their face shall entitle the holders thereof to
purchase such number of one one-thousandths of a share of Preferred Stock as
shall be set forth therein at the price set forth therein (the "Exercise
Price"), but the number of such shares and the Exercise Price shall be subject
to adjustment as provided herein.
(b) Any Right Certificate issued pursuant to Section 3(a) or Section
22 hereof that represents Rights beneficially owned by (i) an Acquiring Person
or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any Associate or Affiliate of an Acquiring Person) who
becomes a transferee after the Acquiring Person becomes such, or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding (whether or not in writing)
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Company has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of Section 7(e) hereof,
and any Right Certificate issued pursuant to Section 6, Section 11 or Section 22
upon transfer, exchange, replacement or adjustment of any other Right
Certificate referred to in this sentence, shall have deleted therefrom the
second sentence of the existing legend on such Right Certificate and in
substitution therefor shall contain the following legend:
The Rights represented by this Right Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person
or an Affiliate or an Associate of an Acquiring Person (as such terms
are defined in the Rights Agreement). This Right Certificate and the
Rights represented hereby may become null and void under certain
circumstances as specified in Section 7(e) of the Rights Agreement.
The Company shall give notice to the Rights Agent promptly after it becomes
aware of the existence and identity of any Acquiring Person or any Associate or
Affiliate thereof. The Company shall instruct the Rights Agent in writing of the
Rights which should be so legended. The failure to print the foregoing legend on
any such Right Certificate or any defect therein shall not affect in any manner
whatsoever the application or interpretation of the provisions of Section 7(e)
hereof.
7
<PAGE>
Section 5. Countersignature and Registration.
(a) The Right Certificates shall be executed on behalf of the Company
by its Chairman of the Board, or its President or any Vice President and by its
Treasurer or any Assistant Treasurer, or by its Secretary or any Assistant
Secretary, either manually or by facsimile signature, and shall have affixed
thereto the Company's seal or a facsimile thereof which shall be attested to by
the Secretary or any Assistant Secretary of the Company, either manually or by
facsimile signature. The Right Certificates shall be manually countersigned by
an authorized signatory of the Rights Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Right Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery by
the Company, such Right Certificates, nevertheless, may be countersigned by an
authorized signatory of the Rights Agent, and issued and delivered by the
Company with the same force and effect as though the person who signed such
Right Certificates had not ceased to be such officer of the Company; and any
Right Certificates may be signed on behalf of the Company by any person who, at
the actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at one of its offices designated as the appropriate place for
surrender of Right Certificates upon exercise or transfer, books for
registration and transfer of the Right Certificates issued hereunder. Such books
shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
(a) Subject to the provisions of Section 4(b), Section 7(e) and
Section 14 hereof at any time after the close of business on the Distribution
Date, and at or prior to the close of business on the Expiration Date, any Right
Certificate or Certificates may be transferred, split up, combined or exchanged
for another Right Certificate or Certificates, entitling the registered holder
to purchase a like number of one one-thousandths of a share of Preferred Stock
(or following a Triggering Event, preferred stock, cash, property, debt
securities, common stock or any combination thereof) as the Right Certificate or
Certificates surrendered then entitled such holder to purchase and at the same
Exercise Price. Any registered holder desiring to transfer, split up, combine or
exchange any Right Certificate shall make such request in writing delivered to
the Rights Agent, and shall surrender the Right Certificate or Certificates to
be transferred, split up, combined or exchanged, with the form of assignment and
certificate duly executed, at the office or offices of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the transfer of any such
surrendered Right Certificate until
8
<PAGE>
the registered holder shall have completed and signed the certificate contained
in the form of assignment on the reverse side of such Right Certificate and
shall have provided such additional evidence of the identity of the Beneficial
Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the
Company shall reasonably request. Thereupon the Rights Agent shall, subject to
Section 4(b), Section 7(e) and Section 14 hereof, countersign and deliver to the
Person entitled thereto a Right Certificate or Certificates, as the case may be,
as so requested. The Company may require payment by the registered holder of a
Right Certificate, of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any transfer, split up, combination or
exchange of Right Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security satisfactory to them, and reimbursement to the Company and the Rights
Agent of all reasonable expenses incidental thereto, and upon surrender to the
Rights Agent and cancellation of the Right Certificate, if mutilated, the
Company will execute and deliver a new Right Certificate of like tenor to the
Rights Agent for countersignature and delivery to the registered owner in lieu
of the Right Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Exercise Price: Expiration Date of Rights.
(a) Subject to Section 7(e) hereof, the registered holder of any
Right Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Right Certificate, with the form of election to purchase
and the certificate on the reverse side thereof duly executed, to the Rights
Agent at the office or offices of the Rights Agent designated for such purpose,
together with payment of the aggregate Exercise Price for the total number of
one one-thousandths of a share of Preferred Stock (or other securities, cash or
other assets, as the case may be) as to which such surrendered Rights are then
exercised, at or prior to the earlier of (i) the close of business on November
10, 2004 (the "Final Expiration Date"), (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof or (iii) the time at which such Rights
are exchanged as provided in Section 24 hereof (the earlier of (i), (ii) or
(iii) being herein referred to as the "Expiration Date"). Except as set forth in
Section 7(e) hereof and notwithstanding any other provision of this Agreement,
any Person who prior to the Distribution Date becomes a record holder of shares
of Common Stock may exercise all of the rights of a registered holder of a Right
Certificate with respect to the Rights associated with such shares of Common
Stock in accordance with the provisions of this Agreement, as of the date such
Person becomes a record holder of shares of Common Stock.
(b) The Exercise Price for each one one-thousandth of a share of
Preferred Stock pursuant to the exercise of a Right shall initially be $16.00,
shall be subject to adjustment from time to time as provided in Section 11 and
Section 13 hereof and shall be payable in lawful money of the United States of
America in accordance with Section 7(c) below.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase and the certificate on the reverse
side thereof duly executed,
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accompanied by payment of the Exercise Price for the shares to be purchased and
an amount equal to any applicable transfer tax (as determined by the Rights
Agent) in cash, or by certified check or bank draft payable to the order of the
Company, the Rights Agent shall, subject to Section 20(k) hereof, thereupon
promptly (i)(A) requisition from any transfer agent of Preferred Stock (or make
available, if the Rights Agent is the transfer agent therefor) certificates for
the number of one one-thousandths of a share of Preferred Stock to be purchased
and the Company hereby irrevocably authorizes its transfer agent to comply with
all such requests, or (B) if the Company shall have elected to deposit the total
number of shares of Preferred Stock issuable upon exercise of the Rights
hereunder with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of one one-thousandths of a share
of Preferred Stock as are to be purchased (in which case certificates for the
shares of Preferred Stock represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) when appropriate, requisition
from the Company the amount of cash, if any, to be paid in lieu of issuance of
fractional shares in accordance with Section 14 hereof, (iii) promptly after
receipt of such certificates or depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder and (iv) when appropriate, after receipt promptly deliver such cash to or
upon the order of the registered holder of such Right Certificate. In the event
that the Company is obligated to issue other securities (including Common Stock)
of the Company, pay cash or distribute other property pursuant to Section 11(a)
hereof, the Company will make all arrangements necessary so that such other
securities, cash or other property are available for distribution by the Rights
Agent, if and when appropriate.
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to the provisions of
Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or any Associate or Affiliate of
an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any
Associate or Affiliate of an Acquiring Person) who becomes a transferee after
the Acquiring Person becomes such or (iii) a transferee of an Acquiring Person
(or of any Associate or Affiliate of an Acquiring Person) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(e), shall become null
and void without any further action and no holder of such Rights shall have any
rights whatsoever with respect to such Rights, whether under any provision of
this Agreement or otherwise. The Company shall use all reasonable efforts to
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ensure that the provisions of this Section 7(e) and Section 4(b) hereof are
complied with, but shall have no liability to any holder of Right Certificates
or other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or any Affiliates or Associates of an Acquiring
Person or any transferee of any of them hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder of Rights upon the occurrence of any
purported exercise as set forth in this Section 7 unless such registered holder
shall have (i) completed and signed the certificate contained in the form of
election to purchase set forth on the reverse side of the Right Certificate
surrendered for such exercise, and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Right Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Right Certificates to the Company.
Section 9. Reservation and Availability of Preferred Stock.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock or any authorized and issued shares of Preferred Stock held in
its treasury, the number of shares of Preferred Stock that will be sufficient to
permit the exercise in full of all outstanding and exercisable Rights.
(b) The Company shall use its best efforts to cause, from and after
such time as the Rights become exercisable, all shares of Preferred Stock issued
or reserved for issuance to be listed, upon official notice of issuance, upon
the principal national securities exchange, if any, upon which the Common Stock
is listed or, if the principal market for the Common Stock is not on any
national securities exchange, to be eligible for quotation on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") or any
successor thereto or other comparable quotation system.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the occurrence of a Section
11(a)(ii) Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(iii)
hereof, or as soon as required by law following the Distribution Date, as the
case may be, a registration statement under the Securities Act of 1933,
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<PAGE>
as amended (the "Securities Act"), with respect to the securities purchasable
upon exercise of the Rights on an appropriate form, (ii) cause such registration
statement to become effective as soon as practicable after such filing and (iii)
cause such registration statement to remain effective (with a prospectus that at
all times meets the requirements of the Securities Act) until the earlier of (A)
the date as of which the Rights are no longer exercisable for such securities or
(B) the Expiration Date. The Company will also take such action as may be
appropriate under, and which will ensure compliance with, the securities or
"blue sky" laws of the various states in connection with the exercisability of
the Rights. The Company may temporarily suspend, for a period of time not to
exceed ninety (90) days after the date determined in accordance with the
provisions of the first sentence of this Section 9(c), the exercisability of the
Rights in order to prepare and file such registration statement and permit it to
become effective. Upon such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no
longer in effect, in each case with prompt written notice to the Rights Agent.
Notwithstanding any such provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction unless the requisite qualification
in such jurisdiction shall have been obtained.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all shares of Preferred Stock
delivered upon the exercise of the Rights shall, at the time of delivery of the
certificates for such shares (subject to payment of the Exercise Price), be duly
and validly authorized and issued and fully paid and nonassessable.
(e) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges which
may be payable in respect of the issuance or delivery of the Right Certificates
or of any certificates for shares of Preferred Stock upon the exercise of
Rights. The Company shall not, however, be required to pay any transfer tax
which may be payable in respect of any transfer or delivery of Right
Certificates to a person other than, or in respect of the issuance or delivery
of securities in a name other than that of, the registered holder of the Right
Certificates evidencing Rights surrendered for exercise or to issue or deliver
any certificates for securities in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Right Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
Section 10. Preferred Stock Record Date. Each Person in whose name any
certificate for Preferred Stock is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the shares of
Preferred Stock represented thereby on, and such certificate shall be dated, the
date upon which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Exercise Price (and any applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Preferred Stock transfer books of the Company
are closed, such person shall be deemed to have become the record holder of such
shares on, and such certificate shall be dated, the next succeeding Business Day
on which the Preferred Stock transfer books of the Company are open. Prior to
the exercise of the Right evidenced thereby, the holder of a Right Certificate
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<PAGE>
shall not be entitled to any rights of a shareholder of the Company with respect
to shares for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or to
exercise any preemptive rights, and shall not be entitled to receive any notice
of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Exercise Price, Number and Kind of Shares or
Number of Rights. The Exercise Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Stock payable
in shares of Preferred Stock, (B) subdivide the outstanding Preferred
Stock, (C) combine the outstanding Preferred Stock into a smaller
number of shares or (D) issue any shares of its capital stock in a
reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or merger in
which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11(a) and Section 7(e) hereof,
the Exercise Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of capital stock
issuable on such date, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock
which, if such Right had been exercised immediately prior to such
date and at a time when the Preferred Stock transfer books of the
Company were open, he would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision,
combination or reclassification; provided, however, that in no event
shall the consideration to be paid upon the exercise of a Right be
less than the aggregate par value of the shares of capital stock of
the Company issuable upon exercise of a Right. If an event occurs
which would require an adjustment under both Section 11(a)(i) and
Section 11(a)(ii) hereof, the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) Subject to the provisions of Section 24 hereof, in the
event any Person, alone or together with its Affiliates and
Associates, shall become an Acquiring Person (a "Section 11(a)(ii)
Event"), then promptly following any such occurrence, proper
provision shall be made so that each holder of a Right, except as
provided in Section 7(e) hereof, shall thereafter have a right to
receive, upon exercise thereof at the then current Exercise Price in
accordance with the terms of this Agreement, such number of shares of
Preferred Stock of the Company as shall equal the result obtained by
(x) multiplying the then current Exercise Price by the then number of
one one-thousandths of a share of Preferred Stock for which a Right
was exercisable immediately prior to the first occurrence of a
Section 11(a)(ii) Event and dividing that product by (y) 50% of the
Fair Market
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<PAGE>
Value per one one-thousandth of a share of the Preferred Stock
(determined pursuant to Section 11(d)) on the date of the occurrence
of a Section 11(a)(ii) Event.
(iii) In the event that there shall not be sufficient
authorized but unissued shares of Preferred Stock to permit the
exercise in full of the Rights in accordance with the foregoing
Section 11(a)(ii), the Company shall take all action as may be
necessary to authorize and reserve for issuance such number of
additional shares of Preferred Stock as may from time to time be
required to be issued upon the exercise in full of all Rights
outstanding and, if necessary, shall use its best efforts to obtain
shareholder approval thereof. Notwithstanding the foregoing
provisions of this Section 11(a)(iii), in lieu of issuing shares of
Preferred Stock in accordance with Section 11(a)(ii) hereof, if a
majority of the Directors then in office determines that such action
is necessary or appropriate and is not contrary to the interests of
the holders of the Rights, they may elect to cause the Company to
pay, and if sufficient shares of Preferred Stock cannot be issued for
such purpose in accordance with the provisions hereof, the Company
shall issue or pay upon the exercise of the Rights, cash, property,
debt securities, shares of preferred stock or common stock, or any
combination thereof, having an aggregate Fair Market Value equal to
the Fair Market Value of the shares of Preferred Stock which
otherwise would have been issuable pursuant to Section 11(a)(ii).
Any such election by a majority of the Directors of the Company must
be made and publicly announced within 30 days of the date on which
any Section 11(a)(ii) Event first occurs following the Stock
Acquisition Date.
(b) If the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Stock (or securities having the same or more
favorable rights, privileges and preferences as the shares of Preferred Stock
("preferred stock equivalents")) or securities convertible into Preferred Stock
or preferred stock equivalents at a price per share of Preferred Stock or per
share of preferred stock equivalents (or having a conversion price per share, if
a security convertible into Preferred Stock or preferred stock equivalents) less
than the Fair Market Value (as determined pursuant to Section 11(d) hereof) per
share of Preferred Stock on such record date, the Exercise Price to be in effect
after such record date shall be determined by multiplying the Exercise Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the number of shares of Preferred Stock outstanding on such
record date, plus the number of shares of Preferred Stock which the aggregate
offering price of the total number of shares of Preferred Stock to be offered
(and the aggregate initial conversion price of the convertible securities so to
be offered) would purchase at such Fair Market Value and the denominator of
which shall be the number of shares of Preferred Stock outstanding on such
record date, plus the number of additional shares of Preferred Stock and
preferred stock equivalents to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible);
provided, however, that in no event shall the consideration to be paid upon the
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<PAGE>
exercise of a Right be less than the aggregate par value of the shares of
capital stock of the Company issuable upon exercise of a Right. In case such
subscription price may be paid in a consideration part or all of which shall be
in a form other than cash, the value of such consideration shall be the Fair
Market Value thereof determined in accordance with Section 11(d) hereof. Shares
of Preferred Stock owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such adjustments
shall be made successively whenever such a record date is fixed; and in the
event that such rights or warrants are not so issued, the Exercise Price shall
be adjusted to be the Exercise Price which would then be in effect if such
record date had not been fixed.
(c) If the Company shall fix a record date for the making of a
distribution to all holders of Preferred Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation) of evidences of indebtedness, cash (other
than a regular periodic cash dividend out of the earnings or retained earnings
of the Company), assets (other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than Preferred Stock) or
convertible securities, subscription rights or warrants (excluding those
referred to in Section 11(b)), the Exercise Price to be in effect after such
record date shall be determined by multiplying the Exercise Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the Fair Market Value (as determined pursuant to Section 11(d) hereof)
per one one-thousandth of a share of Preferred Stock on such record date, less
the Fair Market Value (as determined pursuant to Section 11(d) hereof) of the
portion of the cash, assets or evidences of indebtedness so to be distributed or
of such convertible securities, subscription rights or warrants applicable to
one one-thousandth of a share of Preferred Stock and the denominator of which
shall be the Fair Market Value (as determined pursuant to Section 11(d) hereof)
per one one-thousandth of a share of Preferred Stock; provided, however, that in
no event shall the consideration to be paid upon the exercise of a Right be less
than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of a Right. Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that such distribution is
not so made, the Exercise Price shall again be adjusted to be the Exercise Price
which would be in effect if such record date had not been fixed.
(d) For the purpose of this Agreement, the "Fair Market Value" of any
share of Preferred Stock, Common Stock or any other stock or any Right or other
security or any other property shall be determined as provided in this Section
11(d).
(i) In the case of a publicly-traded stock or other security,
the Fair Market Value on any date shall be deemed to be the average
of the daily closing prices per share of such stock or per unit of
such other security for the 30 consecutive Trading Days (as such term
is hereinafter defined) immediately prior to such date; provided,
however, that in the event that the Fair Market Value per share of
any share of stock is determined during a period following the
announcement by the issuer of such stock of (x) a dividend or
distribution on such stock payable in shares of such stock or
securities convertible into shares of such stock or (y) any
subdivision, combination or reclassification of such stock, and
15
<PAGE>
prior to the expiration of the 30 Trading Day period after the ex-dividend date
for such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the Fair Market
Value shall be properly adjusted to take into account ex-dividend trading. The
closing price for each day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the securities are not
listed or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which such security is
listed or admitted to trading; or, if not listed or admitted to trading on any
national securities exchange, the last quoted price (or, if not so quoted, the
average of the last quoted high bid and low asked prices) in the
over-the-counter market, as reported by NASDAQ or such other system then in use;
or, if on any such date no bids for such security are quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in such security selected by the Board
of Directors of the Company. If on any such date no market maker is making a
market in such security, the Fair Market Value of such security on such date
shall be determined reasonably and with utmost good faith to the holders of the
Rights by the Board of Directors of the Company, provided, however, that if at
the time of such determination there is an Acquiring Person, the Fair Market
Value of such security on such date shall be determined by a nationally
recognized investment banking firm selected by the Board of Directors, which
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights. The term
"Trading Day" shall mean a day on which the principal national securities
exchange on which such security is listed or admitted to trading is open for the
transaction of business or, if such security is not listed or admitted to
trading on any national securities exchange, a Business Day.
(ii) If a security is not publicly held or not so listed or traded, "Fair
Market Value" shall mean the fair value per share of stock or per other unit of
such security, determined reasonably and with utmost good faith to the holders
of the Rights by the Board of Directors of the Company, provided, however, that
if at the time of such determination there is an Acquiring Person, the Fair
Market Value of such security on such date shall be determined by a nationally
recognized investment banking firm selected by the Board of Directors, which
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights; provided,
however, that for the purposes of making any adjustment provided for by Section
11(a)(ii) hereof, the Fair Market Value of a share of Preferred Stock shall not
be less than the product of the then Fair Market Value of a share of Common
Stock multiplied by the higher of the then Dividend Multiple or Vote Multiple
(as both
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<PAGE>
of such terms are defined in the Certificate of Designation attached
as Exhibit A hereto) applicable to the Preferred Stock and shall not
exceed 105% of the product of the then Fair Market Value of a share
of Common Stock multiplied by the higher of the then Dividend
Multiple or Vote Multiple applicable to the Preferred Stock.
(iii) In the case of property other than securities, the Fair
Market Value thereof shall be determined reasonably and with utmost
good faith to the holders of Rights by the Board of Directors of the
Company, provided, however, that if at the time of such determination
there is an Acquiring Person, the Fair Market Value of such property
on such date shall be determined by a nationally recognized
investment banking firm selected by the Board of Directors, which
determination shall be described in a statement filed with the Rights
Agent and shall be binding upon the Rights Agent and the holders of
the Rights.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Exercise Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Exercise Price; provided, however,
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest hundred-thousandth of a share of Common Stock or
ten-millionth of a share of Preferred Stock, as the case may be, or to such
other figure as the Board of Directors may deem appropriate. Notwithstanding the
first sentence of this Section 11(e), any adjustment required by this Section 11
shall be made no later than the earlier of (i) three (3) years from the date of
the transaction which mandates such adjustment or (ii) the Expiration Date.
(f) If as a result of any provision of Section 11(a) hereof, the
holder of any Right thereafter exercised shall become entitled to receive any
shares of capital stock of the Company other than Preferred Stock, thereafter
the number of such other shares so receivable upon exercise of any Right shall
be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Preferred Stock
contained in Section 11(a), (b), (c), (e), (g) through (k) and (m), inclusive,
and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the
Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Exercise Price hereunder shall evidence the right to
purchase, at the adjusted Exercise Price, the number of one one-thousandths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Exercise Price as a result of the
calculations made in Section 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Exercise Price, that
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<PAGE>
number of one one-thousandths of a share of Preferred Stock (calculated to the
nearest one ten-millionth) obtained by (i) multiplying (x) the number of one
one-thousandths of a share of Preferred Stock for which a Right may be
exercisable immediately prior to this adjustment by (y) the Exercise Price in
effect immediately prior to such adjustment of the Exercise Price and (ii)
dividing the product so obtained by the Exercise Price in effect immediately
after such adjustment of the Exercise Price.
(i) The Company may elect on or after the date of any adjustment of
the Exercise Price to adjust the number of Rights, in substitution for any
adjustment in the number of shares of Preferred Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment in the
number of Rights shall be exercisable for the number of one one-thousandths of a
share of Preferred Stock for which a Right was exercisable immediately prior to
such adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the nearest
one one-hundred-thousandth) obtained by dividing the Exercise Price in effect
immediately prior to adjustment of the Exercise Price by the Exercise Price in
effect immediately after adjustment of the Exercise Price. The Company shall
make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the date on which
the Exercise Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least ten (10) days later than the
date of the public announcement. If Right Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of Right Certificates on such record date Right Certificates evidencing,
subject to Section 14 hereof, the additional Rights to which such holders shall
be entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new Right
Certificates evidencing all the Rights to which such holders shall be entitled
after such adjustment. Right Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein (and may bear, at
the option of the Company, the adjusted Exercise Price) and shall be registered
in the names of the holders of record of Right Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Exercise Price or
the number of one one-thousandths of a share of Preferred Stock issuable upon
the exercise of the Rights, the Right Certificates theretofore and thereafter
issued may continue to express the Exercise Price per share and the number of
shares which were expressed in the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Exercise Price below the then stated value, if any, of the number of one
one-thousandths of a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable shares of Preferred Stock
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<PAGE>
at such adjusted Exercise Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date
the number of one one-thousandths of a share of Preferred Stock or other capital
stock or securities of the Company, if any, issuable upon such exercise over and
above the number of one one-thousandths of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Exercise Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Exercise Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any consolidation or subdivision of the Preferred Stock, issuance
wholly for cash of any shares of Preferred Stock at less than the Fair Market
Value, issuance wholly for cash of shares of Preferred Stock or securities which
by their terms are convertible into or exchangeable for shares of Preferred
Stock, stock dividends or issuance of rights, options or warrants referred to
hereinabove in this Section 11, hereafter made by the Company to holders of its
Preferred Stock, shall not be taxable to such shareholders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date and so long as the Rights have not been redeemed
pursuant to Section 23 hereof or exchanged pursuant to Section 24 hereof, (i)
consolidate with, (ii) merge with or into, or (iii) sell or transfer (or permit
any Subsidiary to sell or transfer), in one transaction or a series of related
transactions, assets or earning power aggregating 50% or more of the assets or
earning power of the Company and its Subsidiaries taken as a whole, to any other
Person or Persons if (x) at the time of or immediately after such consolidation,
merger or sale there are any rights, warrants or other instruments outstanding
or agreements or arrangements in effect which would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights, or (y)
prior to, simultaneously with or immediately after such consolidation, merger or
sale the shareholders of a Person who constitutes, or would constitute, the
"Principal Party" for the purposes of Section 13(a) hereof shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
and Associates. The Company further covenants and agrees that after the
Distribution Date it will not, except as permitted by Section 23 or Section 27
hereof, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will substantially
diminish or otherwise eliminate the benefits intended to be afforded by the
Rights.
(o) In the event the Company shall at any time after the date of this
Agreement and prior to the Distribution Date (i) declare or pay any dividend on
the outstanding Common Stock payable in shares of Common Stock or (ii) effect a
subdivision, combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than
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by payment of dividends in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in any such case (A) the number of one
one-thousandths of a share of Preferred Stock purchasable after such event upon
proper exercise of each Right shall be determined by multiplying the number of
one one-thousandths of a share of Preferred Stock so purchasable immediately
prior to such event by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately prior to such event and the
denominator of which is the number of shares of Common Stock outstanding
immediately after such event, and (B) each share of Common Stock outstanding
immediately after such event shall have issued with respect to it that number of
Rights which each share of Common Stock outstanding immediately prior to such
event had issued with respect to it. The adjustments provided for in this
Section 11(o) shall be made successively whenever such a dividend is declared or
paid or such a subdivision, combination or consolidation is effected.
(p) The exercise of Rights under Section 11(a)(ii) shall only result
in the loss of rights under Section 11(a)(ii) to the extent so exercised and
shall not otherwise affect the rights of holders of Right Certificates under
this Rights Agreement, including rights to purchase securities of the Principal
Party following a Section 13 Event which has occurred or may thereafter occur,
as set forth in Section 13 hereof. Upon exercise of a Right Certificate under
Section 11(a)(ii), the Rights Agent shall return such Right Certificate duly
marked to indicate that such exercise has occurred.
Section 12. Certificate of Adjusted Exercise Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 or Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent and with each transfer agent for the
Preferred Stock and the Common Stock a copy of such certificate and (c) mail a
brief summary thereof to each holder of a Right Certificate in accordance with
Section 26 hereof. The Rights Agent shall be fully protected in relying on any
such certificate and on any adjustment contained therein and shall not be deemed
to have knowledge of any such adjustment unless and until it shall have received
such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power.
(a) In the event that, following the Stock Acquisition Date, directly
or indirectly, (x) the Company shall consolidate with, or merge with and into,
any other Person (other than a Subsidiary of the Company in a transaction which
is not prohibited by Section 11(n) hereof), and the Company shall not be the
continuing or surviving corporation of such consolidation or merger, (y) any
Person (other than a Subsidiary of the Company in a transaction which is not
prohibited by Section 11(n) hereof) shall consolidate with the Company, or merge
with and into the Company and the Company shall be the continuing or surviving
corporation of such merger and, in connection with such merger, all or part of
the shares of Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (z) the Company
shall sell, mortgage or otherwise transfer (or one or more of its Subsidiaries
shall sell, mortgage or otherwise transfer), in one transaction or a series of
related transactions, assets or earning power aggregating 50% or more
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of the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any other Person or Persons (other than the Company or any Subsidiary
of the Company in one or more transactions, each of which is not prohibited by
Section 11(n) hereof), then, and in each such case, proper provision shall be
made so that: (i) each holder of a Right, except as provided in Section 7(e)
hereof, shall have the right to receive, upon the exercise thereof at the then
current Exercise Price in accordance with the terms of this Agreement, such
number of validly authorized and issued, fully paid and nonassessable shares of
freely tradeable Common Stock of the Principal Party (as hereinafter defined in
Section 13(b)), free and clear of rights of call or first refusal, liens,
encumbrances or other adverse claims, as shall be equal to the result obtained
by (1) multiplying the then current Exercise Price by the number of one
one-thousandths of a share of Preferred Stock for which a Right is exercisable
immediately prior to the first occurrence of a Section 13 Event, and dividing
that product by (2) 50% of the Fair Market Value (determined pursuant to Section
11(d) hereof) per share of the Common Stock of such Principal Party on the date
of consummation of such consolidation, merger, sale or transfer; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such consolidation, merger, sale, mortgage or transfer, all the obligations and
duties of the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply to such Principal
Party; and (iv) such Principal Party shall take such steps (including, but not
limited to, the reservation of a sufficient number of shares of its Common Stock
to permit exercise of all outstanding Rights in accordance with this Section
13(a) and the making of payments in cash and/or other securities in accordance
with Section 11(a)(iii) hereof) in connection with such consummation as may be
necessary to assure that the provisions hereof shall thereafter be applicable,
as nearly as reasonably may be, in relation to its shares of Common Stock
thereafter deliverable upon the exercise of the Rights.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or
(y) of the first sentence of Section 13(a), the Person that is the issuer
of any securities into which shares of Common Stock of the Company are
converted in such merger or consolidation, and if no securities are so
issued, the Person that is the other party to the merger or consolidation;
and
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions;
provided, however, that in any such case, (x) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding 12-month
period registered under Section 12 of the Exchange Act, and such Person is a
direct or indirect Subsidiary or Affiliate of another Person the Common Stock of
which is and has been so registered, "Principal Party" shall refer to such other
Person; (y) in case such Person is a direct or indirect Subsidiary or Affiliate
of more than one Person, the Common Stocks of two or more of which are and have
been so registered, "Principal Party" shall refer to whichever of such Persons
is the issuer of the
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Common Stock having the greatest aggregate market value of shares outstanding;
and (z) in case such Person is owned, directly or indirectly, by a joint venture
formed by two or more Persons that are not owned, directly or indirectly, by the
same Person, the rules set forth in (x) and (y) above shall apply to each of the
chains of ownership having an interest in such joint venture as if such party
were a "Subsidiary" of both or all of such joint venturers and the Principal
Parties in each such chain shall bear the obligations set forth in this Section
13 in the same ratio as their direct or indirect interests in such Person bear
to the total of such interests.
(c) The Company shall not consummate any such consolidation, merger,
sale or transfer unless prior thereto (x) the Principal Party shall have a
sufficient number of authorized shares of its Common Stock, which have not been
issued or reserved for issuance, to permit the exercise in full of the Rights in
accordance with this Section 13, and (y) the Company and each Principal Party
and each other Person who may become a Principal Party as a result of such
consolidation, merger, sale or transfer shall have executed and delivered to the
Rights Agent a supplemental agreement providing for the terms set forth in
Section 13(a) and (b) and further providing that, as soon as practicable after
the date of any consolidation, merger, sale or transfer of assets mentioned in
Section 13(a), the Principal Party at its own expense will:
(i) prepare and file a registration statement under the
Securities Act with respect to the Rights and the securities purchasable
upon exercise of the Rights on an appropriate form, use its best efforts
to cause such registration statement to become effective as soon as
practicable after such filing and use its best efforts to cause such
registration statement to remain effective (with a prospectus that at all
times meets the requirements of the Securities Act) until the Expiration
Date;
(ii) use its best efforts to qualify or register the Rights and
the securities purchasable upon exercise of the Rights under the blue sky
laws of such jurisdictions as may be necessary or appropriate;
(iii) use its best efforts to list (or continue the listing of)
the Rights and the securities purchasable upon exercise of the Rights on a
national securities exchange or to meet the eligibility requirements for
quotation on NASDAQ; and
(iv) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply
in all material respects with the requirements for registration on Form 10
under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(o) hereof, or to
distribute Right Certificates which evidence fractional Rights. If the Company
elects not to issue such fractional Rights, the Company shall pay, in lieu of
such fractional Rights, to the registered
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<PAGE>
holders of the Right Certificates with regard to which such fractional Rights
would otherwise be issuable, an amount in cash equal to the same fraction of the
Fair Market Value of a whole Right, as determined pursuant to Section 11(d)
hereof.
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one
one-thousandth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock). In lieu of fractional shares of Preferred Stock that
are not integral multiples of one one-thousandth of a share of Preferred Stock,
the Company may pay to the registered holders of Right Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the Fair Market Value of one one-thousandth of a share of Preferred
Stock. For purposes of this Section 14(b), the Fair Market Value of one
one-thousandth of a share of Preferred Stock shall be determined pursuant to
Section 11(d) hereof for the Trading Day immediately prior to the date of such
exercise.
(c) The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect of this
Agreement, other than rights of action vested in the Rights Agent pursuant to
Sections 18 and 20 hereof, are vested in the respective registered holders of
the Right Certificates (or, prior to the Distribution Date, the registered
holders of the Common Stock); and any registered holder of any Right Certificate
(or, prior to the Distribution Date, of the Common Stock), without the consent
of the Right Agent or of the holder of any other Right Certificate (or, prior to
the Distribution Date, of the Common Stock), may, on his own behalf and for his
own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Right evidenced by such Right Certificate in the manner
provided in such Right Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, each Right will be transferable
only simultaneously and together with the transfer of shares of Common Stock;
(b) after the Distribution Date, the Right Certificates are
transferable only on
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the registry books of the Rights Agent if surrendered at the office or offices
of the Rights Agent designated for such purpose, duly endorsed or accompanied by
a proper instrument of transfer;
(c) the Company and the Rights Agent may deem and treat the person in
whose name a Right Certificate (or, prior to the Distribution Date, the
associated Common Stock certificate) is registered as the absolute owner thereof
and of the Rights evidenced thereby (notwithstanding any notations of ownership
or writing on the Right Certificates or the associated Common Stock certificate
made by anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent shall be affected by
any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as the result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority prohibiting or otherwise restraining
performance of such obligations; provided, however, that the Company must use
its best efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.
Section 17. Right Certificate Holder Not Deemed a Shareholder. No holder,
as such, of any Right Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the shares of Preferred Stock or any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent such compensation
as shall be agreed to in writing between the Company and the Rights Agent for
all services rendered by it hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and disbursements and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense, incurred without gross negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability arising therefrom, directly or
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<PAGE>
indirectly. The provisions of this Section 18(a) shall survive the expiration of
the Rights and the termination of this Agreement.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Right Certificate
or certificate for Common Stock, Preferred Stock, or other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be signed and executed by
the proper Person or Persons.
(c) The Rights Agent shall not be liable for consequential damages
under any provision of this Agreement or for any consequential damages arising
out of any act or failure to act hereunder.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust or shareholder services business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto, provided that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency created by this Agreement, any of the Right Certificates shall
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of the predecessor Rights Agent and deliver such
Right Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and in
this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Right Certificates so countersigned; and in
case at that time any of the Right Certificates shall not have been
countersigned, the Rights Agent may countersign such Right Certificates either
in its prior name or in its changed name; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and in
this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties
and obligations expressly imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof,
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shall be bound:
(a) The Rights Agent may consult with legal counsel selected by it
(who may be legal counsel for the Company), and the opinion of such counsel
shall be full and complete authorization and protection to the Rights Agent as
to any action taken or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "Fair Market Value") be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof shall be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by a
person believed by the Rights Agent to be the Chairman of the Board, a Vice
Chairman of the Board, the President, a Vice President, the Treasurer, any
Assistant Treasurer, the Secretary or an Assistant Secretary of the Company and
delivered to the Rights Agent. Any such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
gross negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Right Certificate;
nor shall it be responsible for any change in the exercisability of the Rights
(including the Rights becoming void pursuant to Section 7(e) hereof) or any
adjustment required under the provisions of Sections 11, 13 or 23(c) hereof or
responsible for the manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment
(except with respect to the exercise of Rights evidenced by Right Certificates
after receipt of a certificate describing any such adjustment furnished in
accordance with Section 12 hereof), nor shall it be responsible for any
determination by the Board of Directors of the Company of the Fair Market Value
of the Rights or Preferred Stock pursuant to the provisions of Section 14
hereof; nor shall it by any act hereunder be deemed to make any representation
or warranty as to the authorization or reservation of any shares of Common Stock
or Preferred Stock to be issued pursuant to this Agreement or any Right
Certificate or as to whether any shares of Common Stock or Preferred Stock will,
when so issued, be validly authorized and issued, fully paid and nonassessable.
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(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder and
certificates delivered pursuant to any provision hereof from any person believed
by the Rights Agent to be the Chairman of the Board, any Vice Chairman of the
Board, the President, a Vice President, the Secretary, an Assistant Secretary,
the Treasurer or an Assistant Treasurer of the Company, and is authorized to
apply to such officers for advice or instructions in connection with its duties,
and it shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with instructions of any such officer. Any application
by the Rights Agent for written instructions from the Company may, at the option
of the Rights Agent, set forth in writing any action proposed to be taken or
omitted by the Rights Agent under this Agreement and the date on or after which
such action shall be taken or such omission shall be effective. The Rights Agent
shall not be liable for any action taken by, or omission of, the Rights Agent in
accordance with a proposal included in such application on or after the date
specified in such application (which date shall not be less than five Business
Days after the date any officer of the Company actually receives such
application, unless any such officer shall have consented in writing to an
earlier date) unless, prior to taking any such action (or the effective date in
the case of an omission), the Rights Agent shall have received written
instructions in response to such application specifying the action to be taken
or omitted.
(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not the Rights
Agent under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, omission, default, neglect or misconduct of any such
attorneys or agents or for any loss to the Company or to the holders of the
Rights resulting from any such act, omission, default, neglect or misconduct,
provided reasonable care was exercised in the selection and continued employment
thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
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(k) If, with respect to any Right Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause (1) or clause (2)
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company by first class
mail. The Company may remove the Rights Agent or any successor Rights Agent
(with or without cause) upon thirty (30) days' notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to each transfer
agent of the Common Stock and Preferred Stock by registered or certified mail,
and to the holders of the Right Certificates by first-class mail. If the Rights
Agent shall resign or be removed or shall otherwise become incapable of acting,
the Company shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of thirty (30) days after giving
notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Right Certificate (who shall, with such notice, submit his Right
Certificate for inspection by the Company), then the incumbent Rights Agent or
the registered holder of any Right Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be (a)
a corporation organized and doing business under the laws of the United States
or of the Commonwealth of Massachusetts or the State of New York (or of any
other state of the United States so long as such corporation is authorized to do
business as a banking institution in the Commonwealth of Massachusetts or the
State of New York), in good standing, which is authorized under such laws to
exercise stock transfer or corporate trust powers and is subject to supervision
or examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least
$50,000,000 or (b) an Affiliate of a corporation described in clause (a) of this
sentence. After appointment, the successor Rights Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any property at
the time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment, the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common Stock
and the Preferred Stock, and mail a notice thereof in writing to the registered
holders of the Right Certificates. Failure to give any notice provided for in
this Section 21, however, or any defect therein, shall not affect the legality
or validity of the resignation or removal of the Rights Agent or the appointment
of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Right Certificates evidencing Rights in such form as
may be approved by its Board of Directors
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to reflect any adjustment or change in the Exercise Price per share and the
number or kind or class of shares of stock or other securities or property
purchasable under the Right Certificates made in accordance with the provisions
of this Agreement. In addition, in connection with the issuance or sale of
shares of Common Stock following the Distribution Date and prior to the
redemption or expiration of the Rights, the Company (a) shall, with respect to
shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, or upon the exercise,
conversion or exchange of securities hereafter issued by the Company, and (b)
may, in any other case, if deemed necessary or appropriate by the Board of
Directors of the Company, issue Right Certificates representing the appropriate
number of Rights in connection with such issuance or sale; provided, however,
that (i) no such Right Certificate shall be issued if, and to the extent that,
the Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or the
person to whom such Right Certificate would be issued, and (ii) no such Right
Certificate shall be issued if, and to the extent that, appropriate adjustments
shall otherwise have been made in lieu of the issuance thereof.
Section 23. Redemption and Termination.
(a) The Board of Directors of the Company may, at its option, redeem
all but not less than all of the then outstanding Rights at a redemption price
of $0.01 per Right, appropriately adjusted to reflect any dividend declared or
paid on the Common Stock in shares of Common Stock or any subdivision or
combination of the outstanding shares of Common Stock or similar event occurring
after the date of this Agreement (such redemption price, as adjusted from time
to time, being hereinafter referred to as the "Redemption Price"). The Rights
may be redeemed only until the earliest to occur of (i) 5:00 P.M., Boston,
Massachusetts time, on the tenth Business Day after the Stock Acquisition Date
or (ii) the Final Expiration Date.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, and without any further action
and without any notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to receive the
Redemption Price for each Right so held. Promptly after the action of the Board
of Directors ordering the redemption of the Rights, the Company shall give
notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to the Rights Agent and to all such
holders at their last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
Transfer Agent for the Common Stock. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made. Neither the Company nor any of its
Affiliates or Associates may redeem, acquire or purchase for value any Rights at
any time in any manner other than that specifically set forth in this Section 23
or Section 24 hereof or in connection with the purchase of shares of Common
Stock prior to the Distribution Date.
(c) The Company may, at its option, pay the Redemption Price in
cash, shares
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of Common Stock (based on the Fair Market Value of the Common Stock as of the
time of redemption) or any other form of consideration deemed appropriate by the
Board of Directors.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its option, at any
time on or after the occurrence of a Section 11(a)(ii) Event, exchange all or
part of the then outstanding and exercisable Rights (which shall not include
Rights that have become void pursuant to the provisions of Section 7(e) hereof)
for shares of Common Stock at an exchange ratio of one share of Common Stock per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors shall not be empowered to effect such exchange at any
time after any Person (other than an Exempt Person), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or
more of the Common Stock of the Company.
(b) Immediately upon the action of the Company ordering the exchange
of any Rights pursuant to subsection (a) of this Section 24 and without any
further action and without any notice, the right to exercise such Rights shall
terminate and the only right thereafter of a holder of such Rights shall be to
receive that number of shares of Common Stock equal to the number of such Rights
held by such holder multiplied by the Exchange Ratio. The Company shall promptly
give notice of any such exchange in accordance with Section 26 hereof; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. Each such notice of exchange will state
the method by which the exchange of the shares of Common Stock for Rights will
be effected and, in the event of any partial exchange, the number of Rights
which will be exchanged. Any partial exchange shall be effected pro rata based
on the number of Rights (other than Rights which have become void pursuant to
the provisions of Section 7(e) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute Preferred Stock (or preferred stock equivalent, as such
term is defined in Section 11(b) hereof) for Common Stock exchangeable for
Rights, at the initial rate of one one-thousandth of a share of Preferred Stock
(or preferred stock equivalent) for each share of Common Stock, as appropriately
adjusted to reflect adjustments in the voting rights of the Preferred Stock
pursuant to the terms thereof, so that the fraction of a share of Preferred
Stock delivered in lieu of each share of Common Stock shall have the same voting
rights as one share of Common Stock.
(d) In the event that there shall not be sufficient shares of Common
Stock or Preferred Stock (or preferred stock equivalent) issued but not
outstanding or authorized but unissued to permit any exchange of Rights as
contemplated in accordance with this Section 24, the Company shall take all such
action as may be necessary to authorize additional shares of Common Stock or
Preferred Stock (or preferred stock equivalent) for issuance upon exchange of
the Rights.
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(e) The Company shall not be required to issue fractions of Common
Stock or to distribute certificates which evidence fractional shares of Common
Stock. If the Company elects not to issue such fractional shares of Common
Stock, the Company shall pay, in lieu of such fractional shares of Common Stock,
to the registered holders of the Right Certificates with regard to which such
fractional shares of Common Stock would otherwise be issuable, an amount in cash
equal to the same fraction of the Fair Market Value of a whole share of Common
Stock. For the purposes of this paragraph (e), the Fair Market Value of a whole
share of Common Stock shall be the closing price of a share of Common Stock (as
determined pursuant to the second sentence of Section 11(d)(i) hereof) for the
Trading Day immediately prior to the date of exchange pursuant to this Section
24.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular periodic cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with, or to effect any sale, mortgage or other transfer (or to
permit one or more of its Subsidiaries to effect any sale, mortgage or other
transfer), in one transaction or a series of related transactions, of 50% or
more of the assets or earning power of the Company and its Subsidiaries (taken
as a whole) to, any other Person (other than a Subsidiary of the Company in one
or more transactions each of which is not prohibited by Section 11(n) hereof),
or (v) to effect the liquidation, dissolution or winding up of the Company, (vi)
to declare or pay any dividend on the Common Stock payable in Common Stock or to
effect a subdivision, combination or consolidation of the Common Stock (by
reclassification or otherwise than by payment of dividends in Common Stock) then
in each such case, the Company shall give to each holder of a Right Certificate
and to the Rights Agent, in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the shares of Common Stock and/or Preferred Stock, if
any such date is to be fixed, and such notice shall be so given in the case of
any action covered by clause (i) or (ii) above at least twenty (20) days prior
to the record date for determining holders of the shares of Preferred Stock for
purposes of such action, and in the case of any such other action, at least
twenty (20) days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the shares of Common Stock
and/or Preferred Stock, whichever shall be the earlier.
(b) In case any Section 11(a)(ii) Event shall occur, then, in any
such case, the Company shall as soon as practicable thereafter give to each
registered holder of a Right Certificate and to the Rights Agent, in accordance
with Section 26 hereof, a notice of the
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occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section 11(a)(ii) hereof.
Section 26. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Right Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
T Cell Sciences, Inc.
115 4th Avenue
Needham, MA 02194
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Right
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
Two Heritage Drive
Quincy, MA 02171
Attention: Administration
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate (or, prior to
the Distribution Date, to the holder of any certificate representing shares of
Common Stock) shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the address of such holder as shown
on the registry books of the Company.
Section 27. Supplements and Amendments. Prior to the Distribution Date,
the Company and the Rights Agent shall, if the Company so directs, supplement or
amend any provision of this Agreement as the Company may deem necessary or
desirable without the approval of any holders of certificates representing
shares of Common Stock. From and after the Distribution Date, the Company and
the Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holder of Right Certificates in order (i)
to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder, or (iv) to change or
supplement the provisions hereof in any manner which the Company may deem
necessary or desirable and which shall not adversely affect the interests of the
holders of Right Certificates (other than an Acquiring Person or any Affiliate
or Associate of an Acquiring Person); provided, however, that from and after the
Distribution Date this Agreement may not be supplemented or amended to lengthen,
pursuant to clause (iii) of this sentence, (A) a time period relating to when
the Rights may be redeemed at such time as the Rights are not then redeemable or
(B) any other time period unless such lengthening is for the purpose of
protecting, enhancing or clarifying the
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rights of, and the benefits to, the holders of Rights. Upon the delivery of such
certificate from an appropriate officer of the Company which states that the
proposed supplement or amendment is in compliance with the terms of this Section
27, the Rights Agent shall execute such supplement or amendment. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Stock. Notwithstanding
any other provision hereof, the Rights Agent's consent must be obtained
regarding any amendment or supplement pursuant to this Section 27 which alters
the Rights Agent's rights or duties.
Section 28. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors. For all
purposes of this Agreement, any calculation of the number of shares of Common
Stock outstanding at any particular time, including for purposes of determining
the particular percentage of such outstanding shares of Common Stock of which
any Person is the Beneficial Owner, shall be made in accordance with the last
sentence of Rule 13d-3(d)(1)(i) of the Rules under the Exchange Act as in effect
on the date hereof. The Board of Directors of the Company shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board or to the Company, or as may
be necessary or advisable in the administration of this Agreement, including
without limitation, the right and power to (i) interpret the provisions of this
Agreement and (ii) make all determinations deemed necessary or advisable for the
administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
of Directors in good faith shall (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights and all other parties, and
(y) not subject any member of the Board of Directors to any liability to the
holders of the Rights or to any other person.
Section 30. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Common Stock) any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Distribution Date, registered holders
of the Common Stock).
Section 31. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
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<PAGE>
Section 32. Governing Law. This Agreement, each Right and each Right
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and to be performed entirely within Delaware.
Section 33. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
[Remainder of page intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
ATTEST: T CELL SCIENCES, INC.
By: _______________________ By: ________________________________
Name:
Title:
ATTEST: STATE STREET BANK AND
TRUST COMPANY, as Rights Agent
By: _______________________ By: ________________________________
Name:
Title:
<PAGE>
Exhibit A
VOTE OF DIRECTORS ESTABLISHING
Series C-1 JUNIOR PARTICIPATING CUMULATIVE
PREFERRED STOCK
of
T CELL SCIENCES, INC.
Pursuant to Section 151 of the General Corporation Law of the State of
Delaware:
VOTED, that pursuant to authority conferred upon and vested in the Board
of Directors by the Third Restated Certificate of Incorporation, as amended as
of the date hereof (the "Certificate of Incorporation"), of T Cell Sciences,
Inc. (the "Corporation"), the Board of Directors hereby establishes and
designates a series of Class C Preferred Stock of the Corporation, and hereby
fixes and determines the relative rights and preferences of the shares of such
series, in addition to those set forth in the Certificate of Incorporation, as
follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series C-1 Junior Participating Cumulative Preferred Stock" (the
"Series C-1 Preferred Stock"), and the number of shares initially constituting
such series shall be 350,000; provided, however, that if more than a total of
350,000 shares of Series C-1 Preferred Stock shall be issuable upon the exercise
of Rights (the "Rights") issued pursuant to the Shareholder Rights Agreement
dated as of November 10, 1994, between the Corporation and State Street Bank and
Trust Company, as Rights Agent (the "Rights Agreement"), the Board of Directors
of the Corporation, pursuant to Section 151(g) of the General Corporation Law of
the State of Delaware, shall direct by resolution or resolutions that a
certificate be properly executed, acknowledged, filed and recorded, in
accordance with the provisions of Section 103 thereof, providing for the total
number of shares of Series C-1 Preferred Stock authorized to be issued to be
increased (to the extent that the Certificate of Incorporation then permits) to
the largest number of whole shares (rounded up to the nearest whole number)
issuable upon exercise of such Rights.
Section 2. Dividends and Distributions.
(A) (i) Subject to the rights of the holders of any shares of any series
of preferred stock (or any similar stock) ranking prior and superior to the
Series C-1 Preferred Stock with respect to dividends, the holders of shares of
Series C-1 Preferred Stock, in preference to the holders of shares of common
stock and of any other junior stock, shall be entitled to receive, when, as and
if declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of March, June,
September and December in each year (each such date being referred to herein as
a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series C-1
<PAGE>
Preferred Stock, in an amount per share (rounded to the nearest cent) equal to
the greater of (a) $1.00 or (b) subject to the provisions for adjustment
hereinafter set forth, 1000 times the aggregate per share amount of all cash
dividends, and 1000 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions other than a dividend payable in
shares of common stock or a subdivision of the outstanding shares of common
stock (by reclassification or otherwise), declared on the common stock since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series C-1 Preferred Stock. The multiple of cash and
non-cash dividends declared on the common stock to which holders of the Series
C-1 Preferred Stock are entitled, which shall be 1000 initially but which shall
be adjusted from time to time as hereinafter provided, is hereinafter referred
to as the "Dividend Multiple." In the event the Corporation shall at any time
after November 10, 1994 (the "Rights Declaration Date") (i) declare or pay any
dividend on common stock payable in shares of common stock, or (ii) effect a
subdivision or combination or consolidation of the outstanding shares of common
stock (by reclassification or otherwise than by payment of a dividend in shares
of common stock) into a greater or lesser number of shares of common stock, then
in each such case the Dividend Multiple thereafter applicable to the
determination of the amount of dividends which holders of shares of Series C-1
Preferred Stock shall be entitled to receive shall be the Dividend Multiple
applicable immediately prior to such event multiplied by a fraction, the
numerator of which is the number of shares of common stock outstanding
immediately after such event and the denominator of which is the number of
shares of common stock that were outstanding immediately prior to such event.
(ii) Notwithstanding anything else contained in this paragraph (A),
the Corporation shall, out of funds legally available for that purpose, declare
a dividend or distribution on the Series C-1 Preferred Stock as provided in
this paragraph (A) immediately after it declares a dividend or distribution on
the common stock (other than a dividend payable in shares of common stock);
provided that, in the event no dividend or distribution shall have been declared
on the common stock during the period between any Quarterly Dividend Payment
Date and the next subsequent Quarterly Dividend Payment Date, a dividend of
$1.00 per share on the Series C-1 Preferred Stock shall nevertheless be payable
on such subsequent Quarterly Dividend Payment Date.
(B) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series C-1 Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares of Series C-1 Preferred Stock,
unless the date of issue of such shares is prior to the record date for the
first Quarterly Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or unless the date
of issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series C-1 Preferred Stock
entitled to receive a quarterly dividend and before such Quarterly Dividend
Payment Date, in either of which events such dividends shall begin to accrue and
be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series C-1
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix in accordance with applicable law a record date for the
determination of holders of shares of Series C-1 Preferred Stock entitled to
receive payment of a dividend or distribution declared
2
<PAGE>
thereon, which record date shall be not more than such number of days prior to
the date fixed for the payment thereof as may be allowed by applicable law.
Section 3. Voting Rights. In addition to any other voting rights required
by law, the holders of shares of Series C-1 Preferred Stock shall have the
following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series C-1 Preferred Stock shall entitle the holder thereof to 1000
votes on all matters submitted to a vote of the stockholders of the Corporation.
The number of votes which a holder of a share of Series C-1 Preferred Stock is
entitled to cast, which shall initially be 1000 but which may be adjusted from
time to time as hereinafter provided, is hereinafter referred to as the "Vote
Multiple." In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare or pay any dividend on common stock payable in
shares of common stock, or (ii) effect a subdivision or combination or
consolidation of the outstanding shares of common stock (by reclassification or
otherwise than by payment of a dividend in shares of common stock) into a
greater or lesser number of shares of common stock, then in each such case the
Vote Multiple thereafter applicable to the determination of the number of votes
per share to which holders of shares of Series C-1 Preferred Stock shall be
entitled shall be the Vote Multiple immediately prior to such event multiplied
by a fraction, the numerator of which is the number of shares of common stock
outstanding immediately after such event and the denominator of which is the
number of shares of common stock that were outstanding immediately prior to such
event.
(B) Except as otherwise provided herein or by law, the holders of shares
of Series C-1 Preferred Stock and the holders of shares of common stock and the
holders of shares of any other capital stock of this Corporation having general
voting rights, shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.
(C) Except as otherwise required by applicable law or as set forth herein,
holders of Series C-1 Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of common stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
(A) Whenever dividends or distributions payable on the Series C-1
Preferred Stock as provided in Section 2 are in arrears, thereafter and until
all accrued and unpaid dividends and distributions, whether or not declared, on
shares of Series C-1 Preferred Stock outstanding shall have been paid in full,
the Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares
of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series C-1 Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any
shares of stock
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<PAGE>
ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series C-1 Preferred Stock,
except dividends paid ratably on the Series C-1 Preferred Stock and
all such parity stock on which dividends are payable or in arrears
in proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) except as permitted in subsection 4(A)(iv) below, redeem, purchase
or otherwise acquire for consideration shares of any stock ranking
on a parity (either as to dividends or upon liquidation, dissolution
or winding up) with the Series C-1 Preferred Stock, provided that
the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends
or upon dissolution, liquidation or winding up) to the Series C-1
Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of Series
C-1 Preferred Stock, or any shares of any stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding
up) with the Series C-1 Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by
the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in
good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under subsection (A) of this Section
4, purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series C-1 Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
preferred stock and may be reissued as part of a new series of preferred stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation
(voluntary or otherwise), dissolution or winding up of the Corporation, no
distribution shall be made (x) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series C-1 Preferred Stock unless, prior thereto, the holders of shares of
Series C-1 Preferred Stock shall have received an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not declared, to the date
of such payment, plus an amount equal to the greater of (1) $1000.00 per share
or (2) an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1000 times the aggregate amount to be
distributed per share to holders of common stock, or (y) to the holders of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series C-1 Preferred Stock, except
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<PAGE>
distributions made ratably on the Series C-1 Preferred Stock and all other such
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up. In the
event the Corporation shall at any time after the Rights Declaration Date (i)
declare or pay any dividend on common stock payable in shares of common stock,
or (ii) effect a subdivision or combination or consolidation of the outstanding
shares of common stock (by reclassification or otherwise than by payment of a
dividend in shares of common stock) into a greater or lesser number of shares of
common stock, then in each such case the aggregate amount per share to which
holders of shares of Series C-1 Preferred Stock were entitled immediately prior
to such event under clause (x) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of common stock outstanding immediately after such event and the
denominator of which is the number of shares of common stock that were
outstanding immediately prior to such event.
Neither the consolidation of nor merging of the Corporation with or into
any other corporation or corporations, nor the sale or other transfer of all or
substantially all of the assets of the Corporation, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
this Section 6.
Section 7. Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of common stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series C-1 Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 1000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of common stock is changed or exchanged,
plus accrued and unpaid dividends, if any, payable with respect to the Series
C-1 Preferred Stock. In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare or pay any dividend on common stock payable
in shares of common stock, or (ii) effect a subdivision or combination or
consolidation of the outstanding shares of common stock (by reclassification or
otherwise than by payment of a dividend in shares of common stock) into a
greater or lesser number of shares of common stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series C-1 Preferred Stock shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of shares of
common stock outstanding immediately after such event and the denominator of
which is the number of shares of common stock that were outstanding immediately
prior to such event.
Section 8. Redemption. The shares of Series C-1 Preferred Stock shall not
be redeemable.
Section 9. Ranking. Unless otherwise provided in the Certificate of
Incorporation or a Certificate of Vote of Directors Establishing a Class of
Stock relating to a subsequently-designated series of preferred stock of the
Corporation, the Series C-1 Preferred Stock shall rank junior to any other
series of the Corporation's preferred stock subsequently issued, as to the
payment of dividends and the distribution of assets on liquidation, dissolution
or winding up and shall rank senior to the common stock.
5
<PAGE>
Section 10. Amendment. The Certificate of Incorporation and this
Certificate of Vote of Directors shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series C-1 Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of two-thirds or more of the outstanding shares
of Series C-1 Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. Series C-1 Preferred Stock may be issued in
whole shares or in any fraction of a share that is one one-thousandth (1/1000th)
of a share or any integral multiple of such fraction, which shall entitle the
holder, in proportion to such holder's fractional shares, to exercise voting
rights, receive dividends, participate in distributions and to have the benefit
of all other rights of holders of Series C-1 Preferred Stock. In lieu of
fractional shares, the Corporation may elect to make a cash payment as provided
in the Rights Agreement for fractions of a share other than one one-thousandth
(1/1000th) of a share or any integral multiple thereof.
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Exhibit B
[Form of Right Certificate]
Certificate No. R- _____ Rights
NOT EXERCISABLE AFTER NOVEMBER 10, 2004 OR EARLIER IF NOTICE OF REDEMPTION IS
GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF T CELL SCIENCES,
INC., AT $0.01 PER RIGHT ON THE TERMS SET FORTH IN THE SHAREHOLDER RIGHTS
AGREEMENT BETWEEN T CELL SCIENCES, INC. AND STATE STREET BANK AND TRUST COMPANY,
AS RIGHTS AGENT, DATED AS OF NOVEMBER 10, 1994 (THE "RIGHTS AGREEMENT"). UNDER
CERTAIN CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN ASSOCIATE OR AFFILIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.
Right Certificate
T CELL SCIENCES, INC.
This certifies that ____________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the
Shareholder Rights Agreement dated as of November 10, 1994 (the "Rights
Agreement") between T CELL SCIENCES, INC. (the "Company") and STATE STREET BANK
AND TRUST COMPANY, as Rights Agent (the "Rights Agent"), to purchase from the
Company at any time after the Distribution Date (as such term is defined in the
Rights Agreement) and prior to the close of business on November 10, 2004 at the
office or offices of the Rights Agent designated for such purpose, or its
successors as Rights Agent, one one-thousandth of a fully paid, non-assessable
share of the Series C-1 Junior Participating Cumulative Preferred Stock (the
"Preferred Stock") of the Company, at a purchase price of $16.00 per one
one-thousandth of a share (the "Exercise Price"), upon presentation and
surrender of this Right Certificate with the Form of Election to Purchase and
the related Certificate duly executed. The number of Rights evidenced by this
Right Certificate (and the number of shares which may be purchased upon exercise
thereof) set forth above, and the Exercise Price per share set forth above, are
the number and Exercise Price as of______, based on the Preferred Stock as
constituted at such date.
<PAGE>
Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined
in the Rights Agreement), if the Rights evidenced by this Right Certificate are
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of
any such Person (as such terms are defined in the Rights Agreement), (ii) a
transferee of any such Acquiring Person, Associate or Affiliate, or (iii) under
certain circumstances specified in the Rights Agreement, a transferee of a
Person who, after such transfer, became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person, such Rights shall become null and void and no
holder hereof shall have any right with respect to such Rights from and after
the occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Exercise Price and the number of
shares of Preferred Stock or other securities which may be purchased upon the
exercise of the Rights evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal office of the
Company and the designated office of the Rights Agent and are also available
upon written request to the Company or the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the office or offices of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Certificates of like
tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of shares of Preferred Stock as the Rights evidenced by the
Right Certificate or Certificates surrendered shall have entitled such holder to
purchase. If this Right Certificate shall be exercised in part, the holder shall
be entitled to receive upon surrender hereof another Right Certificate or
Certificates for the number of whole Rights not exercised. If this Right
Certificate shall be exercised in whole or in part pursuant to Section 11(a)(ii)
of the Rights Agreement, the holder shall be entitled to receive this Right
Certificate duly marked to indicate that such exercise has occurred as set forth
in the Rights Agreement.
Under certain circumstances, subject to the provisions of the Rights
Agreement, the Board of Directors of the Company at its option may exchange all
or any part of the Rights evidenced by this Certificate for shares of the
Company's Common Stock or Preferred Stock at an exchange ratio (subject to
adjustment) of one share of Common Stock or one one-thousandth of a share of
Preferred Stock per Right.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Board of Directors of the Company at its
option at a redemption price of $0.01 per Right (payable in cash, Common Stock
or other consideration deemed appropriate by the Board of Directors).
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<PAGE>
The Company is not obligated to issue fractional shares of stock upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-thousandth of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depositary receipts). If
the Company elects not to issue such fractional shares, in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Preferred
Stock, Common Stock or any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by an authorized signatory of the Rights
Agent.
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WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
[Corporate Seal] T CELL SCIENCES, INC.
Attested: By ___________________________________
Name:
Title: [Chairman, Vice
By __________________________________ Chairman, President or
[Secretary or Assistant Secretary] Vice President]
Countersigned:
STATE STREET BANK
AND TRUST COMPANY,
as Rights Agent
Authorized Signatory
Date of countersignature:
4
<PAGE>
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Right Certificate.)
FOR VALUE RECEIVED _____________ hereby sells, assigns and transfers unto
_______________________________ (Please print name and address of transferee)
_______________________________ this Right Certificate, together with all right,
title and interest therein, and does hereby irrevocably constitute and appoint
______________ Attorney, to transfer the within Right Certificate on the books
of the within-named Company, with full power of substitution.
Dated: ___________________
___________________________________________
Signature
Signature Guaranteed: _________________________
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate ____ are ____ are not
being transferred by or on behalf of a Person who is or was an Acquiring Person
or an Affiliate or Associate of any such Person (as such terms are defined in
the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned __ did __ did not directly or indirectly acquire the Rights
evidenced by this Right Certificate from any Person who is, was or became an
Acquiring Person or an Affiliate or Associate of any such Person.
Dated: ____________________ _______________________________________
Signature
5
<PAGE>
NOTICE
The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Right Certificate in every
particular, without alteration or enlargement or any change whatsoever.
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<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Right Certificate.)
To T CELL SCIENCES, INC.:
The undersigned hereby irrevocably elects to exercise ______ Rights
represented by this Right Certificate to purchase the shares of Preferred Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of:
Please insert social security
or other identifying taxpayer number: ____________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this
Right Certificate or if the Rights are being exercised pursuant to Section
11(a)(ii) of the Rights Agreement, a new Right Certificate for the balance of
such Rights shall be registered in the name of and delivered to:
Please insert social security
or other identifying taxpayer number: ____________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
Dated: ___________
____________________________________________
Signature
Signature Guaranteed: ____________
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<PAGE>
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate ____ are ____ are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Person (as such terms are defined in the
Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned __ did __ did not directly or indirectly acquire the Rights
evidenced by this Right Certificate from any Person who is, was or became an
Acquiring Person or an Affiliate or Associate of any such Person.
Dated: ____________________ _______________________________________
Signature
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<PAGE>
NOTICE
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
<PAGE>
Exhibit 10.4
VIRUS RESEARCH INSTITUTE, INC.
1992 Equity Incentive Plan
Amended and Restated as of May 10, 1996
Section 1. Purpose. The purpose of the Virus Research Institute, Inc. 1992
Equity Incentive Plan, as amended and restated (the "Plan"), is to attract and
retain officers, employees, directors and consultants to provide an incentive
for them to assist the Company to achieve long-range performance goals and to
enable them to participate in the long-term growth of the Company.
Section 2. Definitions.
"Act" means the Securities Exchange Act of 1934, as amended.
"Affiliate" means any business entity in which the Company owns directly
or indirectly 50% or more of the total combined voting power or has a
significant financial interest as determined by the Committee.
"Award" means any Option or Restricted Stock awarded under the Plan.
"Board" means the Board of Directors of the Company.
"Change of Control" has the meaning set forth in Section 10.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time and any successor code and related rules, regulations and interpretations.
"Committee" means the Committee of the Board referred to in Section 3.
"Common Stock" or "Stock" means the Common Stock, $0.001 par value, of the
Company, subject to adjustments pursuant to Section 5(b).
"Company" means Virus Research Institute, Inc.
"Designated Beneficiary" means the beneficiary designated by a
Participant, in a manner determined by the Committee, to receive amounts due or
exercise rights of the Participant in the event of the Participant's death. In
the absence of an effective designation by a Participant, designated Beneficiary
shall mean the Participant's estate.
"Disinterested Person" means an Independent Director who qualifies as a
"disinterested person" under Rule 16b-3(c)(2)(i) promulgated under the Act, or
any successor definition under said Rule.
<PAGE>
"Fair Market Value" means (i) with respect to Common Stock, (x) if the
Common Stock is listed or admitted for trading on any national securities
exchange, the last sales price or the closing bid price if no sale occurred, of
Common Stock on the principal securities exchange on which such class of stock
is listed, (y) if the Common Stock is not listed or admitted for trading on any
such exchange, the last reported sales price of Common Stock on the Nasdaq Stock
Market, or any similar system of automatic quotation of securities prices then
in common use, if so quoted, or (z) if not so quoted as described in clause (y),
the mean between the high and the low asked quotations for the Common Stock as
reported by the National Quotation Bureau Incorporated if at least two
securities dealers have inserted both bid and asked quotations for such class of
stock on at least five of the ten trading days preceding the day in question; or
(ii) with respect to any other property, the fair market value of such property
as determined by the Committee in good faith or in the manner established by the
Committee from time to time. Notwithstanding the foregoing, the Fair Market
Value of the Common Stock on the effective date of the Company's initial public
offering shall be the offering price to the public of the Common Stock on such
date.
"Incentive Stock Option" means an option to purchase shares of Common
Stock awarded to a Participant under Section 6 which is intended to meet the
requirements of Section 422 of the Code or any successor provision.
"Independent Director" means a member of the Board who is not also an
employee of the Company.
"Nonstatutory Stock Option" means an option to purchase shares of Common
Stock awarded to a Participant under Sections 6 or 7 which is not intended to be
an Incentive Stock Option.
"Option" means an Incentive Stock Option or a Nonstatutory Stock Option.
"Participant" means a person selected by the Committee to receive an Award
under the Plan.
"Restricted Period" means the period of time selected by the Committee
during which an award of Restricted Stock may be forfeited to the Company.
"Restricted Stock" means shares of Common Stock subject to forfeiture
awarded to a Participant under Section 8.
Section 3. Administration.
(a) Committee. The Plan shall be administered by a committee of not
less than two Independent Directors as appointed by the Board from time to time
(the "Committee"). Each member of the Committee shall be a Disinterested Person.
On and after the date the Company becomes subject to Section 162(m) of the Code,
each member of the Committee shall also be an "outside director" within the
meaning of Section 162(m) of the Code and the regulations promulgated
thereunder.
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<PAGE>
(b) Powers of Committee. The Committee shall have the power and
authority to grant Awards consistent with the terms of the Plan, including the
power and authority:
(i) to select the officers, employees and consultants of the Company
to whom Awards may from time to time be granted;
(ii) to determine the time or times of grant, and the extent, if
any, of Incentive Stock Options, Nonstatutory Stock Options and Restricted
Stock Awards or any combination of the foregoing, granted to any one or
more Participants;
(iii) to determine the number of shares of Common Stock to be
covered by any Award;
(iv) to determine and modify from time to time the terms and
conditions, including restrictions, not inconsistent with the terms of the
Plan, of any Award, which terms and conditions may differ among individual
Awards and Participants, and to approve the form of written instruments
evidencing the Awards;
(v) to accelerate at any time the exercisability or vesting of all
or any portion of any Award and/or include provisions in Awards providing
for such acceleration;
(vi) subject to the provisions of Section 6(c), to extend at any
time the period in which Options may be exercised;
(vii) to determine at any time whether, to what extent, and under
what circumstances Common Stock and other amounts payable with respect to
an Award shall be deferred either automatically or at the election of the
Participant and whether and to what extent the Company shall pay or credit
amounts constituting interest (at rates determined by the Committee) or
dividends or deemed dividends on such deferrals; and
(viii) at any time to adopt, alter and repeal such rules, guidelines
and practices for administration of the Plan and for its own acts and
proceedings as it shall deem advisable; to interpret the terms and
provisions of the Plan and any Award (including related written
instruments); to make all determinations it deems advisable for the
administration of the Plan; to decide all disputes arising in connection
with the Plan; and to otherwise supervise the administration of the Plan.
All decisions and interpretations of the Committee shall be binding on
all persons, including the Company and the Participants.
(c) Delegation of Authority to Grant Awards. The Committee, in its
discretion, may delegate to the Chief Executive Officer or Chief Financial
Officer of the Company all or part of the Committee's authority and duties with
respect to Awards, including the granting thereof, to individuals who are not
subject to the reporting and other provisions of Section 16 of the Act. The
Committee may revoke or amend the terms of a delegation at any time but
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<PAGE>
such action shall not invalidate any prior actions of the Committee's delegate
or delegates that were consistent with the terms of the Plan.
Section 4. Eligibility. All full and part-time officers and employees, and
in the case of Awards other than Incentive Stock Options, consultants of the
Company or any Affiliate capable of contributing significantly to the successful
performance of the Company, other than a person who has irrevocably elected not
to be eligible, are eligible to be Participants in the Plan. Independent
Directors are also eligible to participate in the Plan but only to the extent
provided in Section 7 below.
Section 5. Stock Available for Awards.
(a) Subject to adjustment under subsection (b), Awards may be made
under the Plan for up to 1,751,176 shares of Common Stock. If any Award in
respect of shares of Common Stock expires or is terminated unexercised or is
forfeited for any reason or settled in a manner that results in fewer shares
outstanding than were initially awarded, including, without limitation the
surrender of shares in payment for the Award or any tax obligation thereon, the
shares subject to such Award or so surrendered, as the case may be, to the
extent of such expiration, termination, forfeiture or decrease, shall again be
available for award under the Plan, subject, however, in the case of Incentive
Stock Options, to any limitation required under the Code. Shares issued under
the Plan may consist in whole or in part of authorized but unissued shares or
treasury shares. Subject to such overall limitation, shares of Common Stock may
be issued up to such maximum number pursuant to any type or types of Award;
provided, however, that on and after the date the Company is subject to Section
162(m) of the Code, Options with respect to no more than 250,000 shares of
Common Stock may be granted to any one individual Participant during any fiscal
year period.
(b) If the Company effects a stock split, consolidation of shares or
other recapitalization of its stock, the payment of a stock dividend, or any
other increase or reduction in the number of shares of Common Stock outstanding
without receiving compensation therefor in money, services or property, then at
the discretion of the Board (i) the number, class, and price of shares of Common
Stock subject to outstanding Options hereunder shall be appropriately adjusted
by the Board in such a manner as to entitle each Optionee to receive upon
exercise of an Option in full, for the same aggregate consideration, that number
and class of shares which the Optionee would have received as a result of the
event requiring the adjustment had the Optionee exercised the Option in full
immediately prior to such event; and (ii) the number and class of shares
reserved for issuance under the Plan shall be appropriately adjusted by the
Board by substituting that number and class of shares of stock which
stockholders of the Company would have received as a result of such event if
they held all of the reserved shares immediately prior to such event; provided,
however, that outstanding Options and Options to be issued under the Plan shall
not be issued or exercisable for fractional shares, and the Board may determine
in its discretion to adjust outstanding Options or shares reserved under the
Plan to the nearest whole number of shares, or it may require payment of cash to
an Optionee who exercises an Option for a fractional share in an amount
reflecting the fair value of the fractional share as determined by the Board.
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<PAGE>
Section 6. Stock Options Granted to Officers. Employees and Consultants.
(a) Subject to the provisions of the Plan, the Committee may award
Incentive Stock Options and Nonstatutory Stock Options and determine the number
of shares to be covered by each Option, the option price therefor and the
conditions and limitations applicable to the exercise of the Option. The terms
and conditions of Incentive Stock Options shall be subject to and comply with
Section 422 of the Code, or any successor provision, and any regulations
thereunder and to the extent that any Option does not qualify as an Incentive
Stock Option, it shall be deemed a Nonstatutory Stock Option.
(b) The Committee shall establish the option price at the time each
Option is awarded, which price shall not be less than 100% of the Fair Market
Value of the Common Stock on the date of award; provided, however, if an officer
or employee owns or is deemed to own (by reason of the attribution rules
applicable under Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of stock of the Company or any Affiliate and an
Incentive Stock Option is granted to such officer or employee, the option price
of such Incentive Stock Option shall be not less than 110% of the Fair Market
Value on the grant date.
(c) The term of each Option shall be fixed by the Committee, but no
Incentive Stock Option shall be exercisable more than ten years after the date
the option is granted. If an officer or employee owns or is deemed to own (by
reason of the attribution rules of Section 424(d) of the Code) more than 10% of
the combined voting power of all classes of stock of the Company or any
Affiliate and an Incentive Stock Option is granted to such officer or employee,
the term of such option shall be no more than five years from the date of grant.
(d) Each Option shall be exercisable at such times and subject to
such terms and conditions as the Committee may specify in the applicable Award
or thereafter. The Committee may impose such conditions with respect to the
exercise of Options, including conditions relating to applicable federal or
state securities laws, as it considers necessary or advisable. The Committee may
at any time accelerate the exercisability of all or any portion of any Option.
(e) Options may be exercised in whole or in part, by giving written
notice of exercise to the Company, specifying the number of shares to be
purchased. Payment of the purchase price may be made by one or more of the
following methods:
(i) In cash, by certified, bank or personal check or other
instrument acceptable to the Committee;
(ii) In the form of shares of Common Stock that are not then
subject to restrictions under any Company plan and, unless otherwise
permitted by the Committee, that have been held by the optionee for at
least six months. Such surrendered shares shall be valued at Fair Market
Value on the exercise date;
(iii) By the optionee delivering to the Company a properly
executed exercise notice together with irrevocable instructions to a
broker to promptly deliver to the Company cash or a check payable and
acceptable to the Company to pay the
5
<PAGE>
purchase price; provided that in the event the optionee chooses to pay the
purchase price as so provided, the optionee and the broker shall comply
with such procedures and enter into such agreements of indemnity and other
agreements as the Committee shall prescribe as a condition of such payment
procedure;
(iv) by any other means which the Board determines are
consistent with the purpose of the Plan and with applicable laws and
regulations including, without limitation, the provisions of Rule 16b-3
and Regulation T promulgated by the Federal Reserve Board; or
(v) by any combination of such methods of payment.
Payment instruments will be received subject to collection. The delivery
of certificates representing the shares of Common Stock to be purchased pursuant
to the exercise of an Option will be contingent upon receipt from the optionee
(or a purchaser acting in his or her stead in accordance with the provisions of
the Option) by the Company of the full purchase price for such shares and the
fulfillment of any other requirements contained in the Option or applicable
provisions of laws.
(f) To the extent required for "incentive stock option" treatment
under Section 422 of the Code, the aggregate Fair Market Value (determined as of
the time of grant) of the shares of Common Stock with respect to which Incentive
Stock Options granted under this Plan and any other plan of the Company or its
parent and subsidiary corporations become exercisable for the first time by an
optionee during any calendar year shall not exceed $100,000. To the extent that
any Option exceeds this limit, it shall constitute a Nonstatutory Stock Option.
Section 7. Stock Options Granted to Independent Directors.
(a) Automatic Grant of Options.
(i) Each Independent Director who is serving as a Director on
the effective date of the Company's initial public offering shall be
granted on such effective date a Nonstatutory Stock Option to acquire
10,000 shares of Common Stock.
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(ii) Each Independent Director who is first elected to serve
as a Director after the effective date of the Company's initial public
offering shall be granted, on the day of his or her election, a
Nonstatutory Stock Option to acquire 10,000 shares of Common Stock (an
"Initial Director Option").
(iii) After each annual meeting of stockholders of the
Company, beginning with the Company's 1998 annual meeting, each
Independent Director who has not received an Initial Director Option
during the preceding year and who is serving as Director of the Company on
the first business day following such annual meeting of stockholders shall
automatically be granted on such day a Nonstatutory Stock Option to
acquire 2,000 shares of Common Stock.
(iv) The exercise price per share for the Common Stock covered
by an Option granted under this Section 7 shall be equal to the Fair
Market Value of the Common Stock on the date the Option is granted.
(b) Exercise; Termination.
(i) Except as provided in Section 10, an Option granted to an
Independent Director under Section 7 shall be exercisable in four equal
annual installments commencing on the date of grant. An Option issued
under this Section 7 shall not be exercisable after the expiration of ten
years from the date of grant.
(ii) If an Independent Director ceases to be a Director for
any reason, an Option granted under this Section 7 to such Independent
Director shall terminate immediately with respect to all shares of Common
Stock for which it is not then exercisable. With respect to the remaining
shares, such Option shall terminate 90 days after the date the Independent
Director ceases to be a Director or at the expiration of the stated term
of the Option, if earlier; provided, however, that if the Independent
Director dies while a Director or within such 90-day period after ceasing
to be a Director, such Option may be exercised for such remaining shares
by the personal representative or legatee of the optionee for a period of
six months from the date of death or until the expiration of the stated
term of the Option, if earlier.
(iii) Options granted under this Section 7 may be exercised
only by written notice to the Company specifying the number of shares to
be purchased. Payment of the full purchase price of the shares to be
purchased may be made by one or more of the methods specified in Section
6(e). An optionee shall have the rights of a stockholder only as to shares
acquired upon the exercise of a Option and not as to unexercised Options.
(c) Limited to Independent Directors. The provisions of this Section
7 shall apply only to Options granted or to be granted to Independent Directors,
and shall not be deemed to modify, limit or otherwise apply to any other
provision of this Plan or to any Option issued under this Plan to a Participant
who is not an Independent Director of the Company. To the extent inconsistent
with the provisions of any other Section of this Plan, the provisions of this
Section 7 shall govern the rights and obligations of the Company and Independent
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Directors respecting Options granted or to be granted to Independent Directors.
The provisions of this Section 7 which affect the price, date of exercisability,
option period or amount of shares of Common Stock under an Option shall not be
amended more than once in any six-month period, other than to conform with
changes in the Code or ERISA.
Section 8. Restricted Stock.
(a) Subject to the provisions of the Plan, the Committee may award
shares of Restricted Stock and determine the duration of the Restricted Period
during which, and the conditions under which, the shares may be forfeited to the
Company and the other terms and conditions of such Awards. Shares of Restricted
Stock shall be issued at par value or for such other consideration as
established by the Committee.
(b) Shares of Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered, except as permitted by the
Committee, during the Restricted Period. Shares of Restricted Stock shall be
evidenced in such manner as the Committee may determine. Any certificates issued
in respect of shares of Restricted Stock shall be registered in the name of the
Participant and unless otherwise determined by the Committee, deposited by the
Participant, together with a stock power endorsed in blank, with the Company. At
the expiration of the Restricted Period, the Company shall deliver such
certificates to the Participant or if the Participant has died, to the
Participant's Designated Beneficiary.
Section 9. General Provisions Applicable to Awards.
(a) Documentation. Each Award under the Plan shall be evidenced in
writing delivered to the Participant specifying the terms and conditions thereof
and containing such other terms and conditions not inconsistent with the
provisions of the Plan as the Committee considers necessary or advisable to
achieve the purposes of the Plan or comply with applicable tax and regulatory
laws and accounting principles.
(b) Committee Discretion. Each type of Award may be made alone, in
addition to or in relation to any other type of Award. The terms of each type of
Award need not be identical, and the Committee need not treat Participants
uniformly. Except as otherwise provided by the Plan or a particular Award, any
determination with respect to an Award may be made by the Committee at the time
of award or at any time thereafter.
(c) Termination of Employment. Unless otherwise provided in the
option agreement or determined by the Committee, upon an optionee's termination
of employment (or other business relationship) with the Company, the optionee's
rights in his or her Options, (i) to the extent not exercisable at the time of
termination, shall automatically expire and (ii) to the extent exercisable at
the time of termination, shall expire 90 days after such termination of
employment or at the expiration of the stated term of the Option, if earlier;
provided, however, that if an optionee's employment was terminated by reason of
death, his or her Options, to the extent exercisable, may be exercised by the
personal representative or legatee of the optionee for a period of six months
from the date of death or until expiration of the stated term of the Option, if
earlier.
8
<PAGE>
(d) Withholding.
(i) The Participant shall pay to the Company, or make
provision satisfactory to the Committee for payment of any taxes required by law
to be withheld in respect of Awards under the Plan no later than the date of the
event creating the tax liability. The Company and its Affiliates may, to the
extent permitted by law, deduct any such tax obligations from any payment of any
kind otherwise due to the Participant.
(ii) In the Committee's discretion, such tax obligations may
be paid in whole or in part in shares of Common Stock. A Participant may elect
to have such tax withholding obligation satisfied, in whole or in part, by (i)
authorizing the Company to withhold from shares of Common Stock to be issued
pursuant to any Award a number of shares with an aggregate Fair Market Value (as
of the date the withholding is effected) that would satisfy the withholding
amount due, or (ii) transferring to the Company shares of Common Stock owned by
the Participant with an aggregate Fair Market Value (as of the date the
withholding is effected) that would satisfy the withholding amount due. With
respect to any Participant who is subject to Section 16 of the Act, the
following additional restrictions shall apply:
(A) the election to satisfy tax withholding obligations
relating to an Award in the manner permitted by this Section 9(d)(ii)
shall be made either (x) during the period beginning on the third business
day following the date of release of quarterly or annual summary
statements of sales and earnings of the Company and ending on the twelfth
business day following such date, or (y) at least six months prior to the
date as of which the receipt of such an Award first becomes a taxable
event for Federal income tax purposes;
(B) such election shall be irrevocable;
(C) such election shall be subject to the consent or
disapproval of the Committee; and
(D) the Common Stock withheld to satisfy tax withholding must
pertain to an Award which has been held by the Participant for at least
six months from the date of grant of the Award.
Notwithstanding the foregoing, the first sentence of Section 9(d)(ii)(A)(x)
shall not be applicable until the Company has been subject to the reporting
requirements of Section 13(a) of the Act for at least a year prior to the
election and has filed all reports and statements required to be filed pursuant
to that Section for that year.
(e) Foreign Nationals. Awards may be made to Participants who are
foreign nationals or employed outside the United States on such terms and
conditions different from those specified in the Plan as the Committee considers
necessary or advisable to achieve the purposes of the Plan or comply with
applicable laws.
9
<PAGE>
(f) Amendment of Award. The Committee may amend, modify or terminate
any outstanding Award, including substituting therefor another Award of the same
or a different type, changing the date of exercise or realization and converting
an Incentive Stock Option to a Nonstatutory Stock Option, provided that the
Participant's consent to such action shall be required unless the Committee
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.
(g) Non-transferability of Awards. No Option shall be transferable
by the optionee otherwise than by will or by the laws of descent and
distribution and all Options shall be exercisable, during the optionee's
lifetime, only by the optionee. Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein or in the written instrument evidencing the Award.
Section 10. Change of Control Provisions.
(a) "Change of Control" shall mean the occurrence of any one of the
following events:
(i) any "person," as such term is used in Sections 13(d) and
14(d) of the Act (other than the Company, any of its subsidiaries, or any
trustee, fiduciary or other person or entity holding securities under any
employee benefit plan or trust of the Company or any of its subsidiaries),
together with all "affiliates" and "associates" (as such terms are defined
in Rule 12b-2 under the Act) of such person, shall become the "beneficial
owner" (as such term is defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company representing 25% or more of the
combined voting power of the Company's then outstanding securities having
the right to vote in an election of the Company's Board of Directors
("Voting Securities"); provided, however, that for purposes of this clause
(i) a "Change of Control" shall not be deemed to have occurred (A) solely
as a result of a person who is party to the Company's Second Amended and
Restated Stockholders Agreement, dated as of April 1994 and amended from
time to time thereafter, and who is deemed to beneficially own at the
close of business on the effective date of the Company's initial public
offering 25% or more of the combined voting power of all then outstanding
Voting Securities; (B) as the result of an acquisition of securities
directly from the Company; or (C) as the result of an acquisition of
securities by the Company which, by reducing the number of shares of
Common Stock or other Voting Securities outstanding, increases the
proportionate voting power represented by the Voting Securities
beneficially owned by any person to 25% or more of the combined voting
power of all then outstanding Voting Securities; provided further however,
that if any person referred to in clause (A), (B) or (C) of this sentence
shall thereafter become the beneficial owner of any additional shares of
Voting Securities (other than pursuant to clauses (B) or (C) or a stock
split, stock dividend, or similar transaction), then a "Change of Control"
shall be deemed to have occurred for purposes of this clause (i);
10
<PAGE>
(ii) persons who, as of the effective date of the Company's
initial public offering, constitute the Company's Board of Directors (the
"Incumbent Directors") cease for any reason, including, without
limitation, as a result of a tender offer, proxy contest, merger or
similar transaction, to constitute at least a majority of the Board,
provided that any person becoming a director of the Company subsequent to
such effective date whose election or nomination for election was approved
by a vote of at least a majority of the Incumbent Directors shall, for
purposes of this Plan, be considered an Incumbent Director;
(iii) the stockholders of the Company shall approve (A) any
consolidation or merger of the Company or any of its subsidiaries where
the stockholders of the Company, immediately prior to the consolidation or
merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 1 3d-3 under the Act),
directly or indirectly, shares representing in the aggregate 70% or more
of the voting shares of the corporation issuing cash or securities in the
consolidation or merger (or of its ultimate parent corporation, if any),
(B) any sale, lease, exchange or other transfer (in one transaction or a
series of transactions contemplated or arranged by any party as a single
plan) of all or substantially all of the assets of the Company or (C) any
plan or proposal for the liquidation or dissolution of the Company; or
(iv) when any "person" (as defined in (i) above) commences a
tender offer for the outstanding shares of Common Stock of the Company.
(b) Upon the occurrence of a Change of Control, (i) each outstanding
Option shall automatically become fully exercisable notwithstanding any
provision to the contrary herein and (ii) each Restricted Stock Award shall be
subject to such terms, if any, with respect to a Change of Control as have been
provided by the Committee in connection with such Award.
(c) In the event of a Change of Control by reason of Section 1
0(a)(iii) above, the Board shall, in its discretion, take one or more of the
following actions with regard to outstanding Options: (i) provide that such
Options shall be assumed, or equivalent options shall be substituted, by the
acquiring or succeeding corporation (or an affiliate thereof) (provided that any
such options substituted for Incentive Stock Options shall meet the requirements
of Section 424(a) of the Code), such that the Options (or equivalent substituted
options) shall thereafter entitle the holder to receive upon exercise thereof
the aggregate number and kind of securities and property as such holder would
have been entitled to receive upon consummation of such transaction had he or
she exercised the Option immediately prior to effectiveness of the transaction;
(ii) upon prior written notice to the optionees, provide that all unexercised
Options will terminate immediately prior to the consummation of such transaction
unless any such Options are exercised by the optionee within a specified period
following the date of such notice and prior to the consummation of the
transaction; and/or (iii) make or provide for a cash payment to the optionees
equal to the difference between (A) the value (as determined by the Board of
Directors) of the consideration payable per share of Common Stock pursuant to
the transaction (the "Transaction Price") times the number of shares of Common
Stock subject to such outstanding Options (to the extent the exercise prices of
such Options are not in excess
11
<PAGE>
of the Transaction Price) and (B) the aggregate exercise price of all such
outstanding Options in exchange for the termination of all outstanding Options.
Section 11. Miscellaneous.
(a) No Right To Employment. No person shall have any claim or right
to be granted an Award, and the grant of an Award shall not be construed as
giving a Participant the right to continued employment. The Company expressly
reserves the right at any time to dismiss a Participant free from any liability
or claim under the Plan, except as expressly provided in the applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any rights
as a stockholder with respect to any shares of Common Stock to be distributed
under the Plan until he or she becomes the holder thereof. A Participant to whom
Common Stock is awarded shall be considered the holder of the Common Stock at
the time of the Award except as otherwise provided in the applicable Award.
(c) Effective Date. Subject to the approval of the stockholders of
the Company, the Plan became effective on October 19, 1992 and the restatement
shall become effective on May 10, 1996.
(d) Amendment of Plan. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time; provided, however, that if and to the
extent determined by the Committee to be required by the Act to ensure that
Awards granted under the Plan are exempt under Rule 16b-3 promulgated under the
Act, or that Incentive Stock Options granted under the Plan are qualified under
Section 422 of the Code, Plan amendments shall be subject to approval by the
Company stockholders.
(e) Governing Law. The provisions of the Plan shall be governed by
and interpreted in accordance with the laws of Delaware.
12
<PAGE>
Exhibit 10.5
T CELL SCIENCES, INC.
PERFORMANCE PLAN
PURPOSE
T Cell Sciences wishes to recognize the collective efforts of its
permanent employees by awarding them with additional compensation upon the
achievement of performance goals. The additional compensation will be determined
at the end of each fiscal year based on the employee's salary grade level and
the percentage of performance goals met during that fiscal year. The payout of
this additional compensation will be determined and allocated in accordance with
the Performance Plan, summarized below.
PERFORMANCE PLAN DESCRIPTION
(1) ELIGIBILITY & PARTICIPATION
All permanent employees (full and part time) of T Cell Sciences who have
had permanent employment status for at least the last six months of a fiscal
year are eligible for a Performance Plan payout for that fiscal year. The payout
will a pro-rata amount based on the actual versus annualized permanent
employment base pay for the fiscal year.
The Performance Plan payout will be a percentage of the employee's base
pay received during the fiscal year (excluding any overtime pay or other special
compensation) up to a set participation target for each salary ~r4de, as
established from time to time by the Compensation Committee of the Board of
Directors. The participation target for any individual employee may be set at a
lower level in the discretion of the Chief Executive Officer or at a higher
level with the approval of the Compensation Committee, from the participation
targets then in effect for the employee's salary grade.
In the event an employee is promoted during a fiscal year into a salary
grade level with a higher participation target, the payout will be calculated
pro rata under the old and new targets based on the percentage of time the
employee has been employed in each salary grade level.
Performance Plan payouts will normally be made after the end of each
fiscal year when a determination is made of the percentage of payout due to all
employees (see "Payout Determination" below). Payouts will be made only to
employees who have a permanent employment status with the Company at the time of
the payout, unless other arrangements have been approved in advance by the Chief
Executive Officer for employees eligible for participation of targets of 10% or
less or by the Compensation Committee for employees eligible for higher targets.
(2) PAYOUT DETERMINATION
The Performance Plan payouts are determined by the achievement of
performance goals. In conjunction with the Company's budget process each fiscal
year, the performance goals for each fiscal year are proposed by management,
approved by the Compensation Committee and ratified by the Board of Directors.
The goals for any fiscal year may be set in whole or part on company-wide,
departmental and/or individual performance. The relative weight of each goal may
vary for different departments or individuals, with the weight to be approved
when the goals are approved.
<PAGE>
At the end of each fiscal year, management of the Company will review with
the Compensation Committee the performance against each goal set for that fiscal
year. The Compensation Committee will determine the percentage of goals achieved
which will be the percentage to be applied against each employee's applicable
participation target. The percentage approved by the Compensation Committee will
be ratified by the Board of Directors.
The approved participation target percentage will then be used to
calculate each employee's payout. The Performance Plan payouts are to be paid in
cash after any required deductions or withholdings.
(3) EFFECTIVE DATE AND AMENDMENTS
The Performance Plan supersedes the Company's Management Incentive Plan
and is effective as of May 1, 1992, with the first payout to be made by December
31, 1992 for the eight month stub fiscal year. The Performance Plan may be
amended, suspended or terminated at any time at the discretion of the
Compensation Committee.
(4) NO CONTRACT OF EMPLOYMENT
The Performance Plan shall not be considered to create any contract of
employment or any right of continued services between the Company and any
employee.
<PAGE>
T CELL SCIENCES INC.
PERFORMANCE PLAN
Effective as of May 1, 1992, and until amended in writing by the
Compensation Committee, the participation targets for each salary grade will be
as set forth below:
2 % - all non-exempt grades & exempt salary grades 1-5
5 % - exempt salary grade 6
10% - exempt salary grade 7-8
15% - exempt salary grades 9-10, non-executive officers
20% - executive officers
<PAGE>
Exhibit 10.6
, 1993
Dear :
The Board of Directors (the "Board") of T Cell Sciences, Inc. (the "Company")
has determined that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of the Company's management,
including yourself, to their responsibilities without distraction arising from
the possibility of a Change in Control (as defined in Section 2) of the Company,
although no such change is now contemplated.
In order to induce you to remain in the employ of the Company, the Company
agrees that you shall receive the benefits set forth in this letter agreement
(the "Agreement") in the event your employment with the Company is terminated
subsequent to a "Change in Control" of the Company and under the circumstances
described in Section 3 below.
1. Term of Agreement. This agreement shall commence on January 1, 1993 and each
January 1 thereafter, the term of this Agreement shall automatically be extended
for one additional year unless, not later than the October 31 of the preceding
year, the Company shall have given notice that it does not wish to extend this
Agreement. This Agreement shall cease to be operative and shall be of no further
force and effect if your employment terminates for any reason prior to a Change
in Control. Further, nothing contained herein shall restrict the ability of the
Company to terminate your employment.
2. Change in Control. No benefits shall be payable hereunder if (i) there has
been a Change in Control of the Company and your employment is thereafter
terminated by you for other than Good Reason, or (ii) there has been a Change in
Control of the Company and your employment is thereafter terminated for Cause by
the Company, death, Disability, or Retirement.
(a) "Change in Control" of the Company shall have the meaning set forth
in the Company's Stock Incentive Plan, except that the Board agrees
not to override the occurrence of a Change in Control.
(b) "Disability" shall mean that as a result of your incapacity due to
physical or mental illness, you are absent from your duties with the
Company for a consecutive period of more than six (6) months, the
Company may terminate your employment on account of "Disability".
(c) "Retirement" shall mean your voluntary termination of employment at
age sixty-five (65) or any other early retirement arrangement
established with your consent with respect to you.
(d) "Cause" shall mean the willful and continued engaging by you in
gross misconduct materially and demonstrably injurious to the
Company. No termination for Cause shall be effective until you have
received a copy of a resolution duly adopted by the affirmative vote
of not less than 75% of the entire membership of the Board at a
meeting of the Board called and held for the purpose (after
reasonable notice to you and an opportunity for you, together with
your counsel, to be heard before the Board), finding that in the
good faith opinion of the Board you were guilty of conduct set forth
in the Section 4(a) and specifying the particulars thereof in
detail.
<PAGE>
(e) "Good Reason" shall mean:
(i) Change of Position. The assignment to you of any duties
inconsistent with your position or status as an officer prior
to the Change in Control or any alteration in the nature or
status of your responsibilities to a lesser position by you.
(ii) Compensation and Benefits. (1) A reduction in your base
salary, incentive compensation, or benefits or perquisites, as
in effect immediately prior to the Change in Control; or (2)
the failure by the Company to continue base salary increases,
incentive compensation grants, benefits and perquisites in
effect prior to the Change in Control.
(iii) Relocation. The relocation of the principal place of your
employment prior to the Change in Control without your written
consent.
(iv) Assumption of Agreement. If you elect to terminate your
employment because of the failure of the Company to obtain the
assumption of this Agreement as provided in Section 7.
3. Benefits Payable. If your employment is terminated following a Change in
Control of the Company by you for Good Reason or by the Company other than for
Cause, death, Disability or Retirement, then your benefits shall be those
described in this Section 3.
(a) Your base salary shall be continued for a period of 12 months. These
special severance payments shall be in lieu of any severance
payments payable under any severance plan or policy of the Company.
(b) During the continuation of your salary payments, the Company shall
continue health insurance benefits for you at its own expense.
Thereafter, you shall be afforded the right to continue such
insurance benefits as provided under the Consolidated Omnibus Budget
Reconciliation Act of 1985 (COBRA).
(c) All stock incentive grants or options under the Company stock option
plan or stock incentive plan shall be 100% vested.
(d) Nothing contained herein shall adversely affect your rights, if any,
to receive payments under any other bonus, incentive compensation,
deferred compensation plan or group term life insurance plan, long
term disability plan or retirement plan of the Company.
6. No Mitigation. You shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
nor shall the amount of any payment provided for in this Agreement be reduced by
any compensation earned by you as the result of employment by another employer
after the date of termination, or otherwise.
7. Successors; Binding Agreement.
(a) The Company shall require any successor entity (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
expressly assume this Agreement.
(b) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
<PAGE>
8. Notice. Notices and all other communications provided for herein shall be in
writing and shall be deemed to have been duly given when delivered or mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed to the Company at its principal office or to you at your address set
forth on the first page of this Agreement, provided that all notices to the
Company shall be directed to the attention of the President of the Company with
a copy to the Secretary of the Company, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notices of change of address shall be effective only upon receipt.
9. Modification; Waiver. No provisions hereof may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by you and a duly authorized officer of the Company (other than you). No
waiver by either party hereto of any condition or provision hereof to be
performed by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any other time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly herein.
10. Validity. This Agreement shall be governed by and construed in accordance
with the law of the State of Delaware. The invalidity or unenforceability of any
provision hereof shall not affect the validity or enforceability of any other
provision hereof, which shall remain in full force and effect.
11. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
12. Arbitration. Any dispute or controversy arising in connection herewith shall
be settled exclusively by arbitration to be held in New York in accordance with
the rules of the American Arbitration Association then in effect.
Notwithstanding the pendency of any such dispute or controversy, the Company
shall continue to pay you your full compensation in effect when the notice
giving rise to the dispute was given (including, without limitation, base salary
and installments under any incentive plan) and continue you as a participant in
all the employee pension, welfare, incentive, compensation or other similar
plans, programs or policies of the Company in which you were participating when
the notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this Section. Amounts paid to you under this
paragraph are in addition to all other amounts due hereunder and shall not be
offset against or reduce any other amounts due hereunder. Each party shall bear
their own costs, including attorneys' fees of the arbitration; provided,
however, that if you prevail on the claim, the Company shall reimburse you for
all reasonable costs and attorneys' fees. Judgement may be entered on the
arbitrator's award in any court of competent jurisdiction.
Sincerely,
T CELL SCIENCES, INC.
by: ___________________________________
Agreed to this _____ day of _______________, 1993
_________________________________________________
<PAGE>
Exhibit 10.14
AMENDMENT TO LEASE
BETWEEN
MOULTON REALTY COMPANY
AND
VIRUS RESEARCH INSTITUTE, INC.
The lease ("Lease") dated December 9, 1991 between Michael J. Spinelli,
Trustee of M.R.C. Realty Trust; Carol A. Hickey; Peter A. Spinelli, General
Partner; and Spinelli Family Associates all doing business as Moulton Realty
Company, as Landlord and Lessor, and Virus Research Institute, Inc., as Tenant
and Lessee, demising the premises located at 61 Moulton Street, Cambridge,
notice of which is recorded in the Middlesex South Registry of Deeds in Book
21695, Page 407, is hereby amended as follows:
1. The number of parking spaces demised to Tenant for its exclusive use is
to be increased from 30 spaces to 43 spaces, effective December 1,1996. The
parking spaces demised to the Tenant effective December 1, 1996 are shown on the
new Schedule A annexed hereto, which the parties agree will substitute for the
current Schedule A to the Lease, effective December 1, 1996.
2. The parties acknowledge that Tenant has exercised validly and
effectively its right and option to extend the term of the Lease, as set forth
in Article III(b) of the Lease, and that the term of the Lease now expires on
November 30, 2001; provided however, that the base rent due during the five (5)
year period commencing on December 1, 1996 to November 30, 2001 shall be
$293,700.00 per year in monthly installments of $24,475.00.
3. Article III(b) of the Lease is amended to read as follows:
OPTION
"OPTION The Landlord hereby grants to the Tenant and its successors
and assigns the right and option to extend the term of the Lease for a
five-year period commencing on December 1, 2001 and ending an November 30,
2006, in accordance with the following terms and conditions:
If this Lease shall be in full force and effect at the expiration of
the first extension term on November 30, 2001, then the Tenant shall have
the right to extend this Lease for an additional period of five (5) years,
beginning on December 1, 2001 and expiring November 30, 2006, as
hereinafter set forth, providing that the Tenant shall give written notice
to the Landlord at least six (6) months prior to expiration of said first
extension term of this Lease of its election to exercise the aforesaid
option. If the aforesaid option is exercised, the terms of this Lease
shall be the same, except that the base rent hereunder shall be adjusted
to equal the fair market rental of the demised premises, but in no event
less than the base rent due in the fifth year of the first extension term
of the Lease. If the parties are unable to agree on the fair market rental
<PAGE>
then each shall appoint an arbitrator who shall be a licensed real estate
broker or appraiser. If the two arbitrators are unable to agree on a fair
market rental then the two arbitrators shall appoint a third arbitrator
and a decision of the majority of the arbitrators shall be binding. In
computing fair market rental for the purposes of this section, any portion
of the Building which on September 1, 1996 is used and improved as office
space and subsequently is converted to laboratory or similar use will,
notwithstanding any such conversion, be treated and valued as office space
in the condition it was in immediately prior to its conversion to
laboratory or similar use. Both landlord and Tenant shall have the right,
prior to conversion, to photograph or otherwise document and memorialize
the condition of any office space intended to be converted to laboratory
or similar use."
4. Landlord agrees to defend, indemnify and hold harmless Tenant, its
officers, employees, agents, successors, and assigns (the "Indemnitees"),
against and in respect of, any and all reasonable damages, losses, liabilities,
expenses, costs, claims, actions, suits, proceedings, assessments, orders,
judgments, fines, and penalties (including without limitation, reasonable legal,
accounting, consulting, engineering, and other expenses), which may be incurred
by any of the Indemnitees, or imposed upon or asserted against any of the
indemnitees by any other party or parties (including, without limitation, a
governmental entity), arising out of, in connection with, or relating to the
subject matter of (a) any actual violation (or any alleged violation which
appears to have a legitimate basis in fact) of any environmental or health and
safety-related law, regulation, rule, ordinance or by-law, whether at the
federal, state or local level, with respect to the demised premises or any
facility or improvement or any operation or activity thereon, occurring or
existing as of and/or prior to December 1, 1991, even if not discovered until
after such date; or (b) the actual presence (or the alleged presence which
appears to have a legitimate basis in fact) of any Hazardous Material, as
defined below, on, in, under, adjacent to, or affecting the premises, occurring
or existing as of and/or prior to December 1, 1991, even if not discovered until
after such date. For purposes of this provision, "Hazardous Material" shall mean
any pollutant, contaminant, toxic substance, hazardous waste, hazardous
material, or hazardous substance, or any oil, petroleum, or petroleum product,
as defined in or pursuant in the Resource Conservation and Recovery Act, as
amended, the Comprehensive Environmental Response, Compensation, and Liability
Act, as amended, the Federal Clean Water Act, as amended, the Massachusetts
Hazardous Waste Management Act, as amended, the Massachusetts Oil and Hazardous
Material Release Prevention and Response Act, as amended, or any other federal,
state, or local environmental law, regulation, ordinance, rule, or by-law.
<PAGE>
Except as expressly amended by this Amendment, the Lease dated December 9,
1991 continues unmodified and in full force and effect.
Signed and sealed this ___ day of October, 1996.
MOULTON REALTY COMPANY
/s/ Michael J. Spinelli
-----------------------------
Michael J. Spinelli
Trustee of M.R.C. Realty Trust
/s/ Carol A. Hickey
-----------------------------
Carol A. Hickey
/s/ Peter A. Spinelli
-----------------------------
Peter A. Spinelli, General Partner
Spinelli Family Associates
VIRUS RESEARCH INSTITUTE, INC.
By: /s/ [Illegible]
-------------------------
<PAGE>
LEASE
between
MOULTON REALTY COMPANY
and
VIRUS RESEARCH INSTITUTE, INC.
THIS INDENTURE OF LEASE, made as of this 9th day of December, 1991, between
MICHAEL J. SPINELLI, TRUSTEE OF M.R.C. REALTY TRUST, CAROL A. HICKEY, PETER A.
SPINELLI, GENERAL PARTNER, SPINELLI FAMILY ASSOCIATES all doing business as
MOULTON REALTY COMPANY having a principal place of business at 25 Moulton
Street, Cambridge, County of Middlesex, Massachusetts, 02139, (hereinafter
called the "Landlord"), and VIRUS RESEARCH INSTITUTE, INC. a corporation duly
organized by law and having an usual place of business in Cambridge, in the
County of Middlesex, Massachusetts (hereinafter called the "Tenant")
W I T N E S S E T H:
I. (a) The Landlord hereby leases to the Tenant the entire premises located at
61 Moulton Street, Cambridge, Middlesex County, Massachusetts which Leasehold is
the existing Building shown on plan annexed hereto as Schedule A, said Building
contains 17,800 square feet, together with parking shown on said plan.
(b) The premises described herein may be used for the purpose of
conducting a research laboratory and uses incidental thereto, including sales,
service, and manufacture of Tenant's products, general office use, as well as
any other use authorized
<PAGE>
under applicable zoning laws and ordinances in connection with its business. The
Landlord's knowledge and belief is that there are no restrictions in the title
to the premises which should prevent the intended use by the Tenant.
(c) Located on the premises are approximately thirty (30) parking
spaces intended for the exclusive use of the Tenant more particularly described
in Schedule A.
(d) The Tenant shall have the right of unobstructed access to the
premises by motor vehicle and otherwise for use in connection with its business,
including unobstructed access to the use of the truck dock, driveway and parking
areas, and Tenant may install a movable trash disposal unit outside the building
at a location agreed to by both parties. the premises are however subject to a
right-of-way as shown on Schedule A.
II. The initial term of this Lease shall be for a period of five (5)
years, commencing December 1, 1991, as hereafter defined.
III. (a) During the term of this Lease, the Tenant shall pay as base rent
to the Landlord at the Landlord's address first written above, or such other
place as the Landlord, by notice in writing to the Tenant, as follows:
(i) During the first year of the term, the sum of $135,000.00,
payable in monthly installments of $11,250.00 per month, due on the first of
each month;
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(ii) During the second year of the term, the sum of
$190,000.00, payable in monthly installments of $15,833.33 per month, due on the
first of each month;
(iii) During the third year of the term, the sum of
$210,000.00, payable in monthly installments of $17,500.00 per month, due on the
first of each month; and
(iv) During the fourth and fifth year of the term, the sum of
$270,000.00, payable in monthly installments of $22,500.00 per month, due on the
first of the each month.
(b) OPTION. If this Lease shall be in full force and effect at the
expiration of the initial term, then the LESSEE shall have the right to extend
this Lease for an additional period of five (5) years, as hereinafter set forth,
providing that the LESSEE shall give written notice to the Landlord at least six
(6) months prior to expiration of the original term of this Lease of its
election to exercise the aforesaid option. If the aforesaid option is exercised,
the terms of this Lease shall be the same, except that the rent hereunder shall
be adjusted to equal the fair market rental of the demised premises, but in no
event less than the fifth year of the original Lease term. If the parties are
unable to agree on the fair market rental then each shall appoint an arbitrator
who shall be a licensed real estate broker or appraiser. If the two arbitrators
are unable to agree on a fair market rental then the two arbitrators shall
appoint a third arbitrator and a decision of the majority of the arbitrators
shall be binding. However, in the event that the
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fair market rental is not determined within sixty (60) days of the election to
exercise the option, then the said option shall thereupon terminate
(c) The Landlord shall promptly pay and discharge all real estate
taxes and betterment assessments levied or assessed upon the premises during the
term of the Lease, except that the Landlord may elect to have such betterment
assessments payable over the longest period permitted by law.
(d) The Tenant shall pay as additional rent to Landlord, 100% of the
real estate taxes levied against the premises. The Tenant shall make payment
within thirty (30) days after receiving a copy of the paid tax bill together
with appropriate proof of payment, prorated on a 365-day year per diem basis for
any partial calendar year during the term of the Lease. Landlord represents and
warrants to Tenant that as of the date of this Lease, the premises are assessed
and maintained as a single and separate tax parcel or lot by the City of
Cambridge. Throughout the term of this Lease, Landlord shall cause the premises
to be assessed and maintained as such a separate tax parcel or lot so that bills
for real estate taxes shall issue solely with respect to real estate taxes
applicable to the premises.
(e) The Landlord shall promptly pay and discharge all real estate
taxes and betterment assessments levied or assessed upon the premises during the
term of the Lease, except that the Landlord may elect to have such betterment
assessments payable
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over the longest period permitted by law. Tenant shall not be required to pay
any portion of any increases in said taxes which are attributable to an increase
in the assessed valuation of the land or buildings, of which the demised
premises are a part, arising out of improvements (including new construction)
made to premises or adjacent Landlord land or buildings unless such improvements
are made by Tenant during the term of the Lease.
(f) If any abatement refund or rebate shall be received for any tax
year, an appropriate adjustment shall thereafter be made in the amount paid by
the Tenant. If Landlord undertakes such abatement process, the cost of such
proceedings, and of any appeal therefrom, shall be charged first against any
abatement received, and the net proceeds credited to the Tenant.
IV. (a) On or after the effective Commencement Date of the Lease, the
Tenant shall have the right and may install at its own expense alterations to
the interior of the building as may be reasonably desirable or necessary for the
conduct of its business. Such work shall be done in a good and workmanlike
manner, after submission of plans and specifications to the Landlord for
approval in writing, which approval shall not be unreasonably withheld or
delayed. At the time of the approval of the Landlord, the parties shall
determine whether or not said improvements shall be considered as an integral
part of Landlord's building and become part of Landlord's property, whereupon
Tenant shall have no obligation to remove same upon
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termination of this Lease.
(b) Promptly following the Commencement Date, Tenant shall perform
the following work with the premises: all working electrical outlets, a fresh
coat of paint to all wall surfaces in this space, 26 new gas and vacuum lines to
the benches in the main laboratory and tissue culture facility (the "Work").
Such work shall be done by contractor(s) selected by Tenant, subject to
Landlord's reasonable approval. As a Tenant allowance (the "Allowance"),
Landlord will reimburse Tenant for up to $16,000.00 of all reasonable documented
costs incurred by Tenant in connection with the Work, by giving Tenant a rental
credit or paying Tenant the amount of the Allowance promptly after substantial
completion of the Work.
V. The Landlord agrees that during said term and so long as Tenant's
occupancy continues:
(a) to be responsible for keeping the buildings presently on the
premises structurally sound and, without limiting the generality of the
foregoing, the Landlord will keep the roof and outside walls weather and
watertight and free from leaks and make all structural repairs and replacements
reasonably necessary to the Tenant's occupancy of the building and to its
foundation, roof, structural parts and utility connections from exterior wall to
street; and
(b) to maintain parking lot and driveways.
(c) to be responsible for delivering the premises to
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Tenant in good order, condition and repair at the commencement of the term.
(d) To the Landlord's best knowledge all activities at the premises
by Landlord and prior tenants and occupants thereof have been undertaken in full
compliance with all applicable environmental and hazardous substance laws.
(e) Landlord has disclosed to Tenant all threatened or pending
litigation or administrative actions relating to the use or disposal of
hazardous substances at the premises.
(f) Landlord has delivered to Tenant true and complete copies of all
reports, analyses, studies and other written materials which are in the
possession, custody or control of Landlord concerning the presence or possible
presence of hazardous substances at the premises.
(g) To the Landlord's best knowledge there are no underground
storage tanks at the premises.
(h) To the Landlord's best knowledge there are no transformers,
capacitors, switches, or other equipment at the premises which contain PCBs.
(i) Landlord shall indemnify, defend and save harmless Tenant, its
officers, directors, employees, contractors, servants and agents, from and
against all loss, costs, damages, claims, proceedings, demands, liabilities,
penalties, fines and expenses, including without limitation reasonable
attorney's fees, consultant's fees, litigation costs, and cleanup costs,
asserted against or incurred by Tenant, its officers, directors,
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employees, contractors, servants and agents at any time and from time to time by
reason or arising out of the presence of any hazardous substances at the
premises caused by the Landlord, its servants, agents or employees.
(j) The Landlord represents that there is handicap access to the
building from the street and handicap bathroom facilities. In the event that
either Federal or State law requires that an elevator be installed on the
premises then the parties agree that the cost for installation for said elevator
will be born equally by said parties.
VI. Tenant agrees during said term and so long as Tenant's occupancy
continues:
(a) to be responsible for all maintenance and repairs of the heating
system, plumbing system, electrical system, central air conditioning system (if
any), interior mains and conduits for utilities, stairways and stairwells.
Landlord will repair, as required, all of above prior to Commencement date and
warrants that the existing systems and utilities will be in good repair and
working order on such date.
(b) to pay when due all charges by public authority or utility for
heat, water, electricity, telephone, gas and other services rendered to the
premises;
(c) to remove promptly snow, ice and foreign substances from the
stairs, parking lot areas designated for Tenant's use, and to maintain
landscaping adjacent to the within Leasehold;
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(d) will be responsible for replacing any glass which may be damaged
or broken with glass of the same quality;
(e) to save the Landlord harmless from all loss and damage
occasioned by any nuisance made or suffered on the premises caused by the
omission, fault, negligence, or other misconduct of the Tenant as well as from
any claim or damage arising from neglect in not removing snow and ice from
stairs or parking lots assigned for Tenant's exclusive use on the premises, and
from any other injury, loss or damage to any person or property on said premises
caused by the omission, fault, negligence or other misconduct of the Tenant;
provided, however, that the above obligations do not apply when the injury or
damage was caused or contributed to by the negligent acts or omissions of the
Landlord, its agents, employees or contractors.
(f) Tenant will not generate, store, dispose of, or otherwise handle
any hazardous substances on the premises in violation of any applicable
environmental or hazardous substance law.
(g) Tenant will promptly inform Landlord of any environmental
releases of hazardous substances that are reportable to governmental authorities
under applicable environmental or hazardous substances laws. Tenant covenants
and agrees that no asbestos, asbestos-containing materials, or PCB compounds
will be used in the development of, or any alteration or additions to, any
portion of the premises.
(h) Tenant shall indemnify, defend and save harmless
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Landlord, its officers, directors, employees, contractors, servants and agents,
from and against all loss, costs, damages, claims, proceedings, demands,
liabilities, penalties, fines and expenses, including without limitation
reasonable attorney's fees, consultants' fees, litigation costs, and cleanup
costs, asserted against or incurred by Landlord, its officers, directors,
employees, contractors, servants and agents at any time and from time to time
resulting from the presence of any hazardous substances on the premises during
the term of this Lease arising after Tenant's taking possession of the premises
and resulting solely from (i) the action or inaction of the Tenant, its
officers, directors, employees, contractors, servants and agents, or (ii)
Tenant's generation, storage, treatment, handling, transportation, disposal or
release of any hazardous substance at or near the premises, or (iii) the
violation of any applicable law governing hazardous substances by tenant, its
officers, directors, employees, contractors, servants or agents. the indemnities
and duties to defend set forth in this Paragraph shall survive the termination
of this Lease. Parties agree to undertake to update the previous 21E Report to
establish that the presence of any hazardous waste is within the acceptable
limits determined by the Commonwealth of Massachusetts. If as a result of said
updated study any remedial action is required by the Commonwealth of
Massachusetts, said work will be taken at the expense of the prior Tenant and/or
Landlord.
(i) not to overload or deface the premises or the
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building or commit or suffer any strip or waste thereon, and not to conduct any
trade or occupation or to make any use of the premises or to do any act or thing
thereon or in the buildings that shall create a nuisance or be contrary to any
law of the Commonwealth of Massachusetts or ordinance or by-law for the time
being in force in the City of Cambridge, or which shall be injurious to any
person or property, or that shall make void or voidable any fire insurance
thereon or on the buildings, but proper conduct of Tenant's business shall not
be deemed a violation of this covenant; nor make any alterations, additions or
improvements without the consent of the Landlord, providing however, the
Landlord may set forth in its consent conditions or criteria to be complied with
by the Lessee;
(j) not to assign this lease or to make any sublease for the whole
or any part of the demised premises without the prior written approval of the
Landlord which approval shall not be unreasonably withheld or delayed. In the
event of any assignment or sublease of the demises premises, any and all rents
payable under such assignment or sublease shall be payable directly to the
Landlord as payment toward the rent and other sums do hereunder; provided,
however, that if the rents and other sums payable or such sub-lease shall
exceed those rents and other sums due hereunder, then the Landlord shall be
entitled to retain such overage. For purposes of calculating any excess rent or
other consideration payable by Tenant to Landlord in connection with any
subletting or assignment, tenant shall be entitled to
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"net out" (i.e., retain) the value of any improvements to the premises made by
Tenant at its expense allocable over the remaining term of the Lease. If any
consideration is paid to the Lessee hereunder for any assignment or sublease,
such consideration shall be paid to the Lessor hereunder. Notwithstanding
anything in this Paragraph to the contrary, the prior approval of the of the
Landlord shall not be required for the assignment of the Lease to any
corporation or business entity into or with which the Tenant is merged or
consolidated or to which substantially all of the Tenant's assets or corporate
stock are transferred provided that in any of such events (i) following any such
transfer Tenant has, (or in the case of a merger or consolidation the successor
to Tenant has) a creditworthiness adequate to meet its obligations hereunder;
(ii) proof reasonably satisfactory to Landlord of such creditworthiness shall
have been delivered to Landlord prior to the effective date of any such transfer
or transaction; and (iii) in the case of a merger or consolidation, the
successor agrees directly with Landlord, by written instrument in form
reasonably satisfactory to Landlord, to be bound by all the obligations of
Tenant hereunder, including, without limitation, the covenant against further
assignment and subletting.
(k) to permit the Landlord or its agents to examine said premises at
reasonable times, subject to reasonable notice and Tenant's reasonable security
precaution and subject to applicable governmental regulations, if any, and
during the six
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months prior to the expiration of said term to show said premises to prospective
purchasers and tenants, and keep affixed in suitable places, not obstructing the
Tenant's signs or displays, notices for letting or selling; and
(l) at the expiration or earlier termination of said term promptly
to remove Tenant's personal property, and, if the Landlord reasonably so
requests or the Tenant so elects, to remove any movable trade fixtures or Tenant
installed equipment; to repair any damage caused by such removal; and, to
peaceably yield up said premises clean and neat and in repair as aforesaid,
damage by reasonable wear and tear and damage by fire and casualties only
excepted. Any such personal property, fixtures or equipment not so removed shall
at the expiration of thirty (30) days from such expiration or termination and
ten (10) days notice to Tenant become the property of the Landlord.
VII. (a) In case of taking by eminent domain of ten (10%) percent or more
of the total floor area of the building or buildings at the time on the premises
the Tenant may by notice to the Landlord within thirty (30) days thereafter
terminate this Lease as of the date when the Tenant is required to vacate the
portions taken. In case of taking by eminent domain of said premises or any
portion thereof, if this Lease is not so terminated, the Landlord shall repair
or rebuild any building presently on said premises so as to restore the same or
what may remain thereof in case of partial taking, as nearly as possible
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to its condition prior to the taking, the work to be commenced within four (4)
weeks after the date when the Tenant is required to vacate the portions taken
and to be completed with due diligence, except for delays due to governmental
regulations, unusual scarcity of or inability to obtain labor or materials, or
any other cause beyond Landlord's control. The Landlord reserves and excepts all
rights to damages to said premises and buildings and the leasehold hereby
created accruing in case of taking or act of public or other authority, and the
Tenant hereby grants to the Landlord all of the Tenant's rights to such damages
and agrees to deliver such further instruments of assignment thereof as the
Landlord from time to time may reasonably request. Tenant, however, reserves its
rights to damages for trade fixtures and relocation expenses. The Landlord
shall, however, pay to the Tenant from such damages when received the amounts,
if any, by which the same were increased by reason of inclusion therein of any
award for fixtures and equipment which Tenant is entitled to remove.
During such repair or rebuilding, a just proportion of the rent shall be
abated until what remains of the premises shall have been restored to proper
condition for use and occupation and thereafter a just proportion of the rent
according to the nature and extent of the taking shall be permanently abated.
The Landlord and Tenant hereby agree that if they are unable to agree upon the
amount of reduction in rent because of such taking, a board of three appraisers
shall be appointed, one by each party
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and the third by the two so chosen and the findings of such board of appraisers
shall bind each party. The expense of such appraisal, including counsel fees,
shall be shared equally by each party.
(b) In case said building is damaged by fire or other casualty or
action of public authority in consequence thereof or incidents of war,
earthquake, action of the elements, explosion or otherwise, the Tenant shall
promptly notify the Landlord. If the premises are so badly damaged that they
cannot be restored and made tenantable by the exercise of reasonable diligence
within ninety (90) days after the commencement of work, or if they are damaged
to the extent of twenty-five (25%) percent or more of the insurable value, then
the Tenant may terminate this Lease upon ten (10) days' notice in writing given
to the Landlord within thirty (30) days after such damage occurs or, at Tenant's
option, thirty (30) days after advice from Landlord regarding cost and time of
repair, whereupon the Tenant shall surrender the premises, and the Landlord, if
the Tenant is not at the time in default hereunder, shall refund to the Tenant
any unearned rent paid in advance by the Tenant, calculated from the date of the
damage. If the Lease is not so terminated or if the premises are damaged to a
lesser extent, the Landlord will repair the damaged premises and the buildings
thereon as nearly as reasonably possible to its or their condition prior to such
damage, the work to be commenced within thirty (30) days and completed with due
diligence, except for delays due to governmental regulation or
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unusual scarcity of or inability to obtain labor or materials, and thereupon
shall be entitled, to the extent of the cost of repairs, to the proceeds of any
insurance against such damage. In case the premises or the buildings thereon are
rendered untenantable by such damage, a just proportion of the rent hereinbefore
reserved according to the nature and extent of the injury shall be abated until
the repair or rebuilding is completed, and the premises shall have been put in
proper condition for use and occupation. The Landlord and Tenant hereby agree
that if they are unable to agree upon the amount of reduction in rent because of
such damage a board of three appraisers shall be appointed, one by each party
and the third by the two so chosen, and the findings of such board of appraisers
shall bind each party. The expense of such appraisal shall be shared equally by
each party.
Notwithstanding the foregoing provisions of this Lease, if the premises
shall be substantially damaged by fire or other casualty or action of public
authority in consequence thereof or incidents of war, earthquake, action of the
elements, explosion or otherwise, within twelve (12) months of the expiration of
the term or any extension hereof, either party may terminate this Lease as of
the date of such damage, by written notice to the other within ten (10) days of
the occurrence of such damage, except that if, prior to or within thirty (30)
days after such damage during the original term of this Lease the Tenant, having
the right do so, shall have elected to extend, pursuant to
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paragraph IV above, the provisions of this paragraph shall not apply.
VIII. The Landlord and Tenant hereby further agree that:
(a) if any sum or sums due as rent as herein provided shall be
unpaid when due and shall remain unpaid for a period of ten (10) days after
notice in writing of such default has been given by the Landlord to the Tenant;
provided, however, if the Landlord has on three (3) separate occasions during
the term of the Lease been required to give Tenant such written notice of
failure to pay rent and is thereafter again required to give such notice to
Tenant, then Tenant shall be given no further opportunity to cure such default
and this Lease shall immediately terminate and Landlord may thereafter enter in
and upon said Leasehold and repossess the same; or
(b) if the Tenant or Landlord shall violate or be in default in its
observance or performance of any covenant, condition and agreement herein
contained other than default in the payment of rent, and shall have failed to
remedy such violation or default within thirty (30) days after notice in writing
of such breach or default has been given by one to the other (or, if the nature
of such breach or default is such that it cannot be remedied within such thirty
(30) day period, if the defaulting party has failed to commence remedial action
within said thirty (30) days and thereafter continued such action with
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due diligence); or
(c) if the estate hereby created shall be taken on execution or by
other process of law in any action against the Tenant; or
(d) if the Tenant shall be declared a bankrupt or insolvent
according to law (or if the Tenant makes any assignment for the benefit of
creditors); or
(e) if a receiver shall be appointed of the Tenant's property and
not be removed within sixty (60) days; then, and in any such case
(notwithstanding any license of any former breach or waiver of the benefit
hereof or consent in a former instance):
Then the non-defaulting party, may, as applicable, at its option,
terminate this Lease or, as the case may be, the Landlord shall have the right
thereafter, while Tenant's default continues, to enter into and upon the
premises or any part thereof in the name of the whole, and repossess the same as
of its former estate (after notice and in accordance with applicable law), and
expel the Tenant and those claiming through or under it and remove its or their
effects without being deemed guilty of any manner of trespass, without prejudice
to any other remedies, and thereupon this Lease shall terminate.
In case of such termination or termination by legal proceeding by Landlord
for default, the Tenant will pay to the Landlord sums equal to the rent reserved
hereunder (as hereinabove defined) at the same time and in the same installments
as herein provided, or if the premises hereby
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demised shall have been relet, for which the Landlord will use its reasonable
efforts to accomplish, sums equal to the excess of said rent reserved hereunder
over the sums actually received by the Landlord, except that there shall be
first credited against the obligations of Tenant under this subdivision any sum
actually paid by Tenant to Landlord.
If the Tenant or Landlord shall default under provision VIII(b) above, the
Landlord or Tenant, as applicable, without being under any obligation to do so
and without thereby waiving such default or any of its other remedies hereunder,
at its sole option, may remedy such default for the account and at the expense
of the Tenant or Landlord, as applicable. Any such sums shall be paid to the
Landlord by the Tenant as additional rent, or in the event of Tenant payments to
cure a Landlord default, the Tenant may deduct same from rental due and owing by
way of set-off to the extent of such payments.
IX. Tenant shall be responsible, with respect to the demised premises of
which the within Leasehold is a part for the cost of:
(a) comprehensive general liability insurance covering all Tenant's
general liability obligations under this lease, with limits of
$3,000,000/$5,000,000 on personal injury or death and limits of $500,000.00 on
property damage in a company qualified to do business in Massachusetts, insuring
Landlord as well as Tenant against injury to persons or property.
(b) insurance upon the premises against fire and loss
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or damage by other risks embraced by Extended Coverage Endorsement, so called,
naming Landlord as insured, in an amount equal to the full insurable value of
the premises with insurance companies authorized to do business in
Massachusetts. Such policies may contain an eighty (80%) percent co-insurance
clause.
(c) Landlord shall be named in all insurance policies.
(d) The cost of said insurance shall be paid by the Tenant within
ten (10) days after presentation of bill from Landlord to Tenant setting forth
the cost of the aforesaid insurance, whether such insurance shall be paid
annually or in monthly installments.
(e) Each of the parties hereto hereby waives any and all rights of
recovery against the other or against any other tenant or occupant of the
building, or against the officers, employees, agents, representatives, customers
and business visitors of such other party of such other tenant or occupant of
the building, for loss of or damage to such waiving party of its property or the
property of others under its control, arising from any cause insured against
under the standard form of fire insurance policy with all permissible extensions
and endorsements covering additional periods or under any other policy of
insurance carried by such waiving party in lien thereof. Such waivers shall be
effective only so long as the same is permitted by each party's insurance
carrier without the payment of additional premium.
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X. (a) No consent or waiver, express or implied, by the Landlord or the
Tenant to or of any breach of any agreement or duty of the other shall be
construed as a consent or waiver of any other breach of the same or any other
agreement or duty. This agreement is the entire agreement between the parties
and modification or alteration of this Lease shall be binding unless signed by
both parties. This Lease shall be governed and construed in accordance with the
laws of the Commonwealth of Massachusetts, and if any provisions shall to any
extent be invalid, the remainder shall not be affected.
(b) The following addresses for communications and payments, unless
otherwise specified, by one party addressed to the other shall be sufficient:
for the Landlord - 25 Moulton Street, Cambridge, Massachusetts; and for the
Tenant - 61 Moulton Street, Cambridge, Massachusetts. Any communication, except
payment of rent, which is not delivered personally and receipted, shall be
deemed duly served if in writing, mailed by certified mail so addressed, postage
prepaid, return receipt requested and such notices shall be deemed given when
posted by the U.S. Postal Service.
(c) The obligations and benefits of this Lease shall run with the
land and this Lease shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns; except that the
Landlord shall be liable hereunder only for obligations and liabilities accruing
or
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arising while, or out of facts or situations occurring while, the Landlord is
the owner of the premises, and for indemnifications, obligations and liabilities
incurred by the Landlord under or pursuant to the Lease provisions.
(d) The Landlord agrees that the Tenant, upon paying rents and all
other charges herein provided and performing the Tenant's agreements hereunder,
shall lawfully and quietly hold, occupy and enjoy said demised premises during
the term of this Lease or until the same is terminated as herein provided, and
neither the Lease nor Tenant's right to remain in exclusive possession shall be
affected or disturbed by reason of transfer of title to premises through
foreclosure or otherwise or by reason of any Landlord default under any mortgage
or deed of trust.
(e) This Lease, and all rights of Tenant hereunder, are and shall be
subject and subordinate to all mortgages which now or hereafter affect the
premises, whether or not such mortgages shall also cover other lands and/or
buildings and/or leases, to each and every advance made hereafter to be made
under such mortgages, and to all renewals, modifications, replacements and
extensions of such leases and such mortgages and all consolidations of such
mortgages, Landlord agrees to use reasonable efforts to obtain and deliver to
Tenant following the execution of this Lease a so called non-disturbance and
attornment agreement from the existing mortgages.
Landlord hereby represents and warrants to Tenant,
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as of the date of this Lease and as of the Commencement Date, that (i) Landlord
is not in default under any mortgage which encumbers the premises, (ii) this
Lease and the permitted uses hereunder do not and will not constitute a
violation of any such mortgage, and (iii) all consents or approvals required by
the terms of any such mortgage for this Lease have been duly obtained by the
Landlord.
XI. The Tenant shall have the right, at its expense, to install a sign or
signs on the demised premises at such locations as may be reasonably necessary
to make known the location of its business. Tenant shall obtain written consent
of Landlord before erecting any sign, which consent shall not be unreasonably
withheld. Upon termination of this Lease, Tenant shall promptly remove the said
signs at its own expense and repair any damage to premises caused by the signs.
XII. Landlord and Tenant represent and warrant to each other that the only
brokers in this transaction are Spaulding & Slye Colliers and Peter Elliot Co.,
Inc. and that Landlord will pay the brokerage commission due said brokers as per
the agreement between the Landlord and said brokers. Landlord and Tenant agree
to defend and indemnify each other against any claims, losses, damages.
liabilities or expenses (including reasonable attorney's fees) arising out of
the breach of any of their respective foregoing representations.
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XIII. Landlord represents that in 1986 it engaged the services of a
professional environmental engineering firm to conduct a so-called hazardous
waste site assessment of the Premises. A copy has been provided to the Tenant.
Landlord further represents, and Tenant acknowledges, that Landlord is engaging
the services of a professional environmental engineering firm to update such
1986 site assessment. Since such update will require both a physical inspection
of the premises as well as the testing and analysis of samples to be taken from
some test well borings on the Premises, if necessary. Landlord estimates that it
may take four to six weeks for such update to be completed. Upon Landlord's
receipt of such update, Landlord shall deliver a copy thereof to Tenant. If such
update shows no material change in condition of the premises, Landlord and
Tenant agrees to rely on such update. If, however, such update discloses any
material change in the condition of the premises the Landlord agrees to
Indemnify Tenant with material change in condition as provided in Article V,
Section I. Said Indemnification shall apply only to any change in the condition
of the premises up to December 9, 1991.
XIV. The Tenant shall deliver to the Landlord within the time of the
execution of the within Lease the sum of $11,250.00 as a deposit to secure
perform of all covenants and payment of all sums due under the terms of the
within Lease or the extensions or renewals thereof. At the conclusion of the
Lease
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term or any extension thereof, Landlord shall be accountable to the Tenant
regarding said security deposit and Landlord further agrees to pay interest on
said sum at the rate of five percent (5%) per annum payable at the conclusion of
the initial term of the Lease and if the within Lease is extended, interest
shall be computed during such extended period and shall be paid at the end of
said extended period.
WITNESS the execution hereof, in duplicate, under seal, all as of the day and
year first above written.
MOULTON REALTY COMPANY
/s/ Michael J. Spinelli
-----------------------------
Michael J. Spinelli
Trustee of M.R.C. Realty Trust
/s/ Carol Ann Hickey
-----------------------------
Carol Ann Hickey
/s/ Peter A. Spinelli
-----------------------------
Peter A. Spinelli, General Partner
Spinelli Family Associates
VIRUS RESEARCH INSTITUTE, INC.
By: /s/ John W. Littlechild
-------------------------
John W. Littlechild
Its President
25
<PAGE>
SCHEDULE A
[GRAPHIC: Plot Plan]
PLOT PLAN OF LAND
IN
CAMBRIDGE, MASS
<PAGE>
Exhibit 10.15
VRI004 (4/30/93)
AMENDMENT TO LICENSE AGREEMENT
This amendment is entered into between the President and Fellows of
Harvard College (hereinafter HARVARD) having offices at the Office for
Technology and Trademark Licensing, 124 Mt. Auburn Street, Suite 440, Cambridge,
Massachusetts, 02138 and Virus Research Institute (hereinafter LICENSEE), a
corporation, having offices at 61 Moulton Street, Cambridge, MA 02139.
WHEREAS HARVARD and LICENSEE have entered into a License Agreement
effective as of May 1, 1992 with respect to certain patents and technology
directed to cholerae (the "License Agreement");
WHEREAS the parties desire to amend such License Agreement.
NOW THEREFORE, in consideration of the foregoing premises, and the mutual
promises and other good and valuable consideration, the parties agree as
follows:
1. Section 1.4 of the License Agreement is deleted in its entirety and
rewritten as follows:
-- "NET SALES" means the total received by LICENSEE from sale of LICENSED
PRODUCTS less transportation charges and insurance, sales taxes, use
taxes, excise taxes, value added taxes, customs duties or other imports,
to the extent itemized on invoice, normal and customary quantity and cash
discounts (to the extent allowed), allowances and credits on account of
rejection or return of LICENSED PRODUCTS. In the event that a LICENSED
PRODUCT includes, a component which has therapeutic and/or prophylactic
activity ("Active Component(s)") covered by a PATENT RIGHT (Patented
Component(s)) and Active Components not covered by a PATENT RIGHT
(Unpatented Component(s)) (such PRODUCT being a Combined Product), then
NET SALES shall be the amount which is normally received by LICENSEE from
a sale of the Patented Component(s) when sold separately in an arm's
length transaction with an unaffiliated third party. If the Patented
Component(s) are not sold separately, then NET SALES upon which royalty is
paid shall be the NET SALES of the Combined Product multiplied by a
<PAGE>
fraction, the numerator of which is the cost for producing the Patented
Components and the denominator of which is the cost for producing the
Combined Product.
2. Add the following Section 1.6 to the License Agreement.
--1.6 The term "SUBLICENSEE" shall mean any non-AFFILIATE third party
licensed by LICENSEE to make, have made, use or sell any product or use
any process under PATENT RIGHTS.--
3. Paragraphs 2.2(c), 2.2(d), 2.2(e) and 2.2(f) of the License Agreement
are deleted in the entirety.
4. Paragraph 2.2(g) of the License Agreement is renumbered as Paragraph
2.2(c).
5. The following paragraph is added to the License Agreement as Paragraph
2.5.
--2.5 LICENSEE has provided HARVARD with a development plan for developing
and obtaining regulatory approval of the LICENSED PRODUCT selected by
LICENSEE, which development plan includes milestones.
LICENSEE shall exert reasonable efforts under the circumstances to achieve
such milestones. In the event LICENSEE subsequently indicates in writing
to HARVARD that such milestones cannot be met or fails to meet such
milestones, LICENSEE shall promptly notify HARVARD, and LICENSEE and
HARVARD shall promptly enter into good faith negotiations to reconsider
such milestones. In the event that the parties cannot agree to the
milestones within sixty (60) days after beginning good faith negotiations,
the matter shall be submitted to arbitration to determine the milestones
and the time period therefor which should be met pursuant to this Section.
The arbitrator in setting and determining milestones shall consider the
state of technology; the efforts exerted by LICENSEE, the business
circumstances of LICENSEE and the public interest objectives to HARVARD'S
licensing program; and technical and regulatory problems. Thereafter,
LICENSEE shall exert reasonable efforts to achieve such milestones.
In the event that LICENSEE cannot meet the milestones set by arbitration
because of technological or regulatory problems, HARVARD shall not
unreasonably deny an extension of time to meet
<PAGE>
the milestones, upon a showing by LICENSEE that it has made good faith
reasonable efforts to meet the milestones.
If LICENSEE (i) falls to meet the milestones established by agreement of
the parties and (ii) fails to obtain extensions of such milestones
established by arbitration and (111) LICENSEE has not exerted good faith
reasonable efforts to meet such milestones, as its sole and exclusive
remedy HARVARD shall have the right to terminate or convert the licenses
to non-exclusive licenses by providing to LICENSEE sixty (60) days prior
written notice.
Notwithstanding anything else to the contrary, in the event that LICENSEE
and/or its AFFILIATE(s) and/or SUBLICENSEE(s) have expended at least two
hundred fifty thousand dollars ($250,000) in research and developing a
LICENSED PRODUCT and LICENSEE intends to continue development of a
LICENSED PRODUCT, the rights and licenses granted hereunder shall not
terminate and shall be converted to a non-exclusive right and license, and
further provided that LICENSEE or a SUBLICENSEE or an entity on its behalf
spends at least one hundred thousand dollars ($100,000) per year in
pursuing development of PRODUCT for commercial sale.
LICENSEE shall ensure that for any PRODUCT being developed or
commercialized by a SUBLICENSEE, such SUBLICENSEE shall assume the
obligations imposed on LICENSEE under this paragraph.
The efforts of an AFFILIATE, SUBLICENSEE or collaborator of LICENSEE shall
be considered as efforts of LICENSEE. - -
6. Rewrite Paragraph 3.2 of the License Agreement in its entirety to read
as follows:
--3.2 LICENSEE shall pay HARVARD, during the term of the license granted
in Section 2.1, (i) a royalty of four percent (4%) of the NET SALES of the
LICENSED PRODUCTS sold by LICENSEE and its AFFILIATES to commercial
organizations, and two percent (2%) of the NET SALES of the LICENSED
PRODUCTS sold by LICENSEE and its AFFILIATES to non-profit or government
agencies, or (ii) twenty-five percent (25%) of royalties received by
LICENSEE or its AFFILIATES from a SUBLICENSEE for all LICENSED PRODUCTS
covered by a PATENT RIGHT licensed to LICENSEE, and twenty-five percent
(25%) of upfront license and license maintenance fees received from a
SUBLICENSEE for a license under PATENT RIGHTS, in the case where the
SUBLICENSEE is a commercial organization, and ten percent (10%) of such
royalties and fees where the SUBLICENSEE, is a government or non-profit
organization.--
7. Delete Paragraph 4.1 of the License Agreement in its entirety.
<PAGE>
8. Rewrite Paragraph 4.2 of the License Agreement in its entirety to read
as follows:
--4.2 LICENSEE shall provide written annual reports within sixty (60) days
after June 30 of each calendar year which shall include but not be limited
to: reports of progress on research and development, regulatory approvals,
manufacturing, sublicensing, marketing and sales during the preceding
twelve (12) months as well as plans for the coming year. --
9. Rewrite Paragraph 8.4 of the License Agreement in its entirety to read
as follows:
--8.4 In the event that the licenses granted to LICENSEE under this
Agreement are terminated, any granted sub-licenses shall remain in full
force and effect as a direct license from HARVARD to the SUBLICENSEE,
provided that the SUBLICENSEE is not then in breach of its sub-license
agreement and the SUBLICENSEE agrees to be bound (as a licensee) to
HARVARD (as a licensor) under the terms and conditions of the sub-license
agreement. --
10. In Paragraph 9.3(a) of the License Agreement, delete the last sentence
in its entirety.
11. Delete Paragraphs 9.3(b), 9.3(c), 9.3(d) and 9.3(e) of the License
Agreement and in lieu thereof insert the following:
(b) LICENSEE'S indemnification under (a) above shall not apply to any
liability, damage, loss or expense to the extent to apply to any
liability, damage, loss or expense to the extent that it is attributable
to the negligent activities or willful misconduct of the Indemnitees.
(c) HARVARD shall notify LICENSEE promptly of any claim or threatened
claim under this Paragraph 9.3 and shall fully cooperate with all
reasonable requests of LICENSEE with respect thereto.
(d) LICENSEE agrees, at its own expense, to provide attorneys reasonably
acceptable to HARVARD to defend against any actions brought or filed
against any party indemnified hereunder with respect to the subject of
indemnity contained herein, whether or not such actions are rightfully
brought and LICENSEE shall have the right to control the defense,
settlement or compromise of any such claim or action.
<PAGE>
(e) At such time as any PRODUCT is being commercially distributed or sold
(other than for research purposes or for the purpose of obtaining
regulatory approvals) by LICENSEE, or by an AFFILIATE, SUBLICENSEE or
agent of LICENSEE (hereunder "Other Seller"), LICENSEE shall itself or in
the alternative shall ensure that Other Seller either (i) at its sole cost
and expense, procure(s) and maintain(s) comprehensive general liability
insurance in amounts not less than $2,000,000 per incident and $2,000,000
annual aggregate and naming the Indemnitees as additional insureds or (ii)
pay(s) for the procurement and maintenance by HARVARD of insurance in the
amounts and in the form set forth in this paragraph. Such comprehensive
general liability insurance shall provide (i) product liability coverage
and (ii) broad form contractual liability coverage for LICENSEE'S
indemnification under Paragraph 9.3(a) of this Agreement. LICENSEE shall
ensure that if LICENSEE or the Other Seller elects to self-insure all or
part of the limits described above (including deductibles or retentions
which are in excess of $250,000 annual aggregate) such self-insurance
program must be acceptable to HARVARD and the Risk Management Foundation.
The minimum amounts of insurance coverage required under this Paragraph
9.3(c) shall not be construed to create a limit of LICENSEE'S liability
with respect to its indemnification under Paragraph 9.3(a) of this
Agreement. At such time, or at any time, LICENSEE can request that HARVARD
ascertain whether Risk Management Foundation has in effect Uniform
Indemnification and Insurance Provisions more favorable than those of this
Agreement, in which event LICENSEE and HARVARD shall amend this Agreement
to include such more favorable provisions.
(f) LICENSEE shall provide HARVARD with written evidence of such insurance
upon request of HARVARD. LICENSEE shall provide HARVARD with written
notice of at least thirty (30) days prior to the cancellation, non-renewal
or material change in such insurance; if LICENSEE does not obtain
replacement insurance providing comparable coverage within such thirty
(30) days period, HARVARD shall have the right to terminate this Agreement
effective at the end of such thirty (30) day period by written notice to
LICENSEE.
(g) LICENSEE shall itself maintain, or shall ensure that Other Seller
maintains or that payments are made for the maintenance by HARVARD of, as
the case may be, such comprehensive general liability insurance beyond the
expiration or termination of this Agreement during (i) the period that any
LICENSED PRODUCT is being commercially distributed or sold (other than for
research purposes or the purpose of obtaining regulatory approvals) by
Other Seller and (ii) a reasonable period after the period referred to in
(g) (i) above which shall in no event
<PAGE>
be less than ten (10) years. The obligations of (g)(ii) above can be
satisfied by the purchase of insurance by LICENSEE or a third party which
covers claims resulting from occurrences during such period of (g)(ii)
above for LICENSED PRODUCT commercially distributed or sold by LICENSEE or
Other Seller during the period referred to in (g)(i) above.
12. Except as modified herein, the License Agreement and the terms,
conditions and obligations thereof remain in full force and effect as originally
written.
IN WITNESS WHEREOF, the parties hereto intending to be bound have set
their hands and seal effective as of the date first above written.
PRESIDENT AND FELLOWS VIRUS RESEARCH INSTITUTE
OF HARVARD COLLEGE
By: /s/ Joyce Brinton BY: /s/ [ILLEGIBLE]
--------------------------- --------------------------
Joyce Brinton, Director
TITLE: Office for Technology and TITLE: President
Trademark Licensing -----------------------
Harvard University
-------------------------
DATE: 7/9/93 DATE: 7/23/93
------------------------- -----------------------
<PAGE>
LICENSE AGREEMENT
This Agreement is made and entered into between the President and Fellows of
Harvard College (hereinafter HARVARD) having offices at the Office for
Technology and Trademark Licensing, 124 Mt. Auburn Street, Suite 440, Cambridge,
Massachusetts, 02138 and Virus Research Institute (hereinafter LICENSEE), a
corporation of Cambridge, MA, having offices at 61 Moulton Street, Cambridge, MA
02139
Whereas HARVARD and The General Hospital Corporation (GENERAL) doing business as
Massachusetts General Hospital are or will be the Owners by assignment, of the
entire right, title and interest in the following United States patent
applications, and in the foreign patent applications corresponding thereto, and
in the inventions described and claimed therein and any patents issuing thereon,
and whereas GENERAL and HARVARD have agreed to cooperate in the patent and
license administration of such patent applications:
U.S.S.N. 629,602 - "Improved Vaccines"; filed December 18, 1990;
Inventors: John Mekalanos and Samuel Miller.
U.S.S.N. 629,102 - "Vibrio Cholerae Strains Defective in irgA Expression
and Cholera Vaccines Derived Therefrom"; filed December 18, 1990;
Inventors: John Mekalanos and Stephen Calderwood.
U.S.S.N. 000,000 - "Doubly-Attenuated Strain of Vibrio Cholerae to Deliver
Heterlogous Antigens for Vaccination" to be filed in 1992; Inventors: John
Mekalanos and Stephen Calderwood (serial number and filing date to be
inserted when available;
Whereas GENERAL has agreed HARVARD is its sole licensing agent for these jointly
owned patent applications; and
Whereas HARVARD is the Owner by assignment of the entire right, title and
interest in the following United States Patents or Patent Applications and in
the foreign patent applications corresponding thereto, and in the inventions
described and contained therein:
U.S.S.N. 043,907 - "Cholera Vaccines"; filed April 29, 1987 and its CIP
USSN 5,098,998, filed April 29, 1988; Inventors: John Mekalanos and Ronald
Taylor.
<PAGE>
U.S. 4,882,278 - "Non-Toxic Vibrio Cholera Mutants"; issued November 21,
1989; Inventor: John Mekalanos.
U.S.S.N 000,000 - "Peruvian Strain of Cholera Vaccine"; to be filed in
1992; Inventor: John Mekalanos (serial number and filing date to be
inserted when available); and
Whereas HARVARD and GENERAL are the Owners by assignment from the inventors of
the BIOLOGICAL MATERIAL as defined in Appendix B and have the right to license
the BIOLOGICAL MATERIAL; and
Whereas HARVARD and the GENERAL are committed to a policy that ideas or creative
works produced at HARVARD and the GENERAL should be used for the greatest
possible public benefit; and
Whereas HARVARD accordingly believes that every reasonable incentive should be
provided for the prompt introduction of such ideas into public use, all in a
manner consistent with the public interest; and
Whereas LICENSEE is desirous of obtaining an exclusive worldwide license in
order to practice the above referenced inventions covered by PATENT RIGHTS and
to use the BIOLOGICAL MATERIAL in the United States and in certain foreign
countries, and to manufacture, use and sell in the commercial market the
products made in accordance therewith; and
Whereas HARVARD is desirous of granting such a license to LICENSEE in accordance
with the terms of this Agreement. Now therefore, in consideration of the
foregoing premises, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 PATENT RIGHTS shall mean any and all United States patents or patent
applications listed above and attached hereto in Appendix A, the
inventions described and claimed therein, and any divisions,
continuations, continuations-in-part directed to subject matter
specifically described in the application and patents listed in Appendix
A, patents issuing thereon or reissues thereof; and any and all foreign
patents and patent applications corresponding thereto; which will be
automatically incorporated in and added to this Agreement and shall
periodically be added to Appendix A and made a part thereof. To the extent
HARVARD's obligations to third parties permit, PATENT RIGHTS shall also
include all IMPROVEMENT INVENTIONS. IMPROVEMENT INVENTIONS shall mean any
inventions or discoveries that enhance, substitute for, or are useful with
the products, procedures or processes described in PATENT RIGHTS to the
extent they are (i) dominated by any claims of a pending and/or issued
patent or
2
<PAGE>
patent application which is then included in the PATENT RIGHTS, and
HARVARD's ownership interest in any United States or foreign patents and
patent application thereon, and (ii) made (i.e., conceived and reduced to
practice) by Dr. John Mekalanos solely or jointly with others directly
supervised in his laboratory at Harvard Medical School. IMPROVEMENT
INVENTIONS shall not include inventions assignable to GENERAL.
1.2 LICENSED PRODUCTS shall mean products covered in whole or in part by an
issued, unexpired claim or a pending claim contained in PATENT RIGHTS
which has not been declared invalid by a court of competent jurisdiction.
1.3 LICENSED PROCESSES shall mean processes covered in whole or in part by an
issued, unexpired claim or a pending claim contained in PATENT RIGHTS
which has not been declared invalid by a court of competent jurisdiction.
1.4 NET SALES shall mean the amount billed or invoiced on sales of LICENSED
PRODUCTS less:
(a) Customary trade, quantity or cash discounts and non-affiliated
brokers' or agents' commissions actually allowed and taken;
(b) Amounts repaid or credited by reason of rejection or return; and/or
(c) To the extent separately stated on purchase orders, invoices or
other documents of sale, taxes levied on and/or other governmental
charges made as to production, sale, transportation, delivery or use
and paid by or on behalf of LICENSEE.
1.5 AFFILIATES shall mean any company, corporation, or business (i) in which
LICENSEE directly or indirectly owns or controls at least fifty percent
(50%) of the voting stock, or (ii) which directly or indirectly owns or
controls at least fifty percent (50%) of the voting stock of LICENSEE or
(iii) the majority ownership of which is directly or indirectly under
common control with LICENSEE.
1.6 BIOLOGICAL MATERIAL shall mean the materials supplied by HARVARD and
GENERAL (identified in Appendix B).
3
<PAGE>
1.7 TECHNOLOGY shall mean any and all information or PATENT RIGHTS, or
BIOLOGICAL MATERIAL supplied by HARVARD and GENERAL to LICENSEE.
GRANT
2.1 For the term of this Agreement, HARVARD hereby grants to LICENSEE and
LICENSEE accepts, subject to the terms and conditions hereof, a worldwide
license under PATENT RIGHTS and a worldwide license to use the BIOLOGICAL
MATERIAL, to make and have made, to use and have used, to sell and have
sold the LICENSED PRODUCTS, and to practice the LICENSED PROCESSES. Such
license shall include the right to grant sublicenses. In order to provide
LICENSEE with a period of exclusivity, HARVARD agrees it will not grant
licenses to others except as required under Paragraph 2.2 (a) or as
permitted in paragraph 2.2 (b). LICENSEE agrees during the period of
exclusivity of this license in the United States that any LICENSED PRODUCT
produced for sale in the United States will be manufactured substantially
in the United States.
2.2 The granting and acceptance of this license is subject to the following
conditions:
(a) HARVARD's "Statement of Policy in Regard to Inventions, Patents and
Copyrights" dated March 17, 1986, Public Law 96-517, Public Law 98-620 and
HARVARD's and GENERAL's obligations under agreements with other sponsors
of research. Any right granted in this Agreement greater than that
permitted under Public Law 96-517 or Public Law 98-620 shall be subject to
modification as may be required to conform to the provisions of that
statute.
(b) HARVARD's and GENERAL's right to make and to use and to grant
non-exclusive licenses to make and to use, for academic research purposes
only and for GENERAL's internal inpatient care purposes and not for any
commercial purpose, the subject matter described and claimed in PATENT
RIGHTS, or the BIOLOGICAL MATERIAL.
(c) LICENSEE shall use reasonable effort to effect introduction of the
LICENSED PRODUCTS into the commercial market as soon as practicable,
consistent with sound and reasonable business practices and judgment;
thereafter, until the expiration of this Agreement, LICENSEE shall
endeavor to keep LICENSED PRODUCTS reasonably available to the public.
(d) HARVARD shall have the right to terminate or render non-exclusive any
license granted hereunder if in HARVARD's reasonable judgement, LICENSEE:
4
<PAGE>
(i) has not, within five years from the date of this Agreement, commenced
clinical trials of a LICENSED PRODUCT or LICENSED PROCESS in the country
or countries where licensed; and/or
(ii) is not, within one year of the date of this Agreement, demonstrably
engaged in on-going research, development, or marketing or licensing
programs as appropriate, directed toward commercial use of the LICENSED
PRODUCT or LICENSED PROCESSES.
In making this determination HARVARD shall take into account the normal course
of such programs conducted with sound and reasonable business practices and
judgment and shall take into account the reports provided hereunder by LICENSEE.
(e) All sublicenses granted by LICENSEE hereunder shall include a requirement
that the sublicensee use its good faith efforts to bring the subject matter of
the sublicense into commercial use as quickly as is reasonably possible
consistent with sound and reasonable business practices and judgement and shall
bind the sublicensee to meet LICENSEE's obligations to HARVARD under this
Agreement. Royalties charged for sublicenses by LICENSEE shall not be in excess
of normal trade practice. Copies of all sublicense agreements shall be provided
to HARVARD.
(f) In the event that LICENSEE is in default of its obligations under Section
2.2 (c) or (e) or Article III, and such default remains unresolved following
notice as provided in Section 8.2 or LICENSEE fails to meet the milestones
specified in Section 2.2 (d) and HARVARD does not thereafter exercise it right
to terminate this license, and LICENSEE is thereafter unable or unwilling to
grant sublicenses, either as suggested by HARVARD or a potential sublicensee or
otherwise, HARVARD may directly license such potential sublicensee unless
LICENSEE reasonably satisfies HARVARD that such sublicense would be contrary to
sound and reasonable business practice, and that the granting of such sublicense
would not materially increase the availability to the public of products
manufactured under this license.
(g) HARVARD shall have the right to terminate this Agreement if LICENSEE does
not have commitments for a minimum of one million dollars ($1,000,000) of
investment capital within six (6) months of the signing of this Agreement, and
three million dollars ($3,000,000) of total funding within thirty-six (36)
months of the signing of this Agreement.
5
<PAGE>
2.3 HARVARD hereby grants to LICENSEE the right to extend the licenses granted
or to be granted in paragraph 2.1 to an AFFILIATE subject to the terms and
conditions hereof.
2.4 All rights reserved to the United States Government and others under
Public Law 96-517 and 98-620 shall remain and shall in no way be affected
by this Agreement.
ARTICLE III
ROYALTIES
3.1 LICENSEE shall pay to HARVARD a non-refundable license fee in the sum of
$200,000 in two equal installments, the first upon execution of this
Agreement, and the second six months after the signing of this Agreement.
3.2 LICENSEE shall pay HARVARD, during the term of the license granted in
Section 2.1, a royalty of four percent (4%) of the NET SALES of all
LICENSED PRODUCTS sold by LICENSEE and its AFFILIATES or sublicensees to
commercial organizations, and two percent (2%) of the NET SALES of all
LICENSED PRODUCTS sold by LICENSEE and its AFFILIATES or sublicensees to
non-profit or government agencies. In the case of sublicenses, LICENSEE
shall also pay to HARVARD twenty-five percent (25%) of non-royalty
sublicense income (e.g., license issue fees, license maintenance fees,
etc.) from commercial organizations, and ten percent (10%) of all such
income from government or non-profit organizations. If this license is
converted to a non-exclusive one and if other non-exclusive licenses are
granted, this royalty shall not exceed the royalty being paid by other
licensees during the term of the non-exclusive license. On sales between
LICENSEE and its AFFILIATES or sublicensees for resale, the royalty shall
be paid on the resale.
3.3 HARVARD shall have the right to terminate or render non-exclusive this
license in the event that LICENSEE does not pay to HARVARD at least the
following amounts in license maintenance fees and/or minimum royalties:
First calendar year -$10,000
Next calendar year -$15,000
Next calendar year -$20,000
and each year thereafter.
In the event that actual royalties are not at least equal to the above
amounts for the specified periods, LICENSEE shall have the right to pay
any difference between such minimum amounts and the actual royalties paid
in satisfaction of its obligations under this Section 3.3.
6
<PAGE>
3.4 In the event that LICENSEE is required to pay royalties to one or more
third parties under patents other than PATENT RIGHTS covering LICENSED
PRODUCTS or LICENSED PROCESSES, LICENSEE shall be entitled to a credit
against royalties due HARVARD in an amount equal to fifty percent (50%) of
royalties paid to such third parties, provided that in no event shall the
royalties otherwise due HARVARD be reduced by more than one-half.
3.5 In the event that the royalties paid to HARVARD are so significant a
factor in the return realized by LICENSEE as to diminish LICENSEE's
capability to respond to competitive pressures in the market, HARVARD
agrees to consider a reasonable reduction in the royalty paid to HARVARD
as to each LICENSED PRODUCT for the period during which such market
condition exists. Factors determining the size of the reduction will
include profit margin on LICENSED PRODUCTS and on analogous products,
prices of competitive products, total prior sales by LICENSEE, and
LICENSEE's expenditures on LICENSED PRODUCT development.
ARTICLE IV
REPORTING
4.1 Prior to signing this Agreement, LICENSEE has provided to HARVARD a
written research and development plan under which LICENSEE intends to
bring the subject matter of the licenses granted hereunder into commercial
use upon execution of this Agreement. Such plan includes projections of
sales and proposed marketing efforts.
4.2 LICENSEE shall provide written annual reports within sixty (60) days after
June 30 of each calendar year which shall include but not be limited to:
reports of progress on research and development, regulatory approvals,
manufacturing, sublicensing, marketing and sales during the preceding
twelve (12) months as well as plans for the coming year. If progress
differs from that anticipated in the plan provided under Section 4.1,
LICENSEE shall explain the reasons for the difference and propose a
modified plan for HARVARD's review and approval. LICENSEE shall also
provide any reasonable additional data HARVARD requires to evaluate
LICENSEE's performance.
4.3 LICENSEE shall report to HARVARD the date of first sale of LICENSED
PRODUCTS (or results of LICENSED PROCESSES) in each country within thirty
(30) days of occurrence.
4.4 Commencing with the calendar year half in which Net Sales first occur,
LICENSEE agrees to submit to HARVARD within sixty (60) days after the
calendar half years ending June 30 and December 31, reports setting forth
for the preceding six (6) month period the amount of the LICENSED PRODUCTS
sold by LICENSEE, its AFFILIATES and sublicensees in each country, the NET
SALES thereof, and the amount of royalty due thereon and with each such
royalty
7
<PAGE>
any non-royalty sublicense income and pay the amount of royalty due. Such
report shall be certified as correct by an officer of LICENSEE and shall
include a detailed listing of all deductions from NET SALES, sublicensee
income or from royalties as specified herein. Such report shall also
specify which PATENT RIGHTS are used in or by each LICENSED PRODUCT
generating royalty income. If no royalties are due to HARVARD for any
reporting period, the written report shall so state. If royalties for any
calendar year do not equal or exceed the minimum royalties established in
paragraph 3.3, LICENSEE shall include the balance of the minimum royalty
with the payment for the half year ending December 31. All royalties due
hereunder shall be payable in United States dollars. Conversion of foreign
currency to U.S. dollars shall be made at the conversion rate existing in
the United States on the, last business day in the reporting period as
reported in the Wall Street Journal. All such reports shall be maintained
in confidence by HARVARD, except as required by law, including Public Law
96-517 and 98-620.
4.5 If by law, regulation, of fiscal policy of a particular country,
conversion into United States dollars or transfer of funds of a
convertible currency to the United States is restricted or forbidden,
LICENSEE shall give HARVARD prompt notice in writing and shall pay the
royalty and other amounts due through such means or methods as are lawful
in such country as HARVARD may reasonably designate. Failing the
designation by HARVARD of such lawful means or methods within thirty (30)
days after such notice is given to HARVARD, LICENSEE shall deposit such
royalty payment in local currency to the credit of HARVARD in a recognized
banking institution designated by HARVARD, or if none is designated by
HARVARD within the thirty (30) day period described above, in a recognized
banking institution selected by LICENSEE and identified in a written
notice to HARVARD by LICENSEE, and such deposit shall fulfill all
obligations of LICENSEE to HARVARD with respect to such royalties.
ARTICLE V
RECORD KEEPING
5.1 LICENSEE shall keep, and shall require its AFFILIATES and sublicensees to
keep accurate and correct records of LICENSED PRODUCTS made, used or sold
under this Agreement, appropriate to determine the amount of royalties due
hereunder to HARVARD. Such records shall be retained for at least three
(3) years following a given reporting period. They shall be available
during normal business hours for inspection at the expense of HARVARD by
HARVARD's Internal Audit Department or by a Certified Public Accountant
selected by HARVARD and approved by LICENSEE for the sole purpose of
verifying reports and payments hereunder. Such accountant shall not
disclose to
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HARVARD any information other than information relating to accuracy of
reports and payments made under this Agreement. In the event that any such
inspection shows an under reporting and underpayment in excess of five
percent (5%) for any twelve (12) month period, then LICENSEE shall pay the
cost of such examination.
ARTICLE VI
DOMESTIC AND FOREIGN PATENT FILING AND MAINTENANCE
6.1 LICENSEE shall reimburse HARVARD for all reasonable expenses HARVARD and
GENERAL have incurred and shall incur for the preparation, filing,
prosecution and maintenance of PATENT RIGHTS for which HARVARD or GENERAL
has not been, and is not eligible to be reimbursed by any third party.
HARVARD and GENERAL shall take responsibility for the preparation, filing,
prosecution and maintenance of any and all patent applications and patents
included in PATENT RIGHTS using patent counsel reasonably acceptable to
LICENSEE, provided however that HARVARD and GENERAL shall first consult
with LICENSEE as to the preparation, filing, prosecution and maintenance
of such patent applications and patents and shall furnish to LICENSEE
copies of documents relevant to any such preparation, filing, prosecution
or maintenance.
6.2 HARVARD, GENERAL, and LICENSEE shall cooperate fully in the preparation,
filing, prosecution and maintenance of PATENT RIGHTS and of all patents
and patent applications licensed to LICENSEE hereunder, executing all
papers and instruments or requiring members of HARVARD and GENERAL to
execute such papers and instruments so as to enable HARVARD and GENERAL to
apply for, to prosecute and to maintain patent applications and patents in
HARVARD's and/or GENERAL's name in any country. Each party shall provide
to the other prompt notice as to all matters which come to its attention
and which may affect the preparation, filing, prosecution or maintenance
of any such patent applications or patents.
6.3 If LICENSEE elects not to pay the expenses of a patent application or
patent included within PATENT RIGHTS in a particular country, LICENSEE
shall notify HARVARD not less than sixty (60) days prior to such action
and shall thereby surrender its rights under such patent or patent
application in such country. LICENSEE agrees that it shall not exercise
this right for the purpose of avoiding the payment of royalties otherwise
due in such country.
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ARTICLE VII
INFRINGEMENT
7.1 With respect to any PATENT RIGHTS under which LICENSEE is exclusively
licensed pursuant to this Agreement, LICENSEE or its sublicensee shall
have the right to prosecute in its own name and at its own expense any
infringement of such patent, so long as such license is exclusive at the
time of the commencement of such action. HARVARD agrees to notify LICENSEE
promptly of each infringement of such patents of which HARVARD is or
becomes aware. Before LICENSEE or its sublicensees commences an action
with respect to any infringement of such patents, LICENSEE shall give
careful consideration to the views of HARVARD and to potential effects on
the public interest in making its decision whether or not to sue and in
the case of a LICENSEE sublicense, shall report such views to the
sublicensee.
7.2 If LICENSEE or its sublicensee elects to commence an action as described
above and HARVARD and/or GENERAL is a legally indispensable party to such
action, HARVARD and/or GENERAL shall have the right to assign to LICENSEE
all of HARVARD's and/or GENERAL's right, title and interest in each patent
which is a part of the PATENT RIGHTS and is the subject of such action
(subject to all HARVARD's and/or GENERAL's obligations to the government
and others having rights in such patent). In the event that HARVARD and/or
GENERAL makes such an assignment, such assignment shall be irrevocable,
and such action by LICENSEE on that patent or patents shall thereafter be
brought or continued without HARVARD and/or GENERAL as a party' if HARVARD
and/or GENERAL is no longer an indispensable party. Notwithstanding any
such assignment to LICENSEE by HARVARD and/or GENERAL and regardless of
whether HARVARD and/or GENERAL is or is not an indispensable party,
HARVARD and/or GENERAL shall cooperate fully with LICENSEE, at LICENSEE's
expense, in connection with any such action. In the event that any patent
is assigned to LICENSEE by HARVARD and/or GENERAL, pursuant to this
paragraph, such assignment shall require LICENSEE to continue to meet its
obligations under this Agreement as if the assigned patent or patent
application were still licensed to LICENSEE.
7.3 If LICENSEE or its sublicensee elects to commence an action as described
above, LICENSEE may reduce, by up to 50%, the royalty due to HARVARD
earned under the patent subject to suit by the amount of the expenses and
costs of such action, including attorney fees. In the event that such
expenses and costs exceed the amount of royalties withheld by LICENSEE for
any calendar year, LICENSEE may to that extent reduce the royalties due to
HARVARD from LICENSEE in succeeding calendar years, but never by more than
50% of the royalty due in any one year.
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7.4 Recoveries or reimbursements from such action shall first be applied to
reimburse LICENSEE and HARVARD and GENERAL for litigation costs not paid
from royalties (if any) and then to reimburse HARVARD for royalties
withheld. Any remaining recoveries or reimbursements shall be distributed
two-thirds to LICENSEE and one-third to HARVARD.
7.5 In the event that LICENSEE and its sublicensee, if any, elect not to
exercise their right to prosecute an infringement of the PATENT RIGHTS
pursuant to the above paragraphs. HARVARD and/or GENERAL may do so at its
own expense, controlling such action and retaining all recoveries
therefrom.
ARTICLE VIII
TERMINATION OF AGREEMENT
8.1 This Agreement, unless extended or terminated as provided herein, shall
remain in effect for the life of the last to expire of PATENT RIGHTS
licensed hereunder.
8.2 In the event that one party to this Agreement shall be in default in the
performance of any obligations under this Agreement, and if the default
has not been remedied within ninety (90) days after the date of notice in
writing of such default, the party giving such notice may terminate this
Agreement by written notice.
8.3 In the event that LICENSEE shall cease to carry on its business, HARVARD
shall have the right to terminate this entire Agreement by giving LICENSEE
written notice of such termination.
8.4 Any sublicenses granted by LICENSEE under this Agreement shall provide for
termination or assignment to HARVARD, at the option of HARVARD, of
LICENSEE's interest therein upon termination of this Agreement.
8.5 LICENSEE shall have the right to terminate this Agreement by giving thirty
(30) days advance written notice to HARVARD to that effect. Upon
termination, a final report shall be submitted and any royalty payments
and unreimbursed patent expenses due to HARVARD become immediately
payable.
8.6 Sections 8.5, 9.2, 9.3 and 9.4 of this Agreement shall survive
termination.
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ARTICLE IX
GENERAL
9.1 HARVARD represents and warrants that the entire right, title, and interest
in the patent applications or patents comprising the PATENT RIGHTS have
been or will be assigned to it and/or GENERAL and that HARVARD has the
authority to issue the licenses under said PATENT RIGHTS set forth herein.
HARVARD does not warrant the validity of the PATENT RIGHTS licensed
hereunder and makes no representations whatsoever with regard to the scope
of the licensed PATENT RIGHTS or that such PATENT RIGHTS may be exploited
by LICENSEE, an AFFILIATE, or sublicensee without infringing other
patents.
9.2 EXCEPT AS PROVIDED IN SECTION 9.1, HARVARD EXPRESSLY DISCLAIMS ANY AND ALL
IMPLIED OR EXPRESS WARRANTIES AND MAKES NO EXPRESS OR IMPLIED WARRANTIES
OF MERCHANTABILITY OR FITNESS OF THE TECHNOLOGY, LICENSED PROCESSES OR
LICENSED PRODUCTS CONTEMPLATED BY THIS AGREEMENT.
9.3 (a) LICENSEE shall indemnify, defend and hold harmless HARVARD and GENERAL
and their directors, governing board members, trustees, officers, faculty,
medical and professional staff, employees, students, and agents and their
respective successors, heirs and assigns (the "Indemnitees"), against any
liability, damage, loss or expenses (including reasonable attorneys' fees
and expenses of litigation) incurred by or imposed upon the Indemnities or
any one of them in connection with any claims, suits, actions, demands or
judgments arising out of any theory of product liability (including, but
not limited to, actions in the form of tort, warranty, or strict
liability) concerning any product, process or service used or sold
pursuant to any right or license granted under this Agreement. LICENSEE's
indemnification under this Section shall apply to any liability, damage,
loss or expense whether or not it is attributable to the negligent
activities of the Indemmties.
(b) LICENSEE agrees, at its own expense, to provide attorneys reasonably
acceptable to HARVARD to defend against any actions brought or filed
against any party indemnified hereunder with respect to the subject of
indemnity contained herein, whether or not such actions are rightfully
brought.
(c) At such time as any such product, process, service is being
commercially distributed or sold (other than for the purpose of obtaining
regulatory approvals) by LICENSEE or by a sublicensee, AFFILIATE or agent
of LICENSEE, LICENSEE shall, at its sole cost and expense, procure and
maintain comprehensive general liability insurance in amounts not less
$2,000,000 per incident and $2,000,000 annual aggregate and naming the
Indemnitees as additional insureds. During clinical trials of any such
product, process or service, LICENSEE shall, at its sole cost and expense,
procure and maintain
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comprehensive general liability insurance in such equal or lesser amount
as HARVARD shall require, naming the Indemnitees as additional insureds.
Such comprehensive general liability insurance shall provide (i) product
liability coverage and (ii) broad form contractual liability coverage for
LICENSEE's indemnification under this Agreement. If LICENSEE elects to
self-insure all or part of the limits described above (including
deductibles or retentions which are in excess of $250,000 annual
aggregate) such self-insurance program must be acceptable to HARVARD and
the Risk Management Foundation of the Harvard Medical Institutions, Inc.
The minimum amounts of insurance coverage required shall not be construed
to create a limit of LICENSEE's liability with respect to its
indemnification under this Agreement.
(d) LICENSEE shall provide HARVARD with written evidence of such insurance
upon request of HARVARD. LICENSEE shall provide HARVARD with written
notice at least fifteen (15) days prior to the cancellation, non-renewal
or material change in such insurance; if LICENSEE does not obtain
replacement insurance providing comparable coverage within such fifteen
(15) day period, HARVARD shall have the right to terminate this Agreement
effective at the end of such fifteen (15) day period without notice or any
additional waiting periods.
(e) LICENSEE shall maintain such comprehensive general liability insurance
beyond the expiration or termination of this Agreement during (i) the
period that any product, process, or service, relating to, or developed
pursuant to, this Agreement is being commercially distributed or sold by
LICENSEE or by a sublicensee, AFFILIATE or agent of LICENSEE and (ii) a
reasonable period after the period referred to in (e) (i) above which in
no event shall be less than fifteen (15) years.
9.4 LICENSEE shall not use HARVARD's or GENERAL's name or any adaptation of it
in any advertising, promotional or sales literature without the prior
written assent of HARVARD or GENERAL, as the case may be.
9.5 Without the prior written approval of HARVARD, the entire license granted
pursuant to this Agreement shall not be transferred by LICENSEE to any
party other than to a successor to the business interest of LICENSEE
relating to the PATENT RIGHTS. This Agreement shall be binding upon the
successors, legal representatives and assignees of HARVARD and LICENSEE.
9.6 The interpretation and application of the provisions of this Agreement
shall be governed by the laws of the Commonwealth of Massachusetts.
9.7 LICENSEE agrees to comply with all applicable laws and regulations. In
particular, it is understood and acknowledged that the transfer of certain
commodities and technical data is subject to United States laws and
regulations controlling the export of such commodities and technical data,
including all Export Administration Regulations of the United States
Department of Commerce. These laws and regulations, among other things,
prohibit or require a
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license for the export of certain types of technical data to certain
specified countries. LICENSEE hereby agrees and gives written assurance
that it will comply with all United States laws and regulations
controlling the export of commodities and technical data, that it will be
solely responsible for any violation of such by LICENSEE or its AFFILIATES
or sublicensees, and that it will defend and hold HARVARD and GENERAL
harmless in the event of any legal action of any nature occasioned by such
violation.
9.8 Written notices required to be given under this Agreement shall be
addressed as follows:
If to HARVARD: Office of Technology and
Trademark Licensing
Harvard University
124 Mt. Auburn Street
Suite 440
Cambridge, MA 02138
CC: Office of Technology Licensing
and Industry Sponsored Research
333 Longwood Ave.
Boston, MA 02115
Director
Office of Technology Affairs
Massachusetts General Hospital
13th Street, Building 149
Charlestown, MA 02129
If to LICENSEE: Virus Research Institute
61 Moulton Street
Cambridge, MA 02139
Attn: John Littlechild, President
or such other address as either party may request in writing.
9.9 Should a court of competent jurisdiction later consider any provision of
this Agreement to be invalid, illegal, or unenforceable, it shall be
considered severed from this Agreement. All other provisions, rights and
obligations shall continue without regard to the severed provision,
provided that the remaining provisions of this Agreement are in accordance
with the intention of the parties.
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9.10 In the event of any controversy or claim arising out of or relating to any
provision of this Agreement or the breach thereof, the parties shall try
to settle such conflicts amicably between themselves. Subject to the
limitation stated in the final sentence of this section, any such conflict
which the parties are unable to resolve shall be settled through
arbitration conducted in accordance with the rules of the American
Arbitration Association. The demand for arbitration shall be filed within
a reasonable time after the controversy or claim has arisen, and in no
event after the date upon which institution of legal proceedings based on
such controversy or claim would be barred by the applicable statute of
limitation. Such arbitration shall be held in Boston, Massachusetts. The
award through arbitration shall be final and binding. Either party may
enter any such award in a court having jurisdiction or may make
application to such court for judicial acceptance of the award and an
order of enforcement, as the case may be. Notwithstanding the foregoing,
either party may, without recourse to arbitration, assert against the
other party a third-party claim or cross-claim in any action brought by a
third party, to which the subject matter of this Agreement may be
relevant.
9.11 This Agreement constitutes the entire understanding between the parties
and neither party shall be obligated by any condition or representation
other than those expressly stated herein or as may be subsequently agreed
to by the parties hereto in writing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives.
The effective date of this Agreement is May 1, 1992.
PRESIDENT AND FELLOWS OF HARVARD COLLEGE
By: /s/ Joyce Brinton
------------------------------------------------
Joyce Brinton, Director
Office for Technology and Trademark Licensing
Harvard University
Name and Title:
------------------------------------
Virus Research Institute
By: /s/ [ILLEGIBLE]
-----------------------------------------------
Name and Title: President
------------------------------------
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APPENDIX A
U.S.S.N. 629,602 - "Improved Vaccines"; filed December 18, 1990; Inventors: John
Mekalanos and Samuel Miller.
U.S.S.N. 629,102 - "Vibrio Cholerae Strains Defective in irgA Expression and
Cholera Vaccines Derived Therefrom"; filed December 18, 1990; Inventors: John
Mekalanos and Stephen Calderwood.
U.S.S.N. 000,000 - "Doubly-Attenuated Strain of Vibrio Cholerae to Deliver
Heterlogous Antigens for Vaccination" to be filed in 1992; Inventors: John
Mekalanos and Stephen Calderwood (serial number and filing date to be inserted
when available).
U.S.S.N. 043,907 - "Cholera Vaccines"; filed April 29, 1987 and its CIP USSN
5,098,998, filed April 29, 1988; Inventors John Mekalanos and Ronald Taylor.
U.S. 4,882,278 - "Non-Toxic Vibrio Cholera Mutants"; issued November 21, 1989;
Inventor: John Mekalanos.
U.S.S.N. 000,000 - "Peruvian Strain of Cholera Vaccine"; to be filed in 1992;
Inventor: John Mekalanos (serial number and filing date to be inserted when
available).
<PAGE>
Appendix B
Biological Materials
1. All strain and plasmid inventions described in the following patents,
patent applications and unfiled patent applications.
a. U.S. Patent No. 4,882,278
b. U.S. Patent Application Serial No. 629,602
c. U.S. Patent Application Serial No. 629,102
d. U.S. Patent Application Serial No. 043,907
e. Unfiled Patent Application entitled "Doubly-Attenuated Strain of
Vibrio Cholerae to Deliver Heterologous Antigens for Vaccination"
f. Unfiled Patent Application entitled "Cholera Vaccine Strains derived
from a 1992 Peruvian Isolate of Vibrio Cholerae and other El Tor
Strains"
2. The following, recently constructed Vibrio Cholerae Strains
a. Peru 1,2,3,4 and 5; each derived from wild-type C6709
b. Bang 1,2,3,4 and 5; each derived from wild-type P27459
c. Bah 1,2,3,4 and 5; each derived from wild-type E7946
d. Any additional Vibrio Cholerae strains derived from items 2(a)- 2(c)
above.
3. All progeny, mutants, derivatives and replications of the biological
materials in Sections 1 and 2 above which are developed by Dr. John
Mekalanos solely or jointly with others directly supervised in his
laboratory at Harvard Medical School, but only to the extent that Harvard
is able to license such biological materials consistent with its
obligations to third parties.
<PAGE>
Exhibit 10.16
LICENSE AND CLINICAL TRIALS AGREEMENT
Agreement ("AGREEMENT"), effective as of February 27, 1995 ("Effective
Date") between VIRUS RESEARCH INSTITUTE, INC., a Delaware corporation, with its
principal place of business at 61 Moulton Street, Cambridge, Massachusetts 02138
(hereinafter referred to as "VRI") and the JAMES N. GAMBLE INSTITUTE OF MEDICAL
RESEARCH, an Ohio non-profit corporation, with its principal place of business
at 2141 Auburn Avenue, Cincinnati, Ohio 45219 (hereinafter referred to as
"GAMBLE").
WITNESSETH:
WHEREAS, GAMBLE is the owner of certain rights in technology as defined
herein; and
WHEREAS, GAMBLE desires to have such rights utilized to promote the public
interest by granting a license thereunder;
WHEREAS, VRI is engaged in the development, production, marketing and sale
of products similar to the technology which is the subject of this AGREEMENT and
has the strategic commitment to facilitate the transfer of such technology for
the public interest; and
WHEREAS, VRI desires to obtain a license to said rights upon the terms and
conditions hereinafter set forth;
WHEREAS, VRI desires to utilize GAMBLE's services with respect to the
conduct of certain of the clinical trials and laboratory services needed to
obtain FDA approval for GAMBLE'S rotavirus vaccines.
NOW THEREFORE, in consideration of the mutual covenants herein contained
and intending to be legally bound hereby, the parties hereto agree as follows:
1. DEFINITIONS.
1.1 "Invention(s)" shall mean rotavirus vaccines, developed from rotavirus
strain 89-12, including that which was safety tested by Lou Potash, Ph.D. of
PRI/DynCorp for GAMBLE and received by GAMBLE on 12/2/93 or modification of
rotavirus strain 89-12 generated by natural or site-directed mutagenesis, that
stimulate neutralizing antibody to multiple serotypes of human rotavirus, and
methods for vaccinating humans against rotavirus illness caused by rotaviruses
of different serotypes using rotavirus strain 89-12 and for expanding the titers
and memory of the cells that express the pre-existing neutralizing antibodies
induced following primary vaccination against rotavirus disease using solely
rotavirus strain 89-12. The Invention(s) include inactivated vaccines using
rotavirus strain 89-12.
1.2 "Technical Information" shall mean vaccine production information and
the results of the safety and identity testing conducted by Lou Potash, Ph.D.,
of PRI/DynCorp and received by GAMBLE on 12/2/93 and information regarding the
history, culture, adaptation and attenuation of rotavirus strain 89-12; and
scientific, technical and medical information related to 89-12, generated by or
on behalf of GAMBLE or obtained from Dr. Potash as part of the quality assurance
process during the term of this AGREEMENT.
1.3 "Patent Rights" shall mean any current or fixture United States or
foreign patent applications which are set forth in Appendix A attached hereto
and arising from Inventions owned by or assigned to GAMBLE, together with any
divisions and continuations (related to rotavirus strain 89-12)
continuations-in-part (related solely to rotavirus strain 89-12 and improvements
thereto), patents issuing
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thereon and reissues thereof and extensions thereof; provided that in the case
of future patent applications and patents, inclusion in Patent Rights shall be
subject to reimbursement by VRI to GAMBLE of the cost of Research and
Development with respect thereto. Nothing in this Agreement gives VRI rights to
Improvements in a vaccine which does not employ rotavirus strain 89-12.
1.4 "Licensed Products" shall mean any product which is covered in whole
or in part by a Valid Claim in the Patent Rights and/or which incorporates or
utilizes to a significant degree Technical Information.
1.5 "Licensed Process" shall mean any process which is covered in whole or
in part by a Valid Claim in the Patent Rights and/or which incorporates or
utilizes to a significant degree Technical Information.
1.6 "Territory" shall mean the entire world.
1.7 "Net Sales" shall mean the gross revenue received by VRI, its
Affiliates from the sales of Licensed Products or Licensed Processes to
independent third parties less:
(a) Transportation charges or allowances separately stated and
invoiced;
(b) Trade, quantity, cash, rebates or other allowances and discounts
and brokers', distributors', or agents' commissions actually allowed and taken;
(c) Credits or allowances made or given on account of rejects or
returns;
(d) Medicare and Medicaid disallowed reimbursements;
(e) Taxes levied on and/or other governmental charges made as to
production, sale, transportation, delivery or use and paid by or on behalf of
Licensee.
Licensed Products shall be considered "sold" when invoiced.
1.8 "Sublicensee" shall mean any corporation, partnership or business
organization which is not an Affiliate to which VRI grants a license to enable
said party to sell Licensed Products or utilize Licensed Processes.
1.9 "Affiliate" shall mean any corporation or other business entity
controlled by, controlling, or under common control with VRI. For this purpose
"control" means direct or indirect beneficial ownership of at least fifty
percent (50%) interest in the income or stock of such corporation or other
business.
1.10 "Valid Claim" shall mean a claim of an issued patent or pending
patent application which has not been pending for more than five (5) years from
the relevant U.S. priority date, January 3, 1992, which has not lapsed or become
abandoned or been declared invalid or unenforceable by a court of competent
jurisdiction or an administrative agency from which no appeal can be or is
taken.
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2. GRANT
2.1 GAMBLE hereby grants to VRI the exclusive right and license under
Patent Rights and Technical Information to make, have made, use, lease, have
leased, sell, and have sold the Licensed Products and to practice the Licensed
Processes in the Territory for the term of this AGREEMENT unless this AGREEMENT
is sooner terminated according to the terms hereof. VRI shall have the right to
extend the grant set forth in this Section 2.1 to its Affiliates.
2.2 Notwithstanding the provision of Section 2.1, GAMBLE shall retain the
right to make, use and practice the Invention(s) and the Technical Information
for its own non-commercial, research purposes. GAMBLE shall have the right to
convey to other non-profit organizations at no charge other than shipping fees,
the Invention(s) and Technical Information for use in non-commercial, basic
research, provided that such organizations have entered into agreements in
substantially the form attached as Appendix B.
2.3 VRI agrees that any Licensed Products subject to obligations under
Public Laws 96-517 or 98-620 and which are intended for sale in the United
States shall be manufactured substantially in the United States. In the event
that VRI determines that compliance with the foregoing obligation is
commercially impracticable, GAMBLE agrees that it will cooperate with VRI in
attempting to obtain from the U.S. Government a waiver of such obligation.
2.4 (a) VRI will have the right, subject to the terms of this AGREEMENT,
to enter into sublicensing agreements with any other entity (other than an
Affiliate to whom the license may be extended in accordance with Section 2.1)
for the rights, privileges and licenses granted hereunder.
(b) VRI agrees that any sublicenses granted by it shall provide that
the obligations to GAMBLE contained in the following provisions of this
AGREEMENT shall be binding upon the Sublicensee: Sections 2.4 (c), 8 and 10. VRI
further agrees to attach a copies of such provisions to each sublicense
agreement.
(c) VRI agrees to forward to GAMBLE a copy of any and all fully
executed sublicense agreements within thirty (30) days of execution thereof, and
further agrees to forward to GAMBLE annually a copy of such reports received by
VRI from its Sublicensee during the preceding twelve (12) month period under the
sublicenses as shall be pertinent to a royalty accounting under said sublicense
agreements. VRI may delete from copies of sublicense agreements provided to
GAMBLE hereunder commercial, research and development, manufacturing, financial
and other provisions unrelated to VRI's or the Sublicensee's obligations to
GAMBLE.
(d) In the event that this AGREEMENT is terminated prior to its
normal expiration, any sublicense granted by VRI shall remain in full force and
effect from and after that date as a direct license between GAMBLE and the
Sublicensee, to the extent that the royalty obligations of VRI in individual
countries have not ceased pursuant to the terms of this AGREEMENT and the
Sublicensee's agreement to be bound by the terms and conditions set forth in
this AGREEMENT.
2.5 (a) In addition to the license granted herein, GAMBLE grants to VRI an
exclusive option to obtain a world-wide, exclusive royalty-bearing license to
any improvement(s) on the Invention(s) that (i) are not subject to prior
commitments to other parties; (ii) relate to the diagnosis, treatment and/or
prevention of human rotavirus illnesses employing strain 89-12; (iii) which are
not specifically included in the Invention(s) or Patent Rights; and (iv) provide
a significant commercial advantage, herein collectively ("Improvements").
(b) Such option shall extend for a period of sixty (60) days from
the date VRI receives written notice from GAMBLE disclosing such Improvement.
During such sixty (60) day period,
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GAMBLE shall reasonably make available to VRI any other information in its
possession or control which would be useful to VRI in evaluating the
improvement. In the event VRI decides to exercise its option, VRI shall do so by
notifying GAMBLE in writing during such sixty (60) day period. Upon exercise of
VRI's option, GAMBLE and VRI shall enter into a license agreement containing
substantially the same provisions as the applicable provisions of this AGREEMENT
except for the initial license fee which shall be at least an amount sufficient
to reimburse GAMBLE for its costs relating to the development of the
Improvement, plus GAMBLE's actual patent costs relating thereto.
(c) The written notice to GAMBLE of VRI's exercise of its option
hereunder shall include instructions to GAMBLE as to whether VRI wishes GAMBLE
to have a patent application prepared and filed with respect to any such
improvement VRI shall pay for all patent costs relating to any Improvement to
which VRI exercises its option.
(d) In the event that VRI does not exercise its option hereunder or
if the parties have not entered into a license agreement as described in Section
2.5 (b)(1) above at the close of sixty (60) days from VRI's notice of exercise,
GAMBLE shall be free to offer a license for the Improvement on terms of its own
choosing to a third party, provided the terms are not more favorable than those
terms offered to VRI. VRI will grant a sublicense under Patent Rights to such
third party, if required, royalty-free, to permit such party to develop and sell
such Improvement.
2.6 As soon as reasonably possible following the Effective Date of this
AGREEMENT, but in no event later than thirty (30) days alter the Effective Date,
GAMBLE shall provide to VRI copies of all Technical Information directly
relating to the Invention(s) in its possession and control on the Effective
Date. In addition, GAMBLE shall transfer to VRI all supplies of rotavirus strain
89-12 and the master and working cellbanks except as may be necessary for GAMBLE
to conduct such basic research as may be agreed upon by the parties. Upon
termination of this AGREEMENT, as a result of a breach by VRI or by VRI pursuant
to Section 7.4, VRI shall return all Technical Information to GAMBLE.
3. CLINICAL TRIALS AND DUE DILIGENCE
3.1 (a) GAMBLE and VRI will cooperate with one another to complete all
pre-clinical studies necessary for the continued support of the Investigational
New Drug application ("IND") filed with the U.S. Food and Drug Administration
(FDA) and for foreign equivalents filed with respect to a Licensed Product. VRI
shall consult with GAMBLE, shall provide GAMBLE with drafts of the regulatory
submission prior to its filing, and shall not unreasonably refuse to comply with
any request by GAMBLE for any changes thereto, but all regulatory filings shall
be submitted in the name of VRI and VRI shall have the final authority with
respect to their content. GAMBLE shall cooperate with VRI in responding to any
comments of the FDA with respect to its regulatory filing.
(b) Following approval under FDA regulations that clinical trials
may commence under the IND for which approval has been granted, GAMBLE,
recognizing the need for expeditious handling of all matters for which GAMBLE is
responsible herein, agrees that GAMBLE will use reasonable efforts to promptly
conduct the clinical trials and necessary laboratory work provided for in the
IND, subject to the following:
(1) In consultation with and subject to the approval of VRI,
GAMBLE will use reasonable efforts to design and draft the protocols with
respect to Phase I clinical trials;
(2) In consultation with, and subject to the approval of VRI,
GAMBLE will use reasonable efforts to design and draft the protocols with
respect to Phase II clinical trials;
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(3) GAMBLE will use reasonable efforts to conduct the initial
Phase II clinical trials and, subject to consultation with and the approval of
VRI, conduct and/or participate in confirmatory or other Phase II clinical
trials, together with all laboratory work; as required;
(4) if other sites are required in connection with Phase II
clinical trials, VRI will consult with GAMBLE regarding the use and selection of
other sites and GAMBLE will use reasonable efforts to assist VRI in selecting
such additional sites;
(5) GAMBLE and VRI will use reasonable efforts to jointly
design and draft protocols for Phase III clinical trials and GAMBLE may, at
GAMBLE's option, participate as one of multiple centers for the clinical trials;
Dependent upon FDA requirements, GAMBLE will use reasonable efforts to conduct
all laboratory work required therefore; provided, however, that if GAMBLE's
laboratory capabilities are not sufficient for the central lab work required for
Phase III clinical trials, GAMBLE will use reasonable efforts to assist VRI in
selecting and approving an appropriate central laboratory and will use
reasonable efforts to supervise that laboratory in its performance of such work;
(6) promptly after completion of the above-described clinical
trials, GAMBLE will cooperate with VRI in preparation and submission to the FDA
of an appropriate application for approval with respect to the Licensed Product
(PLA/NDA) and in the submission of regulatory filings in foreign countries;
(7) if the PLA/NDA is not approved, GAMBLE will cooperate with
VRI at VRI's expense in taking any further action required to obtain its
approval;
(8) GAMBLE will use reasonable efforts to conduct all trials
with the prior approval and ongoing review of all appropriate and necessary
review authorities and in accordance with applicable federal, state and local
laws and regulations and will provide VRI with written evidence of review and
approval of each trial by the appropriate Institutional Review Board prior to
the initiation of each trial and of that Board's continuing review and approval
of each trial whenever it is reviewed, but at least once per year;
(9) GAMBLE will furnish VRI with the data resulting from the
clinical trials within a reasonable time alter completion of each trial,
provided that GAMBLE will permit representatives of VRI to examine GAMBLE's
facilities, validate case reports against original data in its files and monitor
work performed, at reasonable times and in a reasonable manner at mutually
agreed upon times during the term of this AGREEMENT, to determine the adequacy
of the facilities and whether the clinical trials are being conducted in
compliance with the protocol and relevant FDA regulations;
(10) GAMBLE will retain original records of the clinical
trials conducted by GAMBLE including the original of all volunteer consent forms
in strict accordance with all federal regulations.
(11) GAMBLE shall compile clinical trial data and provide
copies of the complete data set to VRI in a timely manner. GAMBLE will cooperate
with VRI in the analysis of the clinical data.
(12) GAMBLE is conducting the adult and child phases of the
Phase I clinical trials described in the protocols entitled "Reactivity and
Immunogenicity of Live, Attenuated Rotavirus Vaccine Candidate Strain 89-12."
and attached as Appendix C, and will make reasonable efforts to conduct the
infant phase of the Phase I clinical trial, and Phase II and Phase III clinical
trials.
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(13) Gilbert M. Schiff M.D. shall be responsible for
supervising the adult clinical trials at GAMBLE and shall be designated as
"Principal Adult Investigator." David I. Bernstein, M.D. shall be responsible
for supervising the pediatric clinical trials at GAMBLE and shall be designated
as "Principal Pediatric Investigator." In the event that either such
investigator is disabled or no longer employed at GAMBLE, then GAMBLE shall have
the right to appoint another such investigator, subject to approval by VRI which
shall not be unreasonably withheld.
(14) GAMBLE and VRI agree to conduct the clinical trials
according to the protocols. However, if at any future date, changes in the
protocol appear desirable, such changes may be made through prior written mutual
agreement between GAMBLE and VRI. The clinical trials may be suspended or
terminated, as appropriate, at any time by GAMBLE if in the reasonable medical
judgment of either: the Principal Adult or Pediatric Investigator, or
responsible institutional review board(s) or in the medical and/or regulatory
judgment of VRI the health or safety of patients will be adversely affected and
it is appropriate to do so. Any action taken by GAMBLE or its investigators or
employees based on any such medical judgment shall not be deemed a breach of
this AGREEMENT.
(15) GAMBLE agrees that the rights and welfare of the human
subjects shall be protected in accordance with the protocols and all applicable
federal and state laws. GAMBLE shall be responsible for obtaining appropriate
institutional review board approval for the protocols and any subsequent changes
to the protocols, and for obtaining informed consent of each human subject
participating in the protocols. GAMBLE shall retain records of the clinical
trials including the original of all volunteer consent forms in accordance with
all federal regulations.
(16) In order to maintain subject confidentiality, no
information relative to subject name or address shall be provided to VRI. All
patient information will be identified in code. Any audits conducted by VRI
shall be undertaken in conjunction with GAMBLE in order to ensure
confidentiality.
(17) VRI shall promptly advise GAMBLE of adverse reactions or
side effects relating to clinical trials which may become known to VRI and,
similarly GAMBLE shall promptly advise VRI of adverse reactions or side effects
relating to clinical trials which may become known to GAMBLE.
(c) If GAMBLE fails to perform any of its obligations under this
Section 3.1 and any such failure is not cured following sixty (60) days written
notice to GAMBLE, VRI may terminate GAMBLE's services relating to the
obligations in the relevant Section (Sections 3.1 (b) (1-17)) of this Section
and VRI shall thereafter have the right to hire a third party contractor at
VRI's expense to perform and control the performance of such services.
Termination of services provided herein in Sections 3.1 (b) (1-17) shall not
affect the rights and obligations of GAMBLE under any other Section. Upon
termination of GAMBLE's services for the foregoing reasons VRI will be obligated
to pay GAMBLE for all pre-approved costs of the studies incurred by GAMBLE and
not capable of cancellation. Such payment will be made within 30 days of
submission of billing by GAMBLE to VRI. At VRI's request, GAMBLE will assist VRI
in selecting and approving such third party contractors to perform functions
described in this Section 3.1.
(d) Notwithstanding the foregoing, VRI, as sponsor of the
development program may terminate GAMBLE services in conducting clinical trials
for commercial reasons at any time with 30 days' notice subject to VRI's payment
of all non-cancelable, pre-approved costs within 30 days of GAMBLE's billing to
VRI.
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3.2 VRI agrees to pay GAMBLE for all fees and expenses that GAMBLE expects
to reasonably incur in conducting the trials described in Section 3.1 above,
provided that the amounts of such fees and costs have been approved by VRI in
writing in advance. VRI agrees to pay 40% of the approved budget for each study
in phase I, II and III upon initiation of each study and the remaining 60% at
agreed upon milestones during the course of each study, so that full payment for
each study is made by the conclusion of that study. Irrespective of the amount
advanced, VRI shall pay all costs incurred by GAMBLE in conducting the trials
described in Section 3.1, provided such expenses have been approved in advance
by VRI. If the monies advanced by VRI exceed expenses for a study, GAMBLE shall
refund the difference. VRI shall have the trials monitored by its own staff or
outside contractors at its election and shall have the data resulting from the
studies compiled and analyzed. VRI shall have any such VRI staff or outside
contractors execute a confidentiality agreement, prior to such staff or outside
contractors involvement in the clinical trials.
3.3 GAMBLE and/or its investigators will have the right to publish the
results of the clinical trials described in Section 3.1 above and performed by
GAMBLE, provided that VRI is provided with a preprint and/or abstract of any
proposed publication at least forty-five (45) days in advance of submission of
the proposed publication. In the event that, as a result of reviewing such
abstract or preprint, VRI determines that such publication would result in
disclosure of an Invention as to which VRI has rights under Sections 2.1, 2.4
and/or 2.5 hereof or includes any VRI Confidential Information (as hereinafter
defined), GAMBLE agrees to delay publication for a sufficient period to enable a
patent application to be filed with respect thereto at VRI's expense and delete
VRI confidential information, VRI acknowledges and agrees that GAMBLE and/or its
investigators will be entitled to appropriate credit, and to be included as
co-authors for those directly involved in the study, in accordance with
prevailing scientific standards.
3.4 In lieu of VRI paying minimum royalties and subject to obtaining FDA
or foreign regulatory approval for the 89-12 rotavirus vaccine VRI agrees to use
reasonable efforts to bring one or more Licensed Products to the marketplace
through a program of development; production, distribution, and marketing
consistent with sound and reasonable business practices and judgments. VRI
agrees to provide GAMBLE annually with a business development plan (which will
include strategy, major milestones for clinical development, FDA registration,
commercialization, and financial performance data) for the upcoming fiscal year,
the first plan due no later than one hundred eighty (180) days from the
Effective Date hereof and each subsequent plan due no later than December 31 in
subsequent years. In the event GAMBLE believes VRI is not exerting reasonable
efforts GAMBLE shall advise VRI and state the efforts which it believes would
meet this requirement. If VRI disagrees the parties will attempt to resolve the
matter by good faith discussions. If they still cannot agree the matter shall be
submitted to arbitration pursuant to Section 12 to determine the efforts to be
exerted by VRI. After the arbitration decision, in the event VRI fails to exert
the efforts required by the arbitration, GAMBLE shall have the right to
terminate this AGREEMENT upon giving VRI thirty (30) days prior written notice
and the opportunity to cure within said thirty (30) days or alternatively VRI
may resume minimum royalty payments in lieu of preparation of a business plan
and using reasonable efforts; however, in such event, resumption of payment of
minimum royalties under this Section 3.4 does not entitle VRI to an exclusive
license agreement.
4. PAYMENTS.
4.1 (a) VRI agrees to pay GAMBLE in partial consideration for the license
granted hereunder a licensing fee in the total amount of $50,000 payable in two
equal installments, as follows:
(1) upon signing of this AGREEMENT $25,000
(2) upon filing of the PLA/NDA for a Licensed $25,000
Product with the FDA
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4.2 (a) VRI shall pay the following running royalties to GAMBLE during the
term of this AGREEMENT as set forth below:
(1) Five percent (5%) on the Net Sales by VRI or its
Affiliates of Licensed Products or any use of Licensed Processes in the United
States (other than sales to Sublicensees for resale) where the manufacture, use
or sale of such Licensed Products or any use of such Licensed Processes is
covered by a Valid Claim of Patent Rights; or four percent (4%) on such Net
Sales in countries other than the United States (other than sales to
Sublicensees for resale) where the manufacture, use or sale of Licensed Products
or any use of Licensed Processes is covered by a Valid Claim of Patent Rights in
the country of sale; or one percent (1%) of Net Sales for five (5) years from
first commercial sale in a country, on a country by country basis, on any other
sales by VRI or its Affiliates of Licensed Products (other than sales to
Sublicensees for resale) where no Patent Rights have been nor are intended to be
filed with respect to such products; or two percent (2%) of Net Sales of
Licensed Products sold to the United States Government or sold to State or other
agencies at equivalent prices to those established for sale to the United States
Government.
(2) From any royalties received from its Sublicensees, VRI
shall pay GAMBLE thirty (30%) of royalties received by VRI from a Sublicensee
for sale of Licensed Products. Reporting and payment of such royalties shall be
made in accordance with the provisions of Section 5.
(3) If royalties for Licensed Products or Licensed Processes
covered by a Valid Claim of Patent Rights cease to be paid because a patent
application has been pending for more than five (5) years from the relevant U.S.
priority date, then a royalty of 1% of Net Sales will be payable until the end
of the fifth year on the market in that country. No royalty will be payable
following the fifth anniversary of first marketing in that country unless a
valid and enforceable patent subsequently issues. If a valid and enforceable
patent issues royalties will be payable from the date of issue until the expiry
of said valid and enforceable patent at the full applicable royalty rate for
that country as set forth in Section 4.2(1).
4.3 (a) Subject to Section 3.4, during the exclusive period of the
AGREEMENT, VRI shall pay a minimum annual royalty commencing on the expiration
of calendar year 1999 and continuing through calendar year 2003, as follows:
1999 $100,000
2000 $200,000
2001 $300,000
2002 $400,000
2003 $500,000
(b) If the royalties earned and paid to GAMBLE pursuant to Section
4.2 (a) for any of the above calendar years are not at least equal to the
applicable minimum royalties, VRI shall have the right to pay any difference
between such minimum royalty amounts and the royalties paid to GAMBLE in full
satisfaction of such obligation under this Section 4.3, which payment, if any,
shall be made with the quarterly royalty payment due for the last quarter of the
applicable calendar year. Waiver of any minimum royalty payment by GAMBLE shall
not be construed as a waiver of any such subsequent payment. If VRI fails to
make any such minimum royalty payment, GAMBLE shall have the right, at its
option, to convert the License for the Licensed Products and Licensed Processes
under Section 2.1 to a non-exclusive license. Royalty rates for non-exclusive
licenses shall be fifty percent (5 0%) of the exclusive rates set forth in
Section 4.2(a).
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4.4 (a) In the event that a Licensed Product under this AGREEMENT is sold
in any country in a combination package or kit containing other active products
not licensed hereunder, the Net Sales in each such country for purposes of
determining royalty payments on the combination package, shall be calculated
using one of the following methods:
(1) By multiplying the net selling price of that combination
package by the fraction A/A+B, where A is the net selling price in such
country during the royalty-paying period in question, of the Licensed Product
sold separately or Licensed Process used separately, and B is the net selling
price in such country during the royalty period in question, of the other active
products sold separately or used separately.
(2) In the event that no such separate sales are made of the
Licensed Product or any of the active products in such combination package in
such country during the royalty-paying period in question, Net Sales for the
purposes of determining royalty payments, shall be calculated by dividing the
net selling price in such country of the combination package by the number of
functions performed by the combination package sold where such package contains
active agents or other proprietary technology other than those licensed under
this AGREEMENT.
4.5 Payment of royalties specified in Section 4.2 (a) shall be made by VRI
to GAMBLE within sixty (60) days after March 31, June 30, September 30 and
December 31 each year during the term of this AGREEMENT covering the quantity of
Licensed Products sold or Licensed Processes used by VRI during the preceding
calendar quarter. The last such payment shall be made within sixty (60) days
after termination or expiration of this AGREEMENT.
4.6 All payments to be made under this Section shall be paid in United
States dollars at such a place and in such a way, as GAMBLE may reasonably
designate, without deduction of exchange, collection or other charges.
Conversion of foreign currency to U.S. dollars shall be made at the conversion
rate published by the Bank of Boston on the last day of the calendar quarter
with respect to which payments are due.
4.7 Only a single royalty shall be paid with respect to any Licensed
Product or Licensed Process, under Section 4.2(a) irrespective of the number of
Valid Claims of Patent Rights utilized.
4.8 In the event that VRI is required to pay royalties to one or more
third parties under patents other than Patent Rights in order to make, use, sell
or have sold Licensed Products or Licensed Processes, VRI shall be entitled to a
credit against royalties due GAMBLE under Section 4.2(a) in an amount equal to
fifty percent ( 50%) of the royalties paid to such third parties. However, in no
event shall royalties payable to GAMBLE under Section 4.2(a) hereunder be
reduced by more than forty percent (40%).
4.9 If the transfer of or the conversion into the United States dollar
equivalent of any remittance due hereunder is not lawful or permissible in any
county, such remittance shall be made thereof in the currency of the country to
the credit and account of GAMBLE or its nominee in any commercial bank located
in that country. Prompt notice shall be given to GAMBLE and GAMBLE may provide a
nominee if so desired.
4.10 If VRI exercises its option for the rights to improvements, VRI shall
reimburse GAMBLE for the cost of the development program to make such
Improvements.
5. REPORTS AND RECORDS
5.1 VRI shall maintain true books of account containing an accurate record
of all data necessary for the determination of the amounts payable under Section
4 hereof. Said records shall be kept at VRI's principal place of business or the
principal place of business of the appropriate division of VRI to
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which this AGREEMENT relates. Said records shall be available for inspection by
a certified public accountant selected and paid by GAMBLE once each year during
regular business hours and for six (6) years thereafter following the end of the
calendar year to which they pertain in order for GAMBLE to ascertain the
correctness of any report and/or payment made under this AGREEMENT. The
provision of this Section 5.1 shall survive termination of this AGREEMENT.
5.2 (a) Commencing with the calendar quarter in which Net Sales first
occurs, sixty (60) days after March 31, June 30, September 30 and December 31,
of each year in which this AGREEMENT is in effect, VRI shall deliver to GAMBLE
full, true and accurate reports of its activities and those of its
Sublicensee(s), if any, relating to this AGREEMENT during the preceding three
month period. These reports shall include at least the following:
(1) Gross Sales for Licensed Products or Licensed
Processes;
(2) Net Sales for Licensed Products or Licensed
Processes
(3) Expenses, defined in Section 1.7, used to
calculate Net Sales;
(4) Calculation of royalties due based on Net Sales;
(5) Any adjustments to amounts due pursuant to this
AGREEMENT; and
(6) Amounts due to GAMBLE for the applicable quarters.
5.3 With each such report, VRI shall pay to GAMBLE the royalties due and
payable as provided for in Section 4.5. If no royalties are due under Section
4.2(a), VRI shall so report.
6. PATENT PROSECUTION AND INFRINGEMENT.
6.1 GAMBLE shall apply for and maintain during the term of this AGREEMENT
any Patent Rights in the United States and in the European Union, Australia,
Brazil, Canada, Japan and South Korea, and Mexico. The prosecution, filing and
maintenance of all patents, with the exception of fee payments, shall be the
primary responsibility of GAMBLE, using patent counsel selected by GAMBLE and
reasonably acceptable to VRI, provided, however, that VRI shall be given a
reasonable opportunity to advise GAMBLE on such matters, particularly as they
pertain to patent prosecution in foreign countries, and GAMBLE shall furnish to
VRI copies of any documents relevant to such prosecution, filing and maintenance
in sufficient time in advance for VRI or its patent counsel to comment thereon.
VRI shall pay all reasonable patent fees and costs, including reasonable counsel
fees, incurred by GAMBLE pursuant to this Section.
6.2 VRI has reimbursed GAMBLE the sum of $24,277, representing 50% of
foreign phase filing costs for the countries and listed in Section 6.1. VRI
shall reimburse GAMBLE the sum of $78,558 upon VRI signing this AGREEMENT for
the remaining 50% of the foreign phase filing costs and for its U.S. patent fees
and costs arising from the Patent Rights invoiced by patent counsel to GAMBLE
prior to October 10, 1994. All fees and costs incurred by GAMBLE after the
Effective Date relating to the filing, prosecution and maintenance of all Patent
Rights shall be paid by VRI within 30 days of receipt of invoice from GAMBLE.
The foregoing notwithstanding, VRI shall will have the right to discontinue
payment of any such fees or costs with respect to the Patent Rights in any
particular country or countries, if after a good faith assessment of the cost of
patent filing, the enforceability of intellectual property rights and the
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commercial value of the market, in a specific country, VRI believes that making
such payments would not be commercially practical. VRI shall provide timely
notice of VRI's intention not to pay a fees so, if GAMBLE desires, GAMBLE may
pay such fee.
6.3 If at any time during the term of this AGREEMENT, VRI furnishes to
GAMBLE reasonably convincing written evidence of an infringement of a patent
included in the Patent Rights which adversely and substantially affects the
commercial operations of VRI under the license granted hereunder, GAMBLE shall
have the right, but not the obligation, to prosecute, at its own expense any
such infringement and shall have the right for such purpose to join VRI as a
party plaintiff at GAMBLE's expense. VRI independently shall have the right to
join any such suit or action brought by GAMBLE and, in such event, shall pay
one-half of the cost of such suit or action from the date of joining. Provided
that VRI has joined in the action and shared the costs thereof as stated in the
preceding sentence, no settlement, consent judgment or other voluntary final
disposition of the suit may be entered into without the consent of VRI, which
consent will not unreasonably be withheld. Any recovery or damages derived from
such action shall first be used to reimburse GAMBLE for all legal expenses
relating to such action. If VRI has not joined the action, GAMBLE is entitled to
all recovery or damages still remaining; however, if VRI has joined the action,
any recovery or damages still remaining shall be applied toward (i)
reimbursement of GAMBLE for the amount of royalties not received by GAMBLE from
the infringing party as a result of such infringement, and (ii) compensation of
VRI for its lost profits or a reasonable royalty on the sales of the infringer,
whichever is applicable; provided, however that if such remaining amount of
recovery or damages is insufficient to compensate GAMBLE fully for such
royalties and to compensate VRI fully for such lost profits or reasonable
royalty, then such amount of recovery or damages still remaining shall be
apportioned pro rata between GAMBLE and VRI in proportion to (a) the amount of
royalties not received by GAMBLE from the infringing party as a result of such
infringement, as compared with (b) VRI's lost profits or reasonable royalty on
the sales of the infringer. Any recovery or damages still remaining after the
above-mentioned applications shall be distributed two-thirds (2/3) to GAMBLE and
one-third (1/3) to VRI.
6.4 If after said three (3) months, GAMBLE fails to cause such
infringement to terminate or to bring a suit or action to compel termination,
VRI shall have the right, but not the obligation, to prosecute, at its own
expense any such infringement and shall have the right for such purpose to join
GAMBLE as a party plaintiff at VRI's expense. GAMBLE independently shall have
the right to join any such suit or action brought by VRI and, in such event,
shall pay one-half of the cost of such suit or action from the date of joining.
Provided that GAMBLE has joined in the action and shared the costs thereof as
stated in the preceding sentence, no settlement, consent judgment or other
voluntary final disposition of the suit may be entered into without the consent
of GAMBLE, which consent will not unreasonably be withheld. Any recovery or
damages derived from such action shall first be used to reimburse VRI (and
GAMBLE if it joined in the action) for all legal expenses relating to such
action. If GAMBLE has not joined the action, VRI is entitled to all recovery or
damages still remaining; however, if GAMBLE has joined the action, any recovery
or damages still remaining shall be applied toward (i) reimbursement of GAMBLE
for the amount of royalties not received by GAMBLE from the infringing party as
a result of such infringement, and (ii) compensation of VRI for its lost profits
or a reasonable royalty on the sales of the infringer, whichever is applicable;
provided, however that if such remaining amount of recovery or damages is
insufficient to compensate GAMBLE fully for such royalties and to compensate VRI
fully for such lost profits or reasonable royalty, then such amount of recovery
or damages still remaining shall be apportioned pro rata between GAMBLE and VRI
in proportion to (a) the amount of royalties not received by GAMBLE from the
infringing party as a result of such infringement, as compared with (b) VRI's
lost profits or reasonable royalty on the sales of the infringer. Any recovery
or damages still remaining after the above-mentioned applications shall be
distributed two-thirds (2/3) to GAMBLE and one-third (1/3) to VRI.
6.5 In any infringement suit that either party may institute to enforce
the Patent Rights pursuant to this AGREEMENT, the other party hereto shall,
cooperate in all respects and, to the extent
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possible, have its employees testify when requested and make available relevant
records, papers, information, samples and the like.
6.6 In the event that a declaratory judgment action alleging invalidity or
non-infringement of any of the Patent Rights shall be brought against VRI,
GAMBLE, at its sole option shall have the right, within sixty (60) days after
GAMBLE receives notice from VRI of such action, to intervene and participate in
action at its own expense.
7. TERM AND TERMINATION.
7.1 Unless earlier terminated as provided herein, this AGREEMENT shall
remain in full force and effect for the life of the last to expire patent issued
under the Patent Rights. Upon expiration, VRI shall have a fully paid-up,
non-cancelable license.
7.2 Subject to Section 16, if VRI shall cease to carry on its business,
this AGREEMENT shall terminate ninety (90) days after VRI ceases to do business,
unless, within ninety (90) days VRI has identified a qualified successor
licensee reasonably acceptable to GAMBLE willing to assume the obligation of VRI
hereunder, in which case the assignment of this AGREEMENT to such successor
licensee shall be subject to the written assumption by such successor of VRI's
obligations hereunder and to the written approval of GAMBLE, which shall not be
unreasonably withheld.
7.3 Should VRI fail to pay GAMBLE such royalties other than minimum
royalties as are due and payable hereunder, GAMBLE shall have the right to
terminate this AGREEMENT on thirty (30) days written notice, or to convert this
AGREEMENT from an exclusive to a non-exclusive license upon expiration of the
thirty (30) day period.
7.4 VRI shall have the right to terminate this AGREEMENT at any time upon
six (6) months written notice to GAMBLE, and upon payment of all amounts due
GAMBLE through the effective date of termination. If this AGREEMENT is
terminated, VRI will provide GAMBLE with information and data necessary for
GAMBLE to pursue the development of Licensed Products or Licensed Processes and
a right to reference VRI's regulatory filings with the FDA.
7.5 Upon any material breach or default of this AGREEMENT by VRI or
GAMBLE, the non-breaching party shall have the right to terminate this AGREEMENT
and the rights, privileges and license hereunder granted upon ninety (90) days
written notice to the other party. Such termination shall become effective
immediately at the conclusion of such notice period unless the breaching party
shall have cured any such breach or default prior to the expiration of the
ninety (90) day period.
7.6 Upon termination of this AGREEMENT for any reason, nothing herein
shall be construed to release either party from any obligation that matured
prior to the effective date of such termination. VRI and any Sublicensee thereof
may, after the effective date of such termination, sell all Licensed Products
which are in inventory at the time of termination, and complete and sell
Licensed Products which VRI can clearly demonstrate were in the process of
manufacture at the time of such termination, provided that VRI shall pay to
GAMBLE the royalties thereon as required by Section 4 of this AGREEMENT and
shall submit the reports required by Section 5 hereof on the sales of Licensed
Products.
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8. INDEMNIFICATION AND INSURANCE.
8.1 VRI shall defend, indemnify and hold harmless GAMBLE and its trustees,
officers, medical and professional staff, employees, and agents and their
respective successors, heirs and assigns, against all losses, damages, expenses,
including attorney's fees and against any claims, suits, actions, demands or
judgments brought against any one or more of them, arising out of any theory of
product liability (including, but not limited to, actions in the form of tort,
warranty, or strict liability) or negligence concerning any product, process or
service made, used or sold pursuant to any right or license granted under this
AGREEMENT. VRI shall have the right to control the defense settlement and/or
compromise of any such claims or actions.
8.2 VRI's obligations under Section 8.1 above shall not apply to any
liability, damage, loss or expense to the extent that it is directly
attributable to the negligence or intentional misconduct of GAMBLE or of any of
its trustees, officers, medical and professional staff, employees, agents or
their respective successors, heirs or assigns.
8.3 VRI shall add, at VRI's expense, GAMBLE as an additional insured on
VRI's clinical trial insurance policy, which provides limits of liability of
$2,000,000 per incident and aggregate, effective upon the Effective Date of this
AGREEMENT, to provide insurance coverage for GAMBLE for the clinical trials.
8.4 VRI, at VRI's expense, shall maintain policies of comprehensive
general liability insurance and will obtain product liability insurance in
amounts not less than $1,000,000 per incident and $2,000,000 annual aggregate
and shall add GAMBLE as an additional insured on VRI's policy, which provides
such limits of liability. Such insurance shall provide (i) product liability
coverage, (ii) negligence, and (iii) broad form contractual liability coverage,
for VRI's indemnification under Section 8.1 of this AGREEMENT. The minimum
amounts of insurance coverage required under these provisions shall not be
construed to create a limit of VRI's liability with respect to VRI's
indemnification obligation under Section 8.1 of this AGREEMENT. VRI shall
maintain such comprehensive general liability insurance and product liability
insurance beyond the expiration or termination of this AGREEMENT and for a
reasonable period after the termination of the clinical trials, which in no
event shall be less than fifteen (15) years after the clinical trials.
8.5 This Section 8 shall survive expiration or termination of this
AGREEMENT.
9. REPRESENTATIONS
9.1 Subject to any prior rights of the U.S. government, GAMBLE represents
that patent applications or patents included in the Patent Rights have been
assigned to it and that GAMBLE has the authority and power to issue licenses
under said Patent Rights and that GAMBLE has the right to disclose Technical
Information to VRI and to enter into and perform this AGREEMENT.
9.2 GAMBLE does not warrant the validity of the Patent Rights licensed
hereunder and makes no representation whatsoever with regard to the scope of the
Patent Rights or that such Patent Rights may be exploited by VRI, its
Affiliates, or Sublicensees without infringing other patents, except that GAMBLE
represents that as of the Effective Date it is not aware of any patent or patent
application not a part of the Patent Rights licensed hereunder that would be
infringed by the exercise by VRI, its Affiliates or Sublicensees, of the rights
granted to them hereunder.
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10. CONFIDENTIALITY.
10.1 Confidential Information. As used in this AGREEMENT, "Confidential
Information" means all information transmitted by a party hereto or obtained by
a party hereto in connection with the performance of the clinical trials and
other services described in Section 3 hereof or of any such other services to be
provided by the parties as described herein, subject to the exceptions specified
below. "Confidential Information" means information of any type, not generally
known, about the business processes, services, products, suppliers, customers,
clients or plans of GAMBLE or VRI ("the parties hereto") of any client of The
parties hereto (regardless of whether the parties hereto have executed a
confidentiality agreement with such customer), which is used or useful in the
conduct of business of the parties hereto, or which confers or tends to confer a
competitive advantage over one who does not possess such information. Such
information includes, but is not limited to, information relating to trade
secrets, Technical Information, patent applications, know-how, research,
development, design, engineering, quality control or service techniques,
information about existing, new or envisioned products, processes or services
and their development, performance, scientific, engineering or technical
information, laboratory notebooks, notes, computer programs, source codes,
object codes, software manuals, sketches, drawings, reports, formulae, gels,
slides, sequences, biological materials living or otherwise, photographs,
negatives, prototypes, models, correspondence, and other documents and things,
and information relating to purchasing, sales, marketing, licensing, contracts
with third parties, and pricing, whether or not in writing and whether or not
labeled or identified as confidential or proprietary. Confidential Information
may be disclosed in writing or orally or may be obtained by observation or
inspection. All data, materials, information, and records developed by a party
hereto in the course of performing this AGREEMENT shall be considered
Confidential Information. However, Confidential Information shall not include
information that a party hereto can demonstrate: (i) is in or enters the public
domain through no fault of such party; (ii) is disclosed to a party hereto by a
third party entitled to disclose it; (iii) was known to a party hereto before
the date of this AGREEMENT; or (iv) is required by law to be disclosed, provided
reasonable advance notice of such requirement is given to a party hereto before
such disclosure.
10.2 Confidentiality. Without prior written consent the parties hereto
will not disclose the other party's Confidential Information to any third party
other than employees, agents or others of the parties hereto who must
necessarily be informed thereof, but only if and to the extent that any such
person has a need for such information. A party hereto will only use
Confidential Information for the purpose of fulfilling its obligations under
this AGREEMENT. The parties hereto agree that they will take such reasonable
steps as may be necessary to prevent the disclosure or use of any such materials
by their officers, employees or agents except as provided herein, including but
not limited to obtaining and enforcing appropriate confidentiality agreements
with such persons. All obligations of confidentiality and nondisclosure set
forth in this AGREEMENT shall survive the termination or expiration of this
AGREEMENT.
10.3 The parties agree that clinical trial data generated by GAMBLE under
the terms of the AGREEMENT will not be published by VRI prior to its publication
by GAMBLE's principal investigators. To the extent not published, the results of
the clinical trials will be held in confidence by GAMBLE. Subject to the
foregoing, VRI will have the unrestricted right to use or disclose such clinical
trial data.
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11. NOTICES.
11.1 Reports, notices and other communications from VRI to GAMBLE as
provided hereunder shall be sent by certified mail to:
James N. Gamble Institute of Medical Research
2141 Auburn Avenue
Cincinnati, OH 45219
Attention: President
or other individuals or addresses as shall hereafter be furnished by
written notice to VRI.
11.2 Reports, notices and other communications from GAMBLE to VRI as
provided hereunder shall be sent to by certified mail to:
Virus Research Institute, Inc.
61 Moulton Street
Cambridge, MA 02138
Attention: President
or other individuals or addresses as shall hereafter be furnished by
written notice to GAMBLE.
12. ARBITRATION.
12.1 (a) Any controversy, dispute or claim arising out of, or relating to,
any provisions, the interpretation or the performance of this AGREEMENT or any
breach thereof which cannot otherwise be resolved by good faith negotiations
between the parties shall be resolved by final and binding arbitration under the
rules of the American Arbitration Association, or the Patent Arbitration Rules,
if applicable, which are in effect as of the Effective Date of this AGREEMENT.
In the event that VRI initiates, requests and/or files for arbitration, the
arbitration shall be conducted in Cincinnati, Ohio. In the event that GAMBLE
initiates, requests and/or files for arbitration, the arbitration shall be
conducted in Boston, Massachusetts.
(b) The arbitration shall be subject to the following terms:
(1) The number of arbitrators shall be three (3).
(2) The arbitrators shall be independent; impartial third
parties having no direct or indirect personal or financial relationship to any
of the parties to the dispute, who has have agreed to accept the appointment as
arbitrator on the terms set out in this Section 12.1.
(3) The arbitrators shall be active or retired attorneys, law
professors, or judicial officers with at least five (5) years experience in
general commercial matters and a familiarity with the laws governing proprietary
rights in intellectual property and in particular patent law.
(4) The arbitrators shall be selected as follows:
(i) Each party shall submit a description of the inner
to be arbitrated to the American Arbitration Association at the appropriate
Regional Office in Cincinnati, Ohio or Boston, Massachusetts, depending upon
where the arbitration is to be held. Said Association shall submit to the
parties a list of the arbitrators available to arbitrate any dispute between
them. Thereafter,
15
<PAGE>
each party shall select; in numerical order, those persons on said list
acceptable as arbitrators and return the same to the Association. The first
three arbitrators acceptable to both parties shall be deemed the selected
arbitrators with respect to the dispute then at issue under this AGREEMENT. In
the event of a failure to select three mutually agreeable arbitrators, the
Association shall be requested to submit as man subsequent lists of arbitrators
as shall be necessary to effect a mutual selection.
(ii) If the method of selection set out in Section 12.1
(b)(4)(a) fails for any reason, then either party may petition any state or
federal court in Massachusetts or Ohio having jurisdiction for appointment of
the arbitrators in accordance with applicable law, provided that the arbitrators
must satisfy the requirements of Sections 12.1 (b)(2) and 12.1 (b)(3) above and
be acceptable to each party hereto.
(5) The arbitrators shall announce the award in writing
accompanied by written findings explaining the facts determined in support of
the award, and any relevant conclusions of law.
(6) Unless otherwise provided in this Section 12.1 or extended
by agreement of the parties, each party shall submit an initial request for
designation of arbitrators within thirty (30) days after any request for
arbitration, the dispute shall be submitted to the arbitrators within sixty (60)
days after the arbitrators are selected, and a decision shall be rendered within
thirty (30) days after the dispute is submitted.
(7) The fees of the arbitrators and any other costs and fees
associated with the arbitration shall be paid in accordance with the decision of
the arbitrators.
(8) The arbitrators shall have no power to add to, subtract
from, or modify any of the terms or conditions of this AGREEMENT. Any award
rendered in such arbitration may be enforced by either party in either the
courts of the Commonwealth of Massachusetts or Ohio or in a United States
District Court for the District of Massachusetts or Ohio, to whose jurisdiction
for such purposes GAMBLE and VRI each hereby irrevocably consents and submits.
12.2 Notwithstanding the foregoing, nothing in this Section shall be
construed to waive any rights or timely performance of any obligations existing
under this AGREEMENT.
13. RESTRICTIONS ON USE OF NAMES.
VRI shall not use the names of GAMBLE, its related entities and its
employees, or any adaptations thereof, in any advertising, promotional or sales
literature, without the prior written consent of GAMBLE; provided however, that
VRI (a) may refer to publications by employees of GAMBLE in the scientific
literature or (b) may state that a license from GAMBLE has been granted as
herein provided.
14. INDEPENDENT CONTRACTOR.
For the purpose of this AGREEMENT and all services to be provided
hereunder, both parties shall be, and shall be deemed to be, independent
contractors and not agents or employees of the other. Neither party shall have
authority to make any statements, representations or commitments or any kind, or
to take any action, that will be binding on the other party.
16
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15. SEVERABILITY.
If any one or more of the provisions of this AGREEMENT shall be held to be
invalid, illegal or unenforceable, the validity, legality or enforceability of
the remaining provisions of this AGREEMENT shall not in any way be affected or
impaired thereby.
16. NON-ASSIGNABILITY.
Neither this AGREEMENT nor any part hereof shall be assignable by either
party without the express written consent of the other provided that either VRI
or GAMBLE may assign this AGREEMENT in connection with the merger, consolidation
or sale of substantially all of its assets or the sale of that portion of its
business to which the Inventions relate or as set forth in Section 7.2 and
further provided that neither party shall unreasonably withhold its consent to
any other assignment by the other party to an assignee which can reasonably
demonstrate its qualifications to carry out the obligations of VRI or GAMBLE
hereunder. Any other attempted assignment without such consent shall be void.
17. ENTIRE AGREEMENT.
This instrument contains the entire AGREEMENT between the parties hereto.
No verbal agreement, conversation or representation between any officers,
agents, or employees of the parties hereto either before or after the execution
of this AGREEMENT shall affect or modify any of the terms or obligations herein
contained.
18. MODIFICATIONS IN WRITING.
No change, modification, extension, termination or waiver of this
AGREEMENT, or any of the provisions herein contained, shall be valid unless made
in writing and signed by a duly authorized representative of each party.
19. GOVERNING LAW.
The validity and interpretation of this AGREEMENT and the legal relations
of the parties to it shall be governed by the laws of the State of Ohio.
20. CAPTIONS.
The captions are provided for convenience and are not to be used in
construing this AGREEMENT.
21. PATENT MARKING
VRI agrees to mark and have marked all Licensed Products sold by it under
the license granted herein, if practical, with the word "Patent" or "Patents"
and the number of the patent or patents applicable thereto.
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this AGREEMENT to be
executed in quadruplicate by their duly authorized representatives as of the
date first above written.
JAMES N. GAMBLE INSTITUTE VIRUS RESEARCH INSTITUTE, INC.
(GAMBLE) (VRI)
By: /s/ Gilbert M. Schiff By: /s/ William A. Packer
--------------------------------- ---------------------------------
Gilbert M. Schiff M.D. William A. Packer
Title: President Title: President
WITNESSED BY: W1TNESSED BY:
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- ------------------------------------- -------------------------------------
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APPENDIX A
LIST OF PATENT APPLICATIONS INCLUDED IN THE PATENT RIGHTS
1.) U.S. Serial No. 07/614,310, filed November 16, 1990, entitled "Human
Rotaviruses, Vaccines and Methods," and invented by Richard L. Ward.
2.) U.S. Serial No. 07/816,974, filed January 3, 1992, entitled "Human
Rotaviruses, Vaccines and Methods," and invented by Richard L. Ward
(Division of U.S. Serial No. 07/614,310).
3.) Serial No. PCT/U.S. 91/08191, filed November 4, 1990, entitled "Human
Rotaviruses, Vaccines and Methods," and invented by Richard L. Ward.
U.S. Patent Application Serial Number 08/143975
U.S. Patent Application Serial Number 08/114114
Brazilian Patent Application Serial Number 9106982
European Patent Application Serial Number 92900590.8
Mexican Patent Application Serial Number 9303196
Australian Application Serial Number 90603/91
Canadian Application Serial Number 2096315
S. Korean Application Serial Number 93701493
Japanese Application Serial Number 501860/92
19
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APPENDIX B
MATERIALS TRANSFER AGREEMENT
THIS AGREEMENT entered the day of 19 , by and between the James
N. Gamble Institute of Medical Research ("Provider"), a non-profit corporation
having a place of business at 2141 Auburn Ave., Cincinnati, Ohio 45219 and ***
("Recipient"), a corporation having a place of business at .
1. Subject to availability Provider agrees to provide the following material
to recipient: ***. Such material and any related biological material or
associated know-how and data that will be received by Recipient from
Provider, and any substance that is replicated or derived therefrom are
covered by this Agreement. All such materials shall hereinafter be
referred to as the "Material(s)."
2. The Materials will be used by Recipient in connection with the research
described in Appendix A and only for non-commercial purposes. The
Materials shall not be used in research that is subject to consulting or
licensing obligations to another institution, corporation or business
entity, unless written permission is obtained in advance from Provider.
3. Recipient shall not distribute, release or disclose the Materials to any
other person or entity and shall ensure that no one will be allowed to
take or send the Materials to any other location, unless written
permission is obtained in advance from Provider. Recipient agrees to
maintain the confidentiality of any propriety information of Provider
regarding the Materials.
4. The Materials are supplied solely for scientific research purposes, for
use in animals and/or in vitro. THE MATERIALS SHALL NOT BE USED IN HUMANS.
5. No right or license is granted under the Agreement either expressly or by
implication. It is understood that any and all proprietary rights,
including but not limited to patent rights, in and to the Materials shall
be and remain in Provider.
6. Recipient agrees to provide Provider with an advance copy at least thirty
(30) days in advance of any written submission (abstract or paper) or oral
presentation that makes reference to the Materials. If in the opinion of
Provider any such publication describes a patentable development, Provider
shall have an opportunity to request that Recipient delay the submission
or public presentation until after a U.S. patent application has been
filed. In no event shall the delay be unreasonable. If a publication does
result from work using the Materials, Recipient agrees to acknowledge
Provider and/or give credit to Provider's scientists, as scientifically
appropriate, based on any direct contribution they may have made to the
work.
20
<PAGE>
7. Recipient agrees not to sequence or clone any Material provided by
Provider without the written permission of Provider.
8. In the event that use of the Material results in an invention,
improvement, substance, or information whether or not patentable and
patents, if any, which result therefrom ("Developed Technology"),
Recipient agrees to disclose promptly to Provider all such inventions,
improvements or substances.
9. Recipient shall assign all right, title and interest in and to Developed
Technology to Provider. Recipient agrees to cooperate and assist Provider
in obtaining patent protection for Developed Technology.
10. Recipient agrees to execute, acknowledge and deliver all such further
papers as may be necessary to perform its obligation under this Agreement
11. Recipient acknowledges that the Materials are provided WITHOUT WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY,
EXPRESS OR IMPLIED. PROVIDER MAKES NO REPRESENTATION THAT THE USE OF THE
MATERIALS WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK OR OTHER
PROPRIETARY RIGHT.
12. In no event shall Provider be liable for any use of the Materials by
Recipient. Recipient hereby agrees to defend, indemnify and hold harmless
Provider, its officers, directors, trustees, employees and agents from any
loss, claim, damage, expense or liability, of whatsoever kind or nature
(including attorney's fees), which may arise from or in connection with
this Agreement or the use, handling or storage of the Materials.
13. Recipient shall report to Provider a summary of the results of Recipient's
work utilizing the Materials.
14. Upon the request of Provider, Recipient shall promptly return to Provider
the Materials furnished to Recipient under this Agreement.
15. Recipient agrees to comply with all government and National Institutes of
Health regulations and guidelines which are applicable to the Recipient's
use of the Materials.
16. This Agreement is not assignable, whether by operation of law or
otherwise, without the prior written consent of Provider.
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IN WITNESS WHEREOF, the parties, intending to be legally bound, have caused this
Agreement to be executed by their respective duly authorized representatives.
RECIPIENT'S AUTHORIZED REPRESENTATIVE
INVESTIGATOR FOR RECIPIENT
BY: ____________________________ BY: ____________________________
________________________________ ________________________________
Typed Name Typed Name
________________________________ ________________________________
Title Title
PROVIDER'S AUTHORIZED REPRESENTATIVE
INVESTIGATOR FOR PROVIDER
BY: ____________________________ BY: ____________________________
________________________________ ________________________________
Typed Name Typed Name
________________________________ ________________________________
Title Title
22
<PAGE>
APPENDIX C
PROTOCOL
REACTIVITY AND IMMUNOGENICITY OF LIVE, ATTENUATED
ROTAVIRUS VACCINE CANDIDATE 89-12
A copy of the protocol will be attached to the execution copy of this AGREEMENT
23
<PAGE>
EXHIBIT 10.17
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [****], have been
separately filed with the Commission.
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
LICENSE AGREEMENT
(EXCLUSIVE)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
P R E A M B L E
ARTICLES
1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2 GRANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3 DUE DILIGENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4 ROYALTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5 REPORTS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6 PATENT PROSECUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7 INFRINGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8 PRODUCT LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
9 EXPORT CONTROLS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
10 NON-USE OF NAMES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
11 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
12 DISPUTE RESOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
13 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
14 PAYMENTS, NOTICES AND OTHER COMMUNICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
15 MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
<PAGE>
This Agreement is made and entered into this _________ day of
___________, 199__, (the "Effective Date") by and between MASSACHUSETTS
INSTITUTE OF TECHNOLOGY, a corporation duly organized and existing under the
laws of the Commonwealth of Massachusetts and having its principal office at 77
Massachusetts Avenue, Cambridge, Massachusetts 02139, U.S.A. (hereinafter
referred to as "M.I.T."), and VIRUS RESEARCH INSTITUTE, INC., a corporation duly
organized under the laws of Massachusetts and having its principal office at 840
Memorial Drive Cambridge, MA 02139 (hereinafter referred to as "LICENSEE").
W I T N E S S E T H
WHEREAS, M.I.T. is the owner of certain PATENT RIGHTS (as
later defined herein) and has the right to grant licenses under said PATENT
RIGHTS, subject only to a royalty-free, nonexclusive license heretofore granted
to the United States Government;
WHEREAS, portions of the M.I.T. PATENT RIGHTS are jointly owned
by M.I.T. and Pennsylvania Research Corporation (hereinafter referred to as
"PRC") and PRC has granted M.I.T. exclusive rights to license PRC's rights in
such PATENT RIGHTS in the medical fields of use according to the institutional
agreement dated December 3, 1990 and appended hereto as Appendix C.
WHEREAS, M.I.T. desires to have the PATENT RIGHTS utilized in
the public interest and is willing to grant a license thereunder;
WHEREAS, LICENSEE has represented to M.I.T., to induce M.I.T.
to enter into this Agreement, that LICENSEE is experienced in the development of
products similar to the LICENSED PRODUCT(s) (as later defined herein) and/or the
use of the LICENSED PROCESS(es) (as later defined herein) and that it shall
commit itself to a thorough, vigorous and diligent program of exploiting the
PATENT RIGHTS so that public utilization shall result therefrom; and
WHEREAS, LICENSEE desires to obtain a license under the PATENT
RIGHTS upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:
<PAGE>
ARTICLE I - DEFINITIONS
For the purposes of this Agreement, the following words and
phrases shall have the following meanings:
1.1 "LICENSEE" shall include a related company of VIRUS
RESEARCH INSTITUTE, INC., the voting stock of which is directly or indirectly at
least fifty percent (50%) owned or controlled by VIRUS RESEARCH INSTITUTE, an
organization which directly or indirectly controls more than fifty percent (50%)
of the voting stock of VIRUS RESEARCH INSTITUTE and an organization, the
majority ownership of which is directly or indirectly under common control with
VIRUS RESEARCH INSTITUTE, INC.
1.2 "PATENT RIGHTS" shall mean all of the following
M.I.T. intellectual property:
(a) the United States and foreign patents and/or patent
applications listed in Appendices A and B;
(b) United States and foreign patents issued from the
applications listed in Appendices A and B and from
divisionals and continuations of these applications;
(c) claims of U.S. and foreign continuation-in-part
applications, and of the resulting patents, which are
directed to subject matter specifically described in
the U.S. and foreign applications listed in Appendices
A and B;
(d) claims of all foreign patent applications, and of the
resulting patents, which are directed to subject
matter specifically described in the United States
patents and/or patent applications described in (a),
(b) or (c) above; and
(e) any reissues of United States patents described in
(a), (b) or (c)above.
1.3 A "LICENSED PRODUCT" shall mean any product or part
thereof which:
(a) is covered in whole or in part by an issued, unexpired
claim or a pending claim which has not been declared
invalid by a court of Competent Jurisdiction from
which there is no appeal or from which no appeal is
taken contained in the PATENT RIGHTS in the country in
which any such product or part thereof is made, used
or sold; or
-2-
<PAGE>
The information below marked by [****] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
(b) is manufactured by using a process or is employed to
practice a process which is covered in whole or in
part by an issued, unexpired claim or a pending claim
which has not been declared invalid by a court of
Competent Jurisdiction from which there is no appeal
or from which no appeal is taken contained in the
PATENT RIGHTS in the country in which any LICENSED
PROCESS is used or in which such product or part
thereof is used or sold.
1.4 A "LICENSED PROCESS" shall mean any process which is
covered in whole or in part by an issued, unexpired claim or a pending claim
which has not been declared invalid by a court of Competent Jurisdiction from
which there is no appeal or from which no appeal is taken contained in the
PATENT RIGHTS.
1.5 "NET SALES" shall mean LICENSEE's (and its
sublicensees') billings for LICENSED PRODUCTS and LICENSED PROCESSES produced
hereunder less the sum of the following:
(a) discounts allowed in amounts customary in the trade;
(b) sales, tariff duties and/or use taxes directly
imposed and with reference to particular sales;
(c) outbound transportation prepaid or allowed; and
(d) amounts allowed or credited on returns.
No deductions shall be made for commissions paid to individuals
whether they be with independent sales agencies or regularly employed by
LICENSEE and on its payroll, or for cost of collections. LICENSED PRODUCTS shall
be considered "sold" when billed out or invoiced.
1.6 "TERRITORY" [****]
1.7 "FIELD OF USE" shall mean non-injected delivery of
vaccines and immunotherapeutics to all mucosal surfaces (including oral
delivery).
-3-
<PAGE>
The information below marked by [****] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
ARTICLE 2 - GRANT
2.1 M.I.T. hereby grants to LICENSEE the right and license
to make, have made, use, lease and sell the LICENSED PRODUCTS and to practice
the LICENSED PROCESSES in the TERRITORY for the FIELD OF USE to the end of the
term for which the PATENT RIGHTS are granted unless this Agreement shall be
sooner terminated according to the terms hereof.
2.2 LICENSEE agrees that LICENSED PRODUCTS leased or sold
in the United States shall be manufactured substantially in the United States.
2.3 [****]
2.4 M.I.T. reserves the right to practice under the
PATENT RIGHTS for noncommercial research purposes.
2.5 In addition to the options granted in the Sponsored
Research Agreement of Appendix C, M.I.T. further grants to LICENSEE a first
option to an exclusive license in the Field of Use to other new inventions
which:
(a) [****]
(b) [****]
(c) [****]
This option for any new invention shall be exercisable within
six months after the date on which M.I.T. notifies LICENSEE that the new
invention has been reported, under the following terms:
(i) [****]
(ii) [****]
(iii) [****]
(iv) [****]
-4-
<PAGE>
The information below marked by [****] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
2.6 LICENSEE shall have the right to enter into
sublicensing agreements for the rights, privileges and licenses granted
hereunder.
2.7 LICENSEE agrees that any sublicenses granted by it
shall provide that the obligations to M.I.T. of Articles 2, 5, 7, 8, 9, 10, 12,
13, and 15 of this Agreement shall be binding upon the sublicensee as if it were
a party to this Agreement. LICENSEE further agrees to attach copies of these
Articles to sublicense agreements.
2.8 LICENSEE agrees to forward to M.I.T. a copy of any
and all sublicense agreements promptly upon execution by the parties.
2.9 LICENSEE shall not receive from sublicensees anything
of value in lieu of cash payments in consideration for any sublicense under this
Agreement, without the express prior written permission of M.I.T.
2.10 The license granted hereunder shall not be construed
to confer any rights upon LICENSEE by implication, estoppel or otherwise as to
any technology not specifically set forth in Appendix A, Appendix B or Section
2.5 hereof.
ARTICLE 3 - DUE DILIGENCE
3.1 LICENSEE shall use its best efforts to bring one or
more LICENSED PRODUCTS or LICENSED PROCESSES to market through a thorough,
vigorous and diligent program for exploitation of the PATENT RIGHTS and to
thereafter continue active, diligent marketing efforts for one or more LICENSED
PRODUCTS or LICENSED PROCESSES throughout the life of this Agreement. [****] to
the bringing to market of a LICENSED PRODUCT or LICENSED PROCESS throughout the
term of this Agreement until the first commercial sale of a LICENSED PRODUCT or
commercial use of a LICENSED PROCESS.
3.2 In addition, LICENSEE shall adhere to the following
milestones:
(a) [****]
(b) [****]
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The information below marked by [****] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
3.3 LICENSEE's failure to perform in accordance with
Paragraphs 3.1 and 3.2 above shall be grounds for M.I.T. to terminate this
Agreement pursuant to Paragraph 13.3 hereof.
ARTICLE 4 - ROYALTIES
4.1 For the rights, privileges and license ranted
hereunder, LICENSEE shall pay royalties to M.I.T. in the manner hereinafter
provided to the end of the term of the PATENT RIGHTS or until this Agreement
shall be terminated:
a) [****]
b) [****]
(c) [****]
(d) [****]
4.2 [****]
4.3 [****]
4.4 If LICENSEE sells LICENSED PRODUCTS to or under
arrangement with a governmental or non-profit organization (such as the World
Health Organization), and if such sales [****]
4.5 No multiple royalties shall be payable because any
LICENSED PRODUCT, its manufacture, use, lease or sale are or shall be covered by
more than one PATENT RIGHTS patent application or PATENT RIGHTS patent licensed
under this Agreement.
4.6 Except as provided in Section 4.7 below, royalty
payments shall be paid in United States dollars in Cambridge, Massachusetts, or
at such other place as M.I.T. may reasonably designate consistent with the laws
and regulations controlling in any foreign country. If any currency conversion
shall be required in connection with the payment of royalties hereunder, such
conversion shall be made by using the exchange rate prevailing at the Chase
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Manhattan Bank (N.A.) on the last business day of the calendar quarterly
reporting period to which such royalty payments relate.
4.7 If by law, regulation, or fiscal policy of a
particular country, conversion into United States dollars or transfer of funds
of a convertible currency to the United States is restricted or forbidden,
LICENSEE shall give M.I.T. prompt notice in writing and shall pay the royalty
and other amounts due through such means or methods as are lawful in such
country as M.I.T. may reasonably designate. Failing the designation by M.I.T. of
such lawful means or methods within thirty (30) days after such notice is given
to M.I.T., LICENSEE shall deposit such royalty payment in local currency to the
credit of M.I.T. in a recognized banking institution designated by M.I.T., or if
none is designated by M.I.T. within the thirty (30) day period described above,
in a recognized banking institution selected by LICENSEE and identified in a
written notice to M.I.T. by LICENSEE, and such deposit shall fulfill all
obligations of LICENSEE to M.I.T. with respect to such royalties.
ARTICLE 5 - REPORTS AND RECORDS
5.1 LICENSEE shall keep full, true and accurate books of
account containing all particulars that may be necessary for the purpose of
showing the amounts payable to M.I.T. hereunder. Said books of account shall be
kept at LICENSEE's principal place of business or the principal place of
business of the appropriate division of LICENSEE to which this Agreement
relates. Said books and the supporting data shall be open at all reasonable
times for five (5) years following the end of the calendar year to which they
pertain, to the inspection of M.I.T. or its Agents for the purpose of verifying
LICENSEE's royalty statement or compliance in other respects with this
Agreement. Should such inspection lead to the discovery of a greater than ten
percent (10%) discrepancy in reporting, LICENSEE agrees to pay the full cost of
such inspection.
5.2 Prior to the first calendar quarter in which Net Sales
occur, LICENSEE shall provide M.I.T. with an annual summary of LICENSEE's
efforts during the preceding year to bring to market a LICENSED PRODUCT or
LICENSED PROCESS. Beginning with the first calendar quarter in which Net Sales
occur, LICENSEE, within ninety (90) days after March 31, June 30, September 30
and December 31, of each year, shall in place of such annual reports
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deliver to M.I.T. true and accurate reports, giving such particulars of the
business conducted by LICENSEE and its sublicensees during the preceding
three-month period under this Agreement as shall be pertinent to a royalty
accounting hereunder. These quarterly reports shall include at least the
following:
(a) number of LICENSED PRODUCT manufactured and sold by
LICENSEE and all sublicensees;
(b) total billings for LICENSED PRODUCTS sold by LICENSEE
and all sublicensees;
(c) accounting for all LICENSED PROCESSES used or sold by
LICENSEE and all sublicensees;
(d) deductions applicable as provided in Paragraph 1.5;
(e) total royalties due; and
(f) names and addresses of all sublicensees of LICENSEE.
5.3 With each such report submitted, LICENSEE shall pay to
M.I.T. the royalties due and payable under this Agreement. If no royalties shall
be due, LICENSEE shall so report.
5.4 On or before the ninetieth (90th) day following the
close of LICENSEE's fiscal year, LICENSEE shall provide M.I.T. with LICENSEE's
certified financial statements for the preceding fiscal year including, at a
minimum, a Balance Sheet and an Operating Statement.
5.5 The royalty payments set forth in this Agreement and
amounts due under Article 6 shall, if overdue, bear interest until payment at a
per annum rate two percent (2%) above the prime rate in effect at the Chase
Manhattan Bank (N.A.) on the due date. The payment of such interest shall not
foreclose M.I.T. from exercising any other rights it may have as a consequence
of the lateness of any payment.
ARTICLE 6 - PATENT PROSECUTION
6.1 Except as provided in Section 6.4, M.I.T. shall apply
for, seek prompt issuance of, and maintain during the term of this Agreement the
PATENT RIGHTS in the United States and in the foreign countries listed in
Appendix B hereto. Appendix B may be amended by
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The information below marked by [****] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
verbal agreement of both parties, such agreement to be confirmed in writing
within ten (10) days. The prosecution, filing and maintenance of all PATENT
RIGHTS patents and applications shall be the primary responsibility of M.I.T.;
provided, however, that patent counsel selected by M.I.T. is reasonably
acceptable to LICENSEE. M.I.T. (and by instruction its patent counsel) shall
consult with LICENSEE and its patent counsel as to the preparation and filing,
prosecution and maintenance of PATENT RIGHTS, and shall furnish to LICENSEE and
its patent counsel copies of documents relevant to such preparation, filing,
prosecution or maintenance sufficiently prior to filing such documents or making
any payment due thereunder to allow for review and comment by LICENSEE and its
patent counsel. If, as a result of any such consultation, LICENSEE shall elect
not to pay the expenses of any patent application or patent included in PATENT
RIGHTS (which election may be limited to a specific country or countries),
LICENSEE shall so notify M.I.T. within thirty (30) days of such consultation and
shall thereby surrender its rights under PATENT RIGHTS in the country or
countries affected, provided, however, that LICENSEE shall remain obligated to
reimburse M.I.T. for any costs incurred with respect to such patent application
or patent prior to said election. M.I.T. agrees that it shall not abandon the
prosecution of any patent applications under PATENT RIGHTS nor shall it fail to
make any payment or fail to take any other action necessary to obtain or
maintain a patent under PATENT RIGHTS unless it has notified LICENSEE in
sufficient time for LICENSEE to assume such prosecution, make such payment or
take such action, and LICENSEE shall thereafter have the right to prosecute
and/or maintain such PATENT RIGHTS at its expense in M.I.T.'s name, and M.I.T.
shall thereafter render to LICENSEE all necessary assistance in order to
facilitate such prosecution and/or maintenance.
6.2 LICENSEE shall reimburse M.I.T. for payment of all
fees and costs relating to the filing, prosecution, and maintenance of the
PATENT RIGHTS incurred by M.I.T. after the Effective Date of this Agreement.
6.3 [****]
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6.4 If, pursuant to Section 8.B.2 of the Research
Agreement, LICENSEE obtains an exclusive license to a new invention which is
added to PATENT RIGHTS, and if such new invention is jointly owned pursuant to
Section 8.F. of the Research Agreement ("JOINT PATENT RIGHTS"), LICENSEE shall
apply for, seek prompt issuance of, and maintain during the term of this
Agreement at its own expense such JOINT PATENT RIGHTS in the United States and
in such other countries as LICENSEE shall have elected. The prosecution, filing
and maintenance of JOINT PATENT RIGHTS shall be the primary responsibility of
LICENSEE; provided, however that patent counsel selected by LICENSEE is
reasonably acceptable to M.I.T. LICENSEE (and by instruction its patent counsel)
shall consult with M.I.T. and its patent counsel as to the preparation and
filing, prosecution and maintenance of JOINT PATENT RIGHTS, and shall furnish to
M.I.T. and its patent counsel copies of documents relevant to such preparation,
filing, prosecution or maintenance sufficiently prior to filing such documents
or making any payment due thereunder to allow for review and comment by M.I.T.
and its patent counsel. If, at any time, LICENSEE shall elect not to pay the
expenses of any patent application or patent included in JOINT PATENT RIGHTS
(which election may be limited to a specific country or countries), LICENSEE
shall so notify M.I.T. within thirty (30) days of such consultation and shall
thereby surrender its rights under JOINT PATENT RIGHTS in the country or
countries affected, provided, however, that LICENSEE shall remain obligated for
any COSTS incurred with respect to such patent application or patent prior to
said election. LICENSEE agrees that it shall not abandon the prosecution of any
patent applications under JOINT PATENT RIGHTS nor shall it fail to make any
payment or fail to take any other action necessary to obtain or maintain, in a
patent under JOINT PATENT RIGHTS unless it has notified M.I.T. in sufficient
time for M.I.T. to assume such prosecution, make such payment or take such
action, and M.I.T. shall thereafter have the right to prosecute and/or maintain
such JOINT PATENT RIGHTS at its expense in LICENSEE's name, and LICENSEE shall
thereafter render to M.I.T. all necessary assistance in order to facilitate such
prosecution and/or maintenance.
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The information below marked by [****] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
ARTICLE 7 - INFRINGEMENT
7.1 LICENSEE shall inform M.I.T. promptly in writing of
any alleged infringement of the PATENT RIGHTS by a third party of which LICENSEE
becomes aware and of any available evidence thereof.
7.2 During the term of this Agreement, M.I.T. shall have
the right, but shall not be obligated to prosecute at its own expense all
infringements of the PATENT RIGHTS and, in furtherance of such right, LICENSEE
hereby agrees that M.I.T. may include LICENSEE as a party plaintiff in any such
suit, without expense to LICENSEE. M.I.T.'s choice of counsel in any such suit
shall be subject to LICENSEE's approval, providing that such approval shall not
be unreasonably withheld. The total cost of any such infringement action
commenced or defended [****]
7.3 If within six (6) months after having been notified of
any alleged infringement, M.I.T. shall have been unsuccessful in persuading the
alleged infringer to desist and shall not have brought and shall not be
diligently prosecuting an infringement action, or if M.I.T. shall notify
LICENSEE at any time prior thereto of its intention not to bring suit against
any alleged infringer in the TERRITORY for the FIELD OF USE, then, and in those
events only, LICENSEE shall have the right, but shall not be obligated, to
prosecute at its own expense any infringement of the PATENT RIGHTS in the
TERRITORY for the FIELD OF USE, and LICENSEE may, for such purposes, use the
name of M.I.T. as party plaintiff; provided, however, that such right to bring
such an infringement action shall remain in effect only for so long as the
license granted herein remains exclusive. No settlement, consent judgment or
other voluntary final disposition of the suit may be entered into without the
consent of M.I.T., which consent shall not unreasonably be withheld. LICENSEE
shall indemnify M.I.T. against any order for costs that may be made against
M.I.T. in such proceedings.
7.4 In the event that LICENSEE shall undertake the
enforcement and/or defense of the PATENT RIGHTS by litigation, [****] Any
recovery of damages by LICENSEE
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The information below marked by [****] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
for each such suit shall be applied first in satisfaction of any unreimbursed
expenses and legal fees of LICENSEE relating to such suit, [****]
7.5 For any patent of the PATENT RIGHTS jointly owned by
M.I.T. and LICENSEE, LICENSEE shall have the first right to enforce and/or
defend the patent. Other provisions of such enforcement or defense by LICENSEE
shall be in accordance with Paragraphs 7.3 and 7.4 above. If LICENSEE chooses
not to enforce or defend such patent, M.I.T. shall then have the right to do so,
in accordance with the provisions of Paragraph 7.2 above.
7.6 In the event that a declaratory judgment action
alleging invalidity or noninfringement of any of the PATENT RIGHTS shall be
brought against LICENSEE, M.I.T., at its option, shall have the right, within
thirty (30) days after commencement of such action, to intervene and take over
the sole defense of the action at its own expense.
7.7 In any infringement suit as either party may institute
to enforce the PATENT RIGHTS pursuant to this Agreement, the other party hereto
shall, at the request and expense of the party initiating such suit, cooperate
in all respects and, to the extent possible, have its employees testify when
requested and make available relevant records, papers, information, samples,
specimens, and the like.
ARTICLE 8 - PRODUCT LIABILITY
8.1 LICENSEE shall at all times during the term of this
Agreement and thereafter, indemnify, defend and hold M.I.T. and PRC, their
trustees, officers, employees and affiliates, harmless against all claims and
expenses, including legal expenses and reasonable attorneys' fees, rising out of
the death of or injury to any person or persons or out of any damage to property
and against any other claim, proceeding, demand, expense and liability of any
kind whatsoever resulting from the production, manufacture, sale, use, lease,
consumption or advertisement of the LICENSED PRODUCT(s) and/or LICENSED
PROCESS(es) or arising from any obligation of LICENSEE hereunder.
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8.2 Commencing not later than commencement of human trials
of any LICENSED PRODUCT, LICENSEE shall obtain and carry in full force and
effect liability insurance which shall protect LICENSEE and M.I.T. in regard to
events covered by Paragraph 8.1 above, providing that such insurance is
available at commercially acceptable rates.
8.3 M.I.T. warrants that it owns above or jointly with PRC
the PATENT RIGHTS and that it has the right to grant the rights and licenses
granted in this agreement. M.I.T.'s total liability under this warranty shall be
limited to the amounts paid by LICENSEE to M.I.T. under this License Agreement.
8.4 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS
AGREEMENT, M.I.T. MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY
KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND VALIDITY OF PATENT RIGHTS
CLAIMS, ISSUED OR PENDING. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS A
REPRESENTATION MADE OR WARRANTY GIVEN BY M.I.T. THAT THE PRACTICE BY LICENSEE OF
THE LICENSE GRANTED HEREUNDER SHALL NOT INFRINGE THE PATENT RIGHTS OF ANY THIRD
PARTY.
ARTICLE 9 - EXPORT CONTROLS
It is understood that M.I.T. is subject to United States laws
and regulations controlling the export of technical data, computer software,
laboratory prototypes and other commodities (including the Arms Export Control
Act, as amended and the Export Administration Act of 1979), and that its
obligations hereunder are contingent on compliance with applicable United States
export laws and regulations. The transfer of certain technical data and
commodities may require a license from the cognizant agency of the United States
Government and/or written assurances by LICENSEE that LICENSEE shall not export
data or commodities to certain foreign countries without prior approval of such
agency. M.I.T. neither represents that a license shall not be required nor that,
if required, it shall be issued.
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ARTICLE 10 - NON-USE OF NAMES
LICENSEE shall not use the names or trademarks of the
Massachusetts Institute of Technology nor of Pennsylvania Research Corporation
nor of Pennsylvania State University, nor any adaptation thereof, nor the names
of any of their employees, in any advertising, promotional or sales literature
without prior written consent obtained from M.I.T., PRC or said employee, in
each case, except that LICENSEE may state that it is licensed by M.I.T. under
one or more of the patents and/or applications comprising the PATENT RIGHTS.
ARTICLE 11 - ASSIGNMENT
This Agreement is not assignable except by LICENSEE in
conjunction with substantially all of the assets of LICENSEE which relate to the
business of vaccines and immunotherapeutics. Any other attempt to do so is void.
ARTICLE 12- DISPUTE RESOLUTION
12.1 For any and all claims, disputes or controversies
arising under, out of, or in connection with this Agreement, including any
dispute relating to patent validity or infringement, which the parties shall be
unable to resolve within sixty (60) days, the party raising such dispute shall
promptly advise the other party of such claim, dispute or controversy in a
writing which describes in reasonable detail the nature of such dispute. By not
later than five (5) business days after the recipient has received such notice
of dispute, each party shall have selected for itself a representative who shall
have the authority to bind such party, and shall additionally have advised the
other party in writing of the name and title of such representative. By not
later than ten (10) business days after the date of such notice of dispute, such
representatives shall schedule a date for a mediation hearing with the Cambridge
Dispute Settlement Center or Endispute Inc. in Cambridge, Massachusetts. If the
representatives of the parties have not been able to resolve the dispute within
fifteen (15) business days after such mediation hearing, the parties shall have
the right to pursue any other remedies legally available to resolve such dispute
in either the Courts of the Commonwealth of Massachusetts or in the United
States District Court for the District of Massachusetts, to whose jurisdiction
for such purposes M.I.T. and LICENSEE each hereby irrevocably consents and
submits.
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The information below marked by [****] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
12.2 Notwithstanding the foregoing, nothing in this Article
shall be construed to waive any rights or timely performance of any obligations
existing under this Agreement.
ARTICLE 13 - TERMINATION
13.1 If LICENSEE shall cease to carry on its business, this
Agreement shall terminate upon notice by M.I.T.
13.2 Should LICENSEE fail to make any payment whatsoever
due and payable to M.I.T. hereunder, M.I.T. shall have the right to terminate
this Agreement effective on thirty (30) days' notice, unless LICENSEE shall make
all such payments to M.I.T. within said thirty (30) day period. Upon the
expiration of the thirty (30) day period, if LICENSEE shall not have made all
such payments to M.I.T., the rights, privileges and license granted hereunder
shall automatically terminate.
13.3 Upon any material breach or default of this Agreement
by LICENSEE, other than those occurrences set out in Paragraphs 13.1 and 13.2
hereinabove, which shall always take precedence in that order over any material
breach or default referred to in this Paragraph 13.3, M.I.T. shall have the
right to terminate this Agreement and the rights, privileges and license granted
hereunder effective on ninety (90) days' notice to LICENSEE. Such termination
shall become automatically effective unless LICENSEE shall have cured any such
material breach or default prior to the expiration of the ninety (90) day
period. The above notwithstanding, if LICENSEE is in breach of Article 3, but
otherwise in compliance with the terms of this Agreement [****]
13.4 [****]
13.5 LICENSEE shall have the right to terminate this
Agreement at any time on six (6) months' notice to M.I.T., and upon payment of
all amounts due M.I.T. through the effective date of the termination.
13.6 Upon termination of this Agreement for any reason,
nothing herein shall be construed to release either party from any obligation
that matured prior to the effective date of
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such termination. LICENSEE and any sublicensee thereof may, however, after the
effective date of such termination, sell all LICENSED PRODUCTS, and complete
LICENSED PRODUCTS in the process of manufacture at the time of such termination
and sell the same, provided that LICENSEE shall pay to M.I.T. the Running
Royalties thereon as required by Article 4 of this Agreement and shall submit
the reports required by Article 5 hereof on the sales of LICENSED PRODUCTS.
13.7 Upon termination of this Agreement for any reason, any
sublicensee not then in default shall have the right to seek a license from
M.I.T., M.I.T. agrees to negotiate such licenses in good faith under reasonable
terms and conditions.
ARTICLE 14- PAYMENTS, NOTICES AND OTHER COMMUNICATIONS
Any payment, notice or other communication pursuant to this
Agreement shall be sufficiently made or given on the date of mailing if sent to
such party by certified first class mail, postage prepaid, addressed to it at
its address below or as it shall designate by written notice given to the other
party:
In the case of M.I.T.:
Director
Technology Licensing Office
Massachusetts Institute of Technology
Room E32-300
Cambridge, Massachusetts 02139
In the case of LICENSEE:
President
Virus Research Institute
840 Memorial Drive
Cambridge, MA 02139
ARTICLE 15 - MISCELLANEOUS PROVISIONS
15.1 This Agreement shall be construed, governed,
interpreted and applied in accordance with the laws of the Commonwealth of
Massachusetts, U.S.A., except that questions
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affecting the construction and effect of any patent shall be determined by the
law of the country in which the patent was granted.
15.2 The parties hereto acknowledge that this Agreement
sets forth the entire Agreement and understanding of the parties hereto as to
the subject matter hereof, and shall not be subject to any change or
modification except by the execution of a written instrument subscribed to by
the parties hereto.
15.3 The provisions of this Agreement are severable, in the
event that any provisions of this Agreement shall be determined to be invalid or
unenforceable under any controlling body of the law, such invalidity or
unenforceability shall not in any way affect the validity or enforceability of
the remaining provisions hereof.
15.4 LICENSEE agrees to mark the LICENSED PRODUCTS sold in
the United States with all applicable United States patent numbers. All LICENSED
PRODUCTS shipped to or sold in other countries shall be marked in such a manner
as to conform with the patent laws and practice of the country of manufacture or
sale.
15.5 The failure of either party to assert a right
hereunder or to insist upon compliance with any term or condition of this
Agreement shall not constitute a waiver of that right or excuse a similar
subsequent failure to perform any such term or condition by the other party.
IN WITNESS WHEREOF the parties have duly executed this
Agreement the day and year set forth below.
MASSACHUSETTS INSTITUTE OF VIRUS RESEARCH INSTITUTE
TECHNOLOGY
By /s/ JOHN T. PRESTON By /s/ JOHN W. LITTLECHILD
-------------------------------------- -------------------------
Title Director, Technology License Office Title President
----------------------------------- ----------------------
Date 12/5/91 Date 12/6/91
----------------------------------- ----------------------
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The information below marked by [****] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
APPENDIX A
[****]
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The information below marked by [****] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
APPENDIX B
[****]
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The information below marked by [****] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
APPENDIX C
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
OFFICE OF SPONSORED PROGRAMS
RESEARCH AGREEMENT between the MASSACHUSETTS INSTITUTE OF TECHNOLOGY,
hereinafter referred to as "the Institute" and the VIRUS RESEARCH
INSTITUTE, hereinafter referred to as "the Sponsor".
WHEREAS, the research program contemplated by this Agreement is of mutual
interest and benefit to the Institute and to the Sponsor, and will
further the instructional and research objectives of the Institute in a
manner consistent with its status as a non-profit, tax-exempt,
educational institution.
NOW, THEREFORE, the parties hereto agree as follows:
1. STATEMENT OF WORK. [****]
2. PRINCIPAL INVESTIGATOR. [****]
3. PERIOD OF PERFORMANCE. [****]
4. REIMBURSEMENT OF COSTS. [****]
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The information below marked by [****] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
5. PAYMENT. Payments shall be made to the Institute by the
Sponsor in advance on the following basis:
[****]
6. TERMINATION. Performance under this Agreement may be
terminated by the Sponsor upon six months written notice;
performance may be terminated by the Institute if
circumstances beyond its control preclude continuation of the
research. Upon termination, the Institute will be reimbursed
as specified in Article 4 for all costs and non-cancelable
commitments incurred in the performance of the research, such
reimbursement not to exceed the total estimated project cost
specified in Article 4.
7. PUBLICATIONS. The Institute will be free to publish the
results of research under this Agreement; provided that a copy
of each publication will be provided to the Sponsor at least
thirty (30) days in advance of publication and, if the
publication would disclose a patentable invention, the
Institute will delay publication for an additional sixty (60)
days to enable the Institute or Sponsor to file a patent
application in accordance with Section 8.
8. INTELLECTUAL PROPERTY.
A. Title to any invention conceived or first reduced to
practice in the performance of the research program
shall remain with the Institute which shall have the
sole right to determine the disposition of any
inventions or other rights resulting therefrom,
including the right to determine whether or not a
patent application will be filed, and shall so notify
the Sponsor.
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The information below marked by [****] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
B. In the event that a patent application on such an
invention is filed by the Institute, the Sponsor
(subject to third party rights, if any, in such
invention) shall be entitled to elect one of the
following alternatives by notice in writing to the
Institute within six (6) months after notification to
the Sponsor that a patent application has been filed:
1. [****]
2. [****]
3. [****]
C. In the event that the Sponsor has not elected any of
the foregoing alternatives within six (6) months after
notification that a patent application has been filed,
the Sponsor shall be deemed to have elected alterative
3. above.
D. [****]
E. In the event that the Institute declines to file a
patent application, the Sponsor may file in the United
States and/or elsewhere, in the name of the Institute,
and shall be entitled to elect between the above
alternatives no later than six (6) months after such
filing date.
F. Inventions made jointly by employees of the Institute
and employees of the Sponsor shall be owned jointly by
the Institute and the Sponsor and, in the absence of
any further agreement, the Institute and the Sponsor
shall
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each have the independent right to use and/or license
the jointly owned invention(s). The Institute shall
grant to Sponsor the same option and license rights to
the Institute's rights in jointly owned invention(s)
as are granted to the Sponsor in Paragraph 8B above.
G. The Sponsor shall retain all invention disclosures
submitted by the Institute in confidence and use its
best efforts to prevent their disclosure to third
parties. The Sponsor shall be relieved of this
obligation only when this information becomes publicly
available through no fault of the Sponsor.
H. Title to and the right to determine the disposition
of any copyrights or copyrightable material first
produced or composed in the performance of this
research shall remain with the Institute. The
Institute shall grant to the Sponsor an irrevocable,
royalty-free, non-transferable, non-exclusive right
and license to use, reproduce, display, distribute,
translate and perform, all such copyrightable
materials other than computer software and its
documentation. The Institute shall grant to the
Sponsor an irrevocable, royalty-free, non-
transferable, non-exclusive right and license to use,
reproduce, display, translate and perform computer
software and its documentation specified to be
developed and delivered under the Statement of Work
for Sponsor's internal (non-commercial) research
purposes. Sponsor may elect to negotiate a
non-exclusive (or exclusive subject to third party
rights, if any) royalty-bearing license to use,
reproduce, display, distribute, translate and perform
such computer software and its documentation for
commercial purposes (in a designated field of use,
where appropriate). Computer software for which a
patent application is filed shall be subject to
paragraph B. above.
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I. In the event that the Institute elects to establish
property rights other than patents to any tangible
research property (TRP), e.g., biological materials,
developed during the course of the research, the
Institute and the Sponsor will determine disposition
of rights to such property by separate agreement. The
Institute will, at a minimum, reserve the right to
use and distribute TRP for non-commercial research
purposes.
J. All licenses elected by Sponsor pursuant to this
clause become effective as of the date the parties
sign a subsequent license agreement, and shall survive
termination or expiration of this Agreement.
9. USE OF NAMES. Neither party will use the name of the other in
any advertising or other form of publicity without the written
permission of the other, in the case of the Institute, that of
the Director of the News Office.
10. NOTICES. Any notices required to be given or which shall be
given under this Agreement shall be in writing delivered by
first class air mail or telex addressed to the parties as
follows:
MASSACHUSETTS INSTITUTE SPONSOR
OF TECHNOLOGY
Mr. George H. Dummer, Director Virus Research
Office of Sponsored Programs, E19-702 Institute, Inc.
Massachusetts Institute of Technology 840 Memorial Drive
77 Massachusetts Avenue Cambridge, MA 02139
Cambridge, MA 02139
In the event notices, statements and payments required under
this Agreement are sent by certified or registered mail by one
party to the party entitled thereto at its
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<PAGE>
above address, they shall be deemed to have been given or made
as of the date so mailed.
11. ASSIGNMENT. This agreement shall be binding upon and inure to
the benefit of the parties hereto and the successors to
substantially the entire business and assets of the respective
parties hereto. This Agreement shall not be assignable by
either party without the prior written consent of the other
party; any attempted assignment is void.
12. GOVERNING LAW. The validity and interpretation of this
agreement and the legal relation of the parties to it shall be
governed by the laws of the Commonwealth of Massachusetts.
13. ENTIRE AGREEMENT. Unless otherwise specified, this Agreement
embodies the entire understanding between the Institute and
the Sponsor for this project, and any prior or contemporaneous
representations, either oral or written are hereby superseded.
No amendments or changes to this Agreement including without
limitation, changes in the statement of work, total estimated
cost, and period of performance, shall be effective unless
made in writing and signed by authorized representatives of
the parties.
MASSACHUSETTS INSTITUTE SPONSOR
OF TECHNOLOGY
By /s/ DAVID J. HARRIGAN By /s/ JOHN W. LITTLECHILD
---------------------------- -------------------------
Associate Director/
Office of Sponsored
Title Programs Title President
------------------------ ---------------------
Date 12/5/91 Date 12/6/91
------------------------ ---------------------
-25-
<PAGE>
The information below marked by [****] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
FIRST AMENDMENT
This Amendment is to the License Agreement with the Effective
Date of December 6, 1991 between MASSACHUSETTS INSTITUTE OF TECHNOLOGY and VIRUS
RESEARCH INSTITUTE, INC.
The parties thereto now further agree as follows:
1. [****]
2. LICENSEE shall pay to M.I.T., in addition to the fees and royalties due
under Article IV of the License Agreement, the following fees:
a) [****]
b) [****]
3. [****]
4. The effective date of this Amendment shall be the last date of the
signatures below. Agreed to for:
MASSACHUSETTS INSTITUTE OF VIRUS RESEARCH INSTITUTE, INC.
TECHNOLOGY
By /s/ JOHN T. PRESTON By /s/ BRYAN E. ROBERTS
--------------------------------- ----------------------------------
Title Director, Technology Licensing Title V.P., Research & Development
------------------------------ -------------------------------
Date 9-17-92 Date 9-17-92
------------------------------- --------------------------------
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<PAGE>
EXHIBIT 10.18
Portions of this Exhibit have been omitted pursuant to a request for
Confidential Treatment. The omitted portions, marked by [****], have been
separately filed with the Commission.
LICENSE AGREEMENT
THIS LICENSE AGREEMENT ("Agreement") is made and entered into as of
December 13, 1994 (the "Effective Date") between VIRUS RESEARCH INSTITUTE, INC.,
as its Delaware corporation having its principal place of business at 61 Moulton
Street, Cambridge, Mass 02138 (hereinafter referred to as "VRI"), and PASTEUR
MERIEUX SERUMS ET VACCINS, a French corporation having its registered head
office at 58 Avenue Leclerc, Lyon, France (hereinafter referred to as "PMC").
RECITALS
A. VRI has certain proprietary rights relating to the use of
polyphosphazene as an immunoadjuvant for vaccines against human diseases.
B. PMC desires to obtain a license to such rights and to research,
develop, manufacture, market, sell and distribute certain vaccines which
incorporate polyphosphazene, all under the terms and conditions set forth below.
NOW THEREFORE, for and in consideration of the covenants, conditions
and undertakings hereinafter set forth, it is agreed by and between the parties
as follows:
ARTICLE 1
DEFINITIONS
1.1 "Affiliate" shall mean, with respect to any Person, (i) any
other Person of which securities or other ownership interests representing 50%
or more of the voting interests (or such lesser percentage which is the maximum
allowed to be owned by a foreign corporation in a particular jurisdiction) are,
at the time such determination is being made, owned, controlled or held directly
or indirectly, by such Person, or (ii) any other Person which, at the time such
determination is being made, is Controlling, Controlled by or under common
Control with, such Person.
For the purpose of this section 1.1, "Control," whether used as a noun
or verb, refers to the possession directly or indirectly, of the power to
direct, or cause the direction of, the management or policies of a Person,
whether through the ownership of voting securities, by contract or otherwise,
and "Person" means any natural person, corporation, firm, business trust, joint
venture, association, organization, company, partnership or other business
entity, or any
<PAGE>
The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
government, or any agency or political subdivision thereof. The Joint Venture
companies known as Pasteur Merieux MSD Snc and MCM Vaccine Co. are Affiliates
of PMC.
1.2 "Co-Exclusive Vaccine" shall mean a parenterally administered
vaccine (other than a DNA vaccine) against one or more of the following
diseases: Respiratory Syncytial Virus ("RSV"), Para Influenza, Cytomegalovirus
("CMV"), Pneumococcal Pneumonia ("Pneumo") (including S. pneumoniae, Branhamalla
and non-typable Haemophilus Influenza), Rabies, each alone or in combination
with each other, and specifically excluding a combination of (a) one or more of
the vaccines specifically enumerated as a Co-Exclusive Vaccine or Exclusive
Vaccine with (b) a vaccine which is not specifically enumerated as an Exclusive
Vaccine or Co-Exclusive Vaccine.
1.3 "Exclusive Vaccine" shall mean a parenterally administered
vaccine(s) (other than a DNA vaccine) against one or more of Lyme Disease,
Meningococcus and Influenza, each alone or in combination with each other or in
combination with a Co-Exclusive Vaccine and shall also include the combination
[****] excluding a combination of (a) one or more of the vaccines specifically
enumerated as a Co-Exclusive Vaccine or Exclusive Vaccine with (b) a vaccine
which is not specifically enumerated as an Exclusive Vaccine or Co-Exclusive
Vaccine.
1.4 "Field" shall mean the prevention of a disease in humans.
1.5 "Licensed Know-How" shall mean any biological materials, and any
research and development information, inventions, know-how, pre-clinical,
clinical and other technical data, in each case that are owned by VRI, or
possessed by VRI with the right to provide the same to others, from and after
the Effective Date and which is necessary or useful for the improving, making,
using or selling of Licensed Products as provided in this Agreement.
1.7 "Licensed Product(s)" shall mean, individually and collectively,
the Exclusive Vaccines and the Co-Exclusive Vaccines provided that
polyphosphazene is used as an immunoadjuvant in the product containing such
vaccine.
1.8 "Net Sales" shall mean the gross invoice price of Licensed
Products sold or distributed by PMC or its Affiliates or any of their
sublicensees, less: (i) normal and customary rebates, trade discounts, and
credits for returns and allowances, all to the extent actually allowed, (ii) to
the extent separately reported on the invoice, sales or other excise taxes or
duties imposed upon and paid by PMC, its Affiliates or sublicensees with respect
to such sales, and (iii) transportation charges and insurance for transportation
to the extent separately invoiced or separately reported on the invoice and paid
by the seller.
2
<PAGE>
In the event that Licensed Product is sold in other than an arms length
transaction, then Net Sales shall be the gross invoice price which would be
received in an arms length transaction, taking account of any deductions for
items referred to in clauses (i), (ii) and (iii) of the preceding paragraph.
In the event that consideration in addition to or in lieu of money is
received for Licensed Product such consideration shall be added to Net Sales.
Notwithstanding the provisions of this Section, Net Sales shall not
include sales to an Affiliate for resale by such Affiliate.
1.9 "Option Agreement" shall mean the Option Agreement of even date
herewith entered into between the parties hereto.
1.10 "Patent Rights" shall mean the following patents and patent
applications, and all subject matter claimed therein:
(a) All patents and applications listed in Exhibit A; any
continuations, continuations-in-part, divisions and substitutions thereof, or of
which such an application or patent is a successor; patents which may issue upon
any of the foregoing; and all renewals, reissues and extensions thereof; and
(b) Any foreign patents and/or applications that are
counterparts of a patent or application described in paragraph (a) above,
including any patent or application that claims subject matter claimed in, or
that takes priority from, a patent or application described in paragraph (a)
above.
(c) Any patent or application owned by VRI during the term of
this Agreement which claims polyphosphazene and/or the use thereof in a
parenteral vaccine.
(d) Any patent or patent application as to which PMC exercises
its option under the Option Agreement.
1.11 "PMC Immunoadjuvant Technology" shall mean any and all
materials, information, data, improvements, patents and patent applications
directed to polyphosphazene and/or its use as an immunoadjuvant including, but
not limited to, data related to polymer safety (other than Drug Master Files or
clinical data, and excluding that which is unique to the formulation of
polyphosphazene with a specific PMC antigen) which are owned by PMC or in the
possession of PMC with the right to provide same to others during the term of
the Agreement.
1.12 "Significant Competition" with respect to each Licensed Product
in each country for each calendar year shall mean that a third party sells a
vaccine which competes with a Licensed Product as a given indication, whether in
single antigen or multivalent form and such
3
<PAGE>
The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
third party vaccine has a commercially recognized advantage in safety,
immunogenicity and/or therapeutic value over the competing Licensed Product and
that such third party vaccine [****] of vaccines for the indication concerned.
The sale of a Co-Exclusive Vaccine by a licensee of VRI shall not be a third
party vaccine for the purpose of this definition.
1.13 "Territory" shall mean (i) all countries included in the
continents of North and South America, including Central America and the islands
of the Carribean, Europe, and Africa, including the dependencies and territories
of such countries; (ii) Thailand, and (iii) all countries previously part of the
U.S.S.R. [****]
1.14 "Valid Claim" shall mean a claim of an issued and unexpired
patent or pending patent application included within the Patent Rights, which
has not been held unenforceable, unpatentable or invalid by a court or other
governmental agency of competent jurisdiction from which no appeal can be or is
taken, and which is not admitted to be invalid or unenforceable through reissue,
disclaimer or otherwise.
ARTICLE 2
GRANT OF RIGHTS
2.1 License to PMC.
(a) Subject to the terms and conditions of this Agreement, VRI
hereby grants to PMC (i) a license under the Patent Rights and Licensed Know-How
to make, have made, and use the Licensed Products which are Exclusive Vaccines
outside of the Territory but only for sale in the Field in the Territory and to
make, have made, use, sell and distribute the Licensed Products which are
Exclusive Vaccines in the Field in the Territory, which license under this
Section 2.1(a)(i) shall be exclusive with respect to sale of Exclusive Vaccines
in the Field in the Territory and in all other respects the license granted
under this Section 2.1(a)(i) is non-exclusive, and (ii) a license under the
Patent Rights and Licensed Know-How to make, have made, and use the Licensed
Products which are Co-Exclusive Vaccines outside of the Territory but only for
sale in the Field in the Territory and to make, have made, use and sell a
Licensed Product which is a Co-Exclusive Vaccine in the Field in the Territory
which license under this Paragraph 2.1(a) shall be exclusive to PMC for use,
sale and distribution of Co-Exclusive Vaccine in the Field in each country of
the Territory but for one other entity which may, at VRI's option, be VRI or an
entity licensed by VRI, and in all other respects the license granted under
4
<PAGE>
The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
this Section 2.1(a)(ii) is non-exclusive. It is expressly understood that only
one entity other than PMC will be or be permitted to be licensed by VRI, to use
or sell any Co-Exclusive Vaccine in the Field in any country of the Territory.
(b) Subject to the terms and conditions of this Agreement, VRI
hereby grants to PMC a non-exclusive license under the Patent Rights and
Licensed Know-How (i) to use, sell and distribute the Licensed Products set
forth in Exhibit B in the countries set forth in Exhibit B, but only to the
extent that all of the antigens contained therein are covered by patent rights
of PMC and/or its Affiliates which give PMC an exclusive position with respect
to those antigens in those countries, and (ii) to make and have made and use
Licensed Products set forth in Exhibit B in any country of the world but only
for use, sale and distribution in the countries set forth in Exhibit B, and only
to the extent that all of the antigens contained therein are covered by patent
rights of PMC and/or its Affiliates, which give PMC an exclusive position with
respect to all of the antigens contained in the Licensed Product of Exhibit B in
those countries of Exhibit B. Exhibit B is intended to set forth the countries
in which PMC holds exclusive rights in respect of a given antigen and the
antigens as to which such exclusive rights are held in that country. Such
Exhibit B shall be amended from time to time to take account of any additional
countries and/or additional Licensed Products which contain only antigens as to
which PMC obtains exclusive rights during the term of this Agreement but only to
the extent that VRI is able to grant such a license and only to the extent VRI
has nor previously granted to a third party rights which would prevent RI from
granting such rights to PMC.
(c) Upon written notice to VRI, PMC shall have the right to be
granted a non- exclusive license to use, sell and distribute each Co-Exclusive
Vaccine and each Exclusive Vaccine, in each country (other than Japan) ,where
PMC and/or its Affiliates have patent rights (as an owner or exclusive licensee)
which cover the antigen of such Exclusive Vaccine or CoExclusive Vaccine
provided that VRI has not granted rights to a third party in such country which
would prevent VRI from granting such license to PMC, which non-exclusive license
extension shall be limited to a Co-Exclusive Vaccine or Exclusive Vaccine, as
the case may be, which contains such antigen. The non-exclusive license shall
include the right to make and have made each such Co-Exclusive Vaccine and
Exclusive Vaccine but only for use and sale in the countries specified in this
paragraph. 2.1(c).
(d) [****]
(e) In order to assure PMC of the exclusive rights granted in
Paragraph 2.1(a)(i), VRI shall not grant to a third party or itself exercise any
rights or licenses under Patent Rights and Licensed Know-How to use, sell or
distribute a parenterally administered vaccine [****] against Lyme Disease,
Meningococcus or Influenza in the Field in the Territory. In addition, except as
permitted in Paragraph 2.1(a)(ii), VRI shall not grant to a third party or
itself
5
<PAGE>
The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
exercise any rights or licenses under Patent Rights and Licensed Know-How to
use, sell or distribute a parenterally administered vaccine [****] against RSV,
Para Influenza, CMV Pneumo (including S. Pneumoniae, Branhamalla and non-typable
Haemophilus Influenza) and Rabies in the Field in the Territory.
2.2 Licenses to VRI. Subject to the rights granted to and maintained
by PMC and to any existing rights of third-parties, PMC hereby grants to VRI a
worldwide, royalty free, license to use PMC Immunoadjuvant Technology to make,
have made, use and sell vaccine products, including the right to sublicense such
license to Affiliates. Such license of PMC Immunoadjuvant Technology may also be
sublicensed to third parties with the prior written consent of PMC, which
consent shall not be unreasonably withheld.
2.3 Sublicenses. With respect to the rights granted under Section
2.1 (a)(i) PMC shall have the right to grant sublicenses under this Agreement
with the prior approval of VRI as to the sublicensee, which approval shall not
be unreasonably denied. With respect to the rights granted under Section
2.1(a)(ii), PMC shall have the right (without the approval of VRI) to grant a
sublicense to one other party in any country where PMC is not selling or does
not intend to sell Licensed Product. PMC shall advise VRI of the name of such
sublicensee when such sublicensee is selected. The rights granted under Section
2.1(b) and (c) are not sublicensable, except to Affiliates of PMC.
2.4 (a) In case of any sublicense by PMC or VRI of the rights and
licenses granted in this Agreement, the sublicensee shall agree to be bound by
the terms, obligations and conditions identical to those of Articles 6 and 10
and Sections 2.5 and 11.5 of this Agreement (substituting the name of the
Sublicensee for that of the sublicensing party), with the other party being
expressly made a third party beneficiary thereof, and the sublicensing party
shall be responsible for the performance by the appointed sublicensee of such
terms, obligations and conditions.
(b) Each sublicense agreement concluded by PMC will include a
requirement that the sublicensee maintain records and permit inspection on terms
essentially identical to Article 9.4 of this Agreement. At VRI's request, PMC
shall arrange for an independent certified accountant selected by VRI to inspect
the records of its sublicensee(s) for the purpose of verifying royalties due to
VRI and shall cause such accountant to report the results thereof to VRI.
(c) All sublicenses granted for a Licensed Product or for the
PMC immunoadjuvant Technology in a country shall terminate upon termination of
the licenses granted hereunder with respect to such Licensed Product or to PMC
Immunoadjuvant
6
<PAGE>
Technology as the case may be, provided that upon expiration of the full term of
this Agreement pursuant to Paragraph 4.1, all parties shall have fully paid-up,
non-cancelable licenses.
2.5 To the extent Patent Rights are licensed to PMC under this
Agreement by PMC exercising its option under the Option Agreement which Patent
Rights VRI has licensed from another party under an agreement with another party
("Another Party Agreement(s)"), PMC understands and agrees as follows:
(i) The rights licensed to PMC by VRI are subject to the terms,
limitations, restrictions and obligations of the Another Party Agreement(s).
(ii) PMC will comply with the terms, obligations, limitations
and restrictions of the Another Party Agreement(s) to the extent PMC has been
permitted to review such terms, obligations, limitations and restrictions. VRI
will give PMC, upon request, a reasonable opportunity to review the same except
to the extent that confidentiality or other obligations towards Another Party
may prevent VRI from doing so. In any event VRI shall act reasonably in advising
PMC of the scope of PMC's obligation pursuant to such Another Party Agreement.
It is expressly understood that PMC may refuse to accept a license under one or
more Another Party Agreements, in which case PMC will not be bound thereby.
2.6 Disclosure of Technology. Upon the execution of this Agreement,
and periodically thereafter upon request by PMC, VRI shall provide to PMC copies
of all available information in tangible form within the Licensed Know-How or
related to the Patent Rights.
2.7 Subject to the terms and conditions of the Supply Agreement to
be negotiated under this Section 2.7, PMC is hereby granted a non-exclusive
right and license under the Patent Rights and Licensed Know-How to make and have
made polyphosphazene for use by PMC, its Affiliates and its sublicensees as an
immunoadjuvant in the manufacture of Licensed Product in accordance with and to
the extent that PMC retains its license to Licensed Product under this
Agreement.
PMC shall have the right at any time during the term of this
Agreement, but not the obligation, to exercise its right under the herein
granted manufacturing license. In the event that PMC decides to exercise such
rights, it shall so inform VRI in writing, and VRI shall promptly disclose to
PMC all applicable manufacturing technology in the possession of VRI at the time
of such disclosure. Subject to applicable confidentiality obligations, VRI and
PMC shall share and exchange any technology and know-how they shall generate
while establishing manufacturing processes and facilities.
When either PMC or VRI achieves manufacture of polyphosphazene
on a commercial basis, it shall have an obligation to use reasonable efforts in
good faith to assist the other to satisfy its reasonable requirements of
polyphosphazene for use as an immunoadjuvant on reasonable commercial terms,
taking into account the respective investments made and risks incurred by the
parties in connection with such manufacture.
7
<PAGE>
The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
PMC and VRI shall consult in good faith and in their mutual
interest as to an arrangement for the manufacture and supply of polyphosphazene
for clinical lots as well as in commercial quantities for use as an
immunoadjuvant by PMC and its Affiliates and authorized sublicensees in the
Licensed Products as licensed hereunder and for use by VRI, its Affiliates and
licensees (other than PMC).
VRI shall use commercially reasonable efforts to establish a
process capable of yielding under GMP conditions consistent and validated
supplies of polyphosphazene in accordance with agreed upon specifications,
[****]
Upon successful completion of such step, PMC shall pay to VRI
the milestone payment provided for in Section 3.1(b) hereof.
VRI shall use commercially reasonable efforts to obtain a
manufacturer of polyphosphazene. Thereafter, under the terms and conditions of a
supply agreement to be negotiated in good faith between the parties (the "Supply
Agreement"), VRI shall be responsible for scaling-up the process in an efficient
cost-effective GAP manufacturing facility for production or polyphosphazene
according to agreed-upon specifications at industrial scale, which Supply
Agreement shall provide that if VRI manufactures the polyphosphazene[****].
[****]
PMC shall render all reasonable assistance to VRI in identifying and
selecting a third-party manufacturer. In the event that VRI retains such
manufacturer, VRI shall then, subject to appropriate confidentiality provisions,
transfer to it all of VRI's technology for manufacture of polyphosphazene.
ARTICLE 3
MILESTONES AND ROYALTIES
3.1 Milestone Fees. PMC shall pay to VRI the non-refundable and
non-creditable amounts specified below within thirty (30) days following the
accomplishment by PMC (or in the case of Paragraph 3.1(a) by PMC or VRI) its
Affiliates or sublicensees of the corresponding event set forth below, or (ii)
within thirty (30) days following receipt by PMC of written notice of
accomplishment by VRI or a VRI's Affiliate of such other corresponding event set
forth below:
(a) The sum of two and one half million dollars, upon the
earlier of (i) successful completion of toxicology work carried out by or on
behalf of PMC or by VRI which
8
<PAGE>
The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
is suitable for use in the preparation of an IND in the United States (or the
equivalent thereof in the European Union) for a Licensed Product(s) or (ii)
initiation of a Phase I Clinical Trial by or on behalf of PMC anywhere in the
world for a Licensed Product.
(b) the sum of one million dollars upon establishment by VRI of
a process capable of yielding under GMP, conditions consistent and validated
supplies of polyphosphazene in accordance with agreed upon specifications [****]
(c) Influenza milestone payments as follows:
[****]
(d) [****]
(e) [****]
3.2 Royalties. [****]
(a) [****]
(b) [****]
(c) Earned royalties [****]
The Royalty obligations set forth above will be calculated for each
calendar year by (a) first applying sales in countries for which there has been
[****] up to the total sales of such products and (b) secondly applying sales in
countries for which there has been [****] for which there was [****] and going
up to the level of total sales of products for which there was [****]. An
example of such calculation is as follows:
[****]
(d) In the case of the earned royalties set forth in
paragraphs (a) and (b) above, the royalties would be adjusted in each country
for each calendar year for each Licensed Product in the event PMC was required
to pay royalties to a third party for use of a polyphosphazene immunoadjuvant in
such Licensed Product in such a country for such year utilizing the following
method, but in no event shall [****]
(1) First determine the relationship between Net
Sales in the applicable country for the year and the total worldwide Net Sales
in that same category of sales for the year for the Licensed Product, i.e.,
divide Net Sales in a country for the applicable
9
<PAGE>
The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
Licensed Product, where, for example, [****] by worldwide Net Sales in all
countries for such Licensed Product [****]
(2) Apply this percentage to total royalties paid
in all such countries for the Licensed Product for the year to determine the VRI
royalties in a country against which a credit for third party royalties paid in
such country may be taken.
(3) Subtract the amount of third party royalties
paid in the country in question [****]
(e) Royalties shall be calculated and paid on a
country-by-country and product-by-product basis [****] provided, however, that
if at any time after the expiration [****], the making, using or selling of the
product is covered by Patent Rights, the royalties shall be paid until the
expiration of the last to expire of any such patent(s).
(f) [****]
3.3 Single Royalty: Non-Royalty Sales. It is understood that in no
event shall more than one royalty be payable under Sections 3.2 with respect to
a particular unit of Licensed Product. No royalty shall be payable under this
Article 3 with respect to sales of Licensed Products among PMC, its Affiliates
and/or sublicensees, but royalty shall be due upon the subsequent sale of the
Licensed Product to an entity who is not an Affiliate or sublicensee provided,
however, that if there is no or is to be no subsequent sale of the Licensed
Product to an entity who is not an Affiliate or a sublicensee, then the royalty
shall be due and shall be based upon the higher of (i) the gross invoice price
to such Affiliate or sublicensee or (ii) the average gross invoice price which
PMC charges to its customers (other than Affiliates and sublicensees) for the
Licensed Product for the relevant reporting period of Section 9.1 in the
relevant country.
No royalty shall be payable for (i) Licensed Product used in clinical
trials, or (ii) Licensed Product used by PMC or its sublicensee for research, or
(iii) customary quantities of Licensed Product distributed by PMC or its
sublicensee as free samples.
3.4 Combination Products. In the event Licensed Products contain
vaccines licensed hereunder in combination, the royalty rate applicable to said
combination products shall be the [****]
10
<PAGE>
The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
ARTICLE 4
TERM AND TERMINATION
4.1 Term. This Agreement shall become effective as of the Effective
Date and, unless earlier terminated pursuant to the other provisions of this
Article 4, shall continue in full force and effect as long as PMC is obligated
to pay royalties under this Agreement. PMC's license under Section 2.1 with
respect to the Licensed Know-How shall survive the expiration, but not an
earlier termination, of this Agreement.
4.2 Termination for Breach. In the event of a material breach of
this Agreement the nonbreaching party in addition to any other remedy which it
may have shall be entitled to terminate this Agreement following written notice
of such breach to the breaching party. If such breach is not cured within sixty
(60) days after written notice is given by the nonbreaching party to the
breaching party specifying the breach, the non-breaching party may terminate the
Agreement forthwith upon written notice to, the breaching party after expiration
of such sixty (60) day period.
4.3 Termination by PMC. (a) Any provision herein notwithstanding,
PMC may terminate this Agreement at any time by giving VRI at least one hundred
and eighty (180) days prior written notice.
(b) PMC may terminate its license with respect to any
Licensed Product by one-hundred and eighty (180) days prior written notice to
VRI, and thereafter such Licensed Product(s) shall no longer be licensed under
this agreement.
(c) In the event of a termination under Article 4.3 (a)
all rights granted herein to PMC shall forthwith revert to VRI and PMC shall
provide VRI [****] developed during the term of this Agreement with respect
thereto which may be used in accordance with [****]
4.4 Survival.
4.4.1 Termination of this Agreement for any reason shall not release
either party hereto from any liability which at the time of such termination has
already accrued to the other party.
4.4.2 In the event this Agreement is terminated for any reason, PMC
and its Affiliates and sublicensees shall have the right to sell to otherwise
dispose of the stock of any Licensed Product then on hand, all subject to the
payment to VRI of fees and royalties pursuant to Article 3 hereof.
11
<PAGE>
4.4.3 Articles 6, 10 and 11, and Sections 2.5, 4.43, 4.5, 5.5, 9.3,
and 9.4, shall survive the expiration and any termination of this Agreement.
Except as otherwise provided in Section 4.1 and Section 4.4.3, all rights and
obligations of the parties under this Agreement shall terminate upon the
expiration or termination of this Agreement.
4.5 In the event that PMC's right, and licenses under this Agreement
are terminated, PMC agrees not to make, use or sell Licensed Products except as
permitted by Article 4.4.2.
4.6 Either party may terminate this Agreement on notice if the other
party makes a general assignment for the benefit of creditors, is the subject of
proceedings in voluntary or involuntary bankruptcy or has a receiver or trustee
appointed for substantially all of its property; provided that in the case of an
involuntary bankruptcy proceeding such right to terminate shall only become
effective if the other party consents thereto or such proceeding is not
dismissed within ninety (90) days after the filing thereof. If, in connection
with bankruptcy proceedings involving a party, an election is made by or on
behalf of such party to reject the obligations of this Agreement and the other
party elects to retain its rights to intellectual property hereunder pursuant to
Section 365 n.1 of the Bankruptcy Code (USA), such other party shall be entitled
to enforce any rights exclusively granted to it in respect of intellectual
property hereunder by commencement of any action it deems necessary to that
effect against third-party infringers and may do so in the name and stead of the
bankrupt party.
ARTICLE 5
PATENTS AND INFRINGEMENTS
5.1 Prosecution by VRI. VRI shall have the right, at PMC's expense,
to control the filing for, prosecution and maintenance of the Patent Rights in
the Territory. In the event that VRI grants any license in a country of the
Territory with respect to any Patent Right, then thereafter PMC's obligation to
pay patent costs for Patent Rights in such country shall be an amount equal to
the total cost therefor multiplied by a fraction having as a numerator one and
as a denominator the total number of licenses granted by VRI in respect of such
Patent Rights in such country. VRI shall keep PMC reasonably informed as to the
status of the Patent Rights in the Territory, and shall provide PMC with copies
of all proposed filings and correspondence of a substantive nature with respect
to patents or applications within the Patent Rights to be made with or sent to
the United Sates Patent and Trademark Office or its counterpart in any country
of the Territory (each, a "Patent Authority"). VRI shall also provide to PMC
copies of all correspondence that it receives from a Patent Authority with
respect to the Patent Rights and shall consider any comments of PMC with respect
thereto.
5.2 Infringement Claims. If the production, sale or use of a
Licensed Product result in any claim for infringement of a patent or other
proprietary right of a third party against PMC, its Affiliates or sublicensees
PMC shall promptly notify VRI thereof in writing. As between the
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The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
parties to this Agreement, PMC shall have the right at its own expense to defend
and control the defense of any such claim against PMC, by counsel of PMC's own
choice.
5.3 Enforcement of Patent Rights. (a) In the event that any Patent
Rights are infringed by a third party with respect to an Exclusive Vaccine or
Co-Exclusive Vaccine in the Field in the Territory, with the consent and
approval of VRI (which shall not be unreasonably denied and shall be deemed to
have been granted if VRI shall be in voluntary or involuntary bankruptcy
proceedings, other than a proceeding such as Chapter II where the debtor
continues to operate the business), PMC and/or its Affiliates or sublicensees
shall have the right (except as provided below), but not the obligation, to
institute, and prosecute any action or proceeding under the Patent Rights with
respect to such infringement, by counsel of its choice, including any
declaratory judgment action arising from such infringement. Any amounts
recovered from third parties with respect to the Patent Rights in such action
shall be applied first to reimburse the expenses of the action; then to the
extent the award is [****] PMC shall not have the right to settle, compromise or
take any action in such litigation which diminish, limit or inhibit the scope,
validity or enforceability of the Patent Rights without the express written
permission of VRI. PMC shall keep VRI advised of the progress of such
proceedings.
5.4 In the event that a third party is infringing the Patent Rights
with respect to an Exclusive Vaccine or Co-Exclusive Vaccine in the Territory in
the Field and PMC does not elect to institute an action, VRI shall have the
right, but not the obligation, to commence an infringement suit under the Patent
Rights against such infringer and retain any recovery; provided that it so
notifies PMC. If VRI commences a suit in accordance with this Section 5.4, PMC
shall have the right to participate in such suit and [****] the out-of-pocket
expenses thereof. If PMC elects to so participate, it shall share in any amounts
recovered in respect of such suit [****]VRI shall have the right to control such
action with counsel of its choice.
5.5 VRI Participation. In VRI's sole discretion, VRI shall be
entitled to participate at its expense through counsel of its choosing in and
control any legal action by or against PMC affecting the validity or
enforceability of the patents on which Parent Rights are based, and PMC may
elect to participate in any such action to the extent necessary to defend its
own interests.
5.6 Each party agrees to cooperate with each other with respect to
any litigation under Sections 5.2, 5.3 or 5.4.
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ARTICLE 6
CONFIDENTIALITY
6.1 Nondisclosure. Except as otherwise provided in this Agreement, a
party receiving (the "Receiving Party") any business or technical information
("Proprietary Information") that is disclosed to it by the other party the
("Disclosing Party") shall for a period beginning on the Effective Date and
ending ten (10) years after the termination of this Agreement hold in confidence
and not disclose to any third party the "Proprietary Information". In addition,
the Receiving Party shall not use Proprietary Information that it receives from
the Disclosing Party, except as is reasonably necessary to exercise the rights
granted to the Receiving Party under Article 2 or Article 5 of this Agreement.
Notwithstanding the foregoing, with the prior written permission of the
Disclosing Party (which shall not be unreasonably withheld), the Receiving Party
may disclose information concerning the Patent Rights and/or the Licensed
Know-How to actual or prospective sublicensees or to other third parties with
whom the Receiving Party is considering or has entered into a business
relationship, all of whom are similarly bound in writing under a reasonable
confidentiality agreement. Proprietary Information of a party shall not include:
6.1.1 Information which is or was published or has become generally
available to the public through no fault of the Receiving Party;
6.1.2 Information which the Receiving Party can document is or was in
its possession at the time of disclosure or was independently developed by the
Receiving Party; or
6.1.3 Information which is rightfully acquired by the Receiving Party
from a third party who is not under an obligations of confidentiality to the
disclosing party, and to the best of the Receiving Party's knowledge and belief
is entitled to rightfully make such disclosure, but only to the extent the
Receiving Party complies with any restrictions imposed by the third party.
6.2 Exceptions. The Receiving Party may disclose Proprietary
Information of the other, in connection with the order of a court of law or
administrative or governmental authority provided that the Receiving Parry
exerts reasonable efforts to preserve the confidentiality thereof and the
disclosing party is given an opportunity to protect the confidentiality thereof,
or as is reasonably necessary in connection with the labeling of its products
that are otherwise sold in compliance with this Agreement or as required for
obtaining regulatory approval of Licensed Product, provided that the Receiving
Party protects the confidentiality thereof to the fullest extent possible.
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6.3 Notwithstanding anything else to the contrary, PMC agrees that
Licensed Know-How, or Proprietary Information received from VRI shall be used by
PMC only in and for Licensed Products and their development for sale in the
Territory in the Field, all in accordance with this Agreement, and can only be
used by PMC for so long as and to the extent that PMC maintains a license under
this Agreement.
6.4 Notwithstanding anything else to the contrary and subject to
Section 4.1, in the event that PMC's rights and licenses under this Agreement
are terminated, PMC agrees (a) not to use Licensed Know-How, or any Proprietary
Information provided to PMC by VRI or any information developed by PMC which is
derived from or is based on Licensed Know- How for the research, development,
making, or using or selling of any product or process, including, but not
limited to Licensed Products and (b) not to do any of the foregoing while this
Agreement is in force for any product except as licensed under this Agreement.
6.5 Notwithstanding anything else to the contrary, VRI agrees that
Licensed Know- How (including but not limited to PMC Immunoadjuvant Technology)
licensed to it by PMC hereunder may be used only in a manner consistent with the
provisions of this Agreement. VRl's licenses herein shall survive the expiration
of the term hereof but not an earlier termination of this Agreement except as
provided in Section 4.3(c).
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
7.1.1 VRI and PMC each represents and warrant to the other that each
has the full right and authority to enter into this Agreement and grant the
rights and licenses granted herein:
7.1.2 VRI represents and warrants to PMC that it has not previously
granted and, prior to termination of this Agreement, will not grant any rights
in the Patent Rights or the Licensed Know-How that are inconsistent with the
rights and licenses granted to PMC herein;
7.1.3 To the best of VRl's knowledge, there is no pending or
threatened claim or litigation to which VRI is a party contesting the validity
or right to use any of the Patent Rights, and VRI has not received any notice of
infringement with respect to Patent Rights.
7.2 Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN SECTION
7.1 ABOVE, NEITHER PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTIES OF
ANY KIND EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NO INFRINGEMENT, OR VALIDITY
OF ANY PATENT RIGHTS ISSUED OR PENDING.
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The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
7.3 Effect of Representations and Warranties. Subject to Section
7.4, it is understood that if the representations and warranties under this
Article 7 are not true and accurate and PMC incurs liabilities, costs or other
expenses as a result of such falsity, VRI shall indemnify and hold PMC harmless
from and against any such liabilities, costs or expenses incurred, provided that
VRI receives prompt notice of any claim against PMC resulting from or related to
such falsity and the sole right to control the defense or settlement thereof.
7.4 Limitation of Liability. Notwithstanding anything else to the
contrary, VRl's liability for any breach of this Agreement (including but not
limited to any liability which results from any breach of any representation or
warranty) is limited to the payments received or to be received from PMC under
this Agreement. This Limitation on Liability shall not be applicable to
intentional misconduct on the part of VRI or where PMC, as a result of such
breach, is liable to a Third Party in excess of such Limitation on Liability.
ARTICLE 8
DUE DILIGENCE
8.1 General. PMC shall use commercially reasonable efforts to
research, develop, register, market and sell and to continue to market and sell
each Licensed Product in each country of the Territory. Upon a failure by PMC to
meet its obligations under this Section 8.1 with respect to any Licensed Product
in any country (directly or through a sublicensee), VRI shall, among other
remedies available to it, have the right to terminate the rights and licenses
granted hereunder with respect to such Licensed Product in such country.
8.2 PMC shall promptly notify VRI, in writing, if at any time PMC
does not intend to continue to research, develop and/or obtain regulatory
approval for and/or market and sell any Licensed Product in any country of the
Territory.
8.3 In the event that PMC provides VRI with notice pursuant to
Section 8.2 with respect to any Licensed Product or with respect to any
country(ies) the rights herein granted by VRI to PMC to such Licensed Product in
such country(ies), upon written notice from VRI to PMC shall revert to VRI.
8.4 In the event that PMC does not meet any of the milestones set
forth in Exhibit C (as the same may be extended as indicated herein) for any of
the Licensed Products set forth in Exhibit C, VRI shall have the right [****]
PMC shall have the right to [****] and the Parties shall agree on a reasonable
period for such extension. Exhibit C shall be appropriately revised to reflect
such extension. In addition, PMC shall have the right to extend each of the
milestones of Exhibit C, if not achieved, as set forth therein by [****] The
parties agree to set similar
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The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
milestones for [****] after [****] for one of the Licensed Products included in
Exhibit C. Notwithstanding the preceding sentence, such milestone [****]
8.5 PMC shall provide written reports to VRI on June 30th and
December 31st of each year concerning the efforts being made, in accordance with
Section 8.1 with respect to the Licensed Product. PMC shall provide VRI with any
additional information reasonably requested by VRI in this respect. Such reports
shall be considered to be Proprietary Information of PMC.
ARTICLE 9
ACCOUNTING AND RECORDS
9.1 Reports. PMC agrees to make quarterly written reports to VRI
within sixty (60) days after the end of each calendar quarter in which royalties
are due under this Agreement, stating in each such report the number,
description, and aggregate Net Sales of Licensed Products sold during the
calendar-quarter and upon which a fee or royalty is payable under Article 3
above. The report shall also include the calculation of Net Sales all on a
country by country and Licensed Product by Licensed Product basis. The report
shall be due with respect to sales of Licensed Product sold by PMC sixty (60)
days after the end of the calendar quarter and with respect to sales of Licensed
Product by sublicensees, ninety (90) days after the end of a calendar quarter.
If no such sales have been made, by PMC, its Affiliates and sublicensees the
report shall so state.
9.2 Payment. Concurrently with the making of each such report of
Section 9.1, PMC shall pay to VRI the royalties at the rate specified in Article
3 above. All payments by PMC to VRI hereunder shall be made in U.S. Dollars. If
any currency conversion shall be required in connection with the calculation of
royalties hereunder, such conversion shall be made by using the rate of exchange
published in the Wall Street Journal for the last business day of the applicable
calendar quarter.
9.3 Withholding Taxes. Any withholding or other tax that PMC or any
of its Affiliates are required by statute to withhold and pay on behalf of VRI
with respect to the royalties payable to VRI under this Agreement shall be
deducted from said royalties and paid contemporaneously with the remittance to
VRI; provided, however, that in regard to any tax so deducted PMC shall furnish
VRI with proper evidence of the taxes paid on its behalf. VRI will furnish PMC
with appropriate documents to secure application of the favorable rate of
withholding tax under applicable tax treaties.
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9.4 Records; Inspection.
9.4.1 PMC shall keep complete, true and accurate books of
account and records for the purpose of determining the amounts payable to VRI
under this Agreement. Such books and records shall be kept at PMC's principal
place of business for at least three (3) years following the end of the calendar
quarter to which they pertain, and will be open for inspection during such three
(3) year period by a representative of VRI for the purpose of verifying PMC's
royalty statements. Such inspections may be made no more than once each calendar
year, during normal business hours and upon thirty (30)/days prior notice. Any
such information shall be considered to be Proprietary Information of PMC.
9.4.2 Inspections conducted under this Section 9.4 shall be at
the expense of VRI, unless an underpayment exceeding five percent (5%) of the
amount paid for the period covered by the inspection is established in the
course of any such inspection, whereupon all costs relating thereto will be paid
by PMC, as well as any unpaid royalties within the thirty (30) days after
requested by VRI.
ARTICLE 10
INDEMNIFICATION AND INSURANCE
10.1 PMC shall defend, indemnify and hold harmless VRI, Affiliates of
VRI and its licensors, and its respective directors, officers, shareholders,
agents, consultants and employees (collectively, the Indemnitees) from and
against any and all liability, loss, damages and expenses (including reasonable
attorneys' fees) as the result of claims, demands, costs or judgments which may
be made or instituted against any of the Indemnitees arising out of the
manufacture, design, possession, distribution, use, testing, sale or other
disposition by or through PMC and/or Affiliates of PMC and/or licensees of
either PMC or Affiliates of PMC of any Licensed Product and/or any product or
process in connection with or arising out of the Patent Rights or Licensed
Know-How and/or any material provided by PMC or Affiliates of PMC under this
Agreement (in each case, other than any claims, demands, costs or judgments
arising out of, based upon or resulting from infringement of the intellectual
property rights of a third party based upon the use of polyphosphazene as an
immunoadjuvant. PMC's obligation to defend, indemnify and hold harmless shall
include any and all such claims, demands, costs or judgments, including but not
limited to money damages arising from alleged personal injury (including death)
to any person or alleged property damage. PMC shall have the right to control
the defense of any action which is to be indemnified in whole by PMC hereunder,
including the right to select counsel (which shall be reasonably acceptable to
VRI) to defend the Indemnitees and to settle any claim as to which the
Indemnitees are fully indemnified by PMC. Notwithstanding the foregoing, PMC
shall have no obligation to indemnify or hold any Indemnitee harmless with
respect to any claim, demand, cost or judgment that results or is alleged to
result from the willful misconduct or negligence of an Indemnitee nor to the
extent that VRI has the obligation to indemnify under a
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Supply Agreement entered into between the parties pursuant to Par. 2.7. If PMC
does not provide counsel to defend the Indemnitees, VRI shall have the right to
select counsel and PM shall pay the reasonable costs and expenses of said
counsel. The provisions of this paragraph shall survive and remain in full force
and effect after any termination, expiration or cancellation of this Agreement
and PMC's obligation hereunder shall apply whether or not such claims are
rightfully brought.
ARTICLE 11
MISCELLANEOUS
11.1 Publicity. VRI and PMC shall cooperate in the preparation of a
mutually agreeable press release and other publicity disclosing the existence of
this Agreement and their business relationship. Except for information disclosed
in such a mutually agreed press release or publicity, neither PMC nor VRI shall
disclose the existence or any terms of this Agreement without the prior written
consent of the other party, except for such limited disclosure as may be
reasonably necessary to either party's bankers, investors, attorneys or other
professional advisors, or in connection with a merger or acquisition, or as may
be required by law in the offering of securities or in securities regulatory
filings or otherwise.
11.2 Waiver. It is agreed that no waiver by either party hereto of
any breach or default of any of the covenants or agreements herein set forth
shall be deemed a Waiver as to any subsequent and/or similar breach or default.
11.3 Independent Contractors. The relationship of the parties hereto
is that of independent contractors. Neither party hereto is an agent, partner or
joint venturer of the other for any purpose.
11.4 Compliance with Laws. In exercising its rights under this
license, PMC shall fully comply with the requirements of any and all applicable
laws, regulations, rules and orders of any governmental body having jurisdiction
on over the exercise of rights under this license.
11.5 Notices. Any notice required or permitted to be given to the
parties hereto shall be deemed to have been properly given if delivered in
person or when received if mailed by first class certified mail or sent by
facsimile to the other party at the appropriate address as set forth below or to
such other addresses as may be designated in writing by the parties from time to
time during the term of this Agreement.
VRI: VIRUS RESEARCH INSTITUTE. INC.:
61 Moulton Street
Cambridge, Mass. 02138
Attention: Chief Executive Officer
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PMC: PASTEUR MERIEUX SERUMS ET VACCINS:
58 Avenue Leclerc
Lyon, France
Attention: V.P. Product Development with copy to V.P.
Secretary & General Counsel
11.6 Complete Agreement. It is understood and agreed between VRI and
PMC that this Agreement and the Option Agreement constitutes the entire
agreement with respect to the subject matter of this Agreement, both written and
oral, between the parties, and that all prior agreements respecting the subject
matter hereof, either written or oral, expressed or implied, shall be abrogated,
cancelled, and are null and void and of no effect. No amendment or change hereof
or addition hereto shall be effective or binding on either of the parties hereto
unless reduced to writing and executed by the respective duly authorized
representatives of each of the parties hereto.
11.7 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision and the parties shall exert best efforts to amend this
Agreement to include a provision which is valid, legal and enforceable and which
carries out the original intent of the parties. In the event that such a
provision cannot be included in the Agreement and the absence thereof materially
changes a party's obligations or rights under this Agreement, such party shall
have the right to terminate this Agreement.
11.8 Counterparts and Headings. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original and both together
shall be deemed to be one and the same agreement. All headings and any cover
page or table of contents are inserted for convenience of reference only and
shall not affect its meaning or interpretation.
11.9 Governing Law. All matters affecting the interpretation,
validity and performance under this Agreement shall be governed by the internal
laws of the Commonwealth of Massachusetts without regard for its conflict of
laws principles.
11.10 Force Majeure. If and to the extent that either party hereto is
prevented, by circumstances not now reasonably foreseeable and not within its
reasonable ability to control, from performing any of its obligations under this
Agreement (other than payment obligations) and promptly so notifies the other
party giving full particulars of the circumstances in question, then the party
affected shall be relieved of liability to the other for failure to perform such
obligations, but shall nevertheless use its best efforts to resume full
performance thereof without avoidable delay, and pending such resumption shall
consult with the other party and shall permit and shall use its best efforts to
facilitate any efforts the other party may make to effect the performance of
such obligations by other means. If such failure to perform continues for a
period of more than one (1) year, the other party may terminate this Agreement
by written notice to the non-performing party with respect to the rights and
licenses with respect to those Licensed
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Products and with respect to those countries affected by such failure. The
failure to achieve milestones under Article 8 and/or the failure to obtain
regulatory approval for a Licensed Product shall not be considered to be
circumstances within this Section 11.10.
ARTICLE 12
ASSIGNMENT; SUCCESSORS
12.1 This Agreement shall not be assignable by either of the parties
without the prior written consent of the other party (which consent shall not be
unreasonably withheld), except that either party may assign this Agreement to an
Affiliate or to a successor in interest or transferee of all or substantially
all of the portion of the business to which this Agreement relates.
12.2 Subject to the limitations on assignment herein, this Agreement
shall be binding upon and inure to the benefit of said successors in interest
and assigns of VRI and PMC. In order for such assignment to be effective any
such successor or assignee of a party's interest shall expressly assume in
writing the performance of all the terms and conditions of this Agreement to be
performed by said party and such Assignment shall not relieve the Assignor of
any of its obligations under this Agreement.
IN WITNESS WHEREOF, both VRI and PMC have executed this Agreement, in
duplicate originals, by their respective officers hereunto duly authorized, the
day and year first above written.
VIRUS RESEARCH INSTITUTE, INC. PASTEUR MERIEUX SERUMS ET
VACCINS
By: /s/ WILLIAM A. PACKER By: /s/ JEAN-JACQUES BERTRAND
------------------------------ -----------------------------------
Print Name: William A. Packer Print Name: Jean-Jacques Bertrand
Vice Chairman, President & Chief
Title: President Title: Executive Officer
--------------------------- --------------------------------
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The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
EXHIBIT A
PATENT RIGHTS
1. United States
[****]
2. PCT
[****]
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The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
EXHIBIT B
PMC PROPRIETARY RIGHTS
[****]
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EXHIBIT 10. 19
Portions of this Exhibit have been omitted pursuant to a request for
Confidential Treatment. The omitted portions, marked by [****], have been
separately filed with the Commission.
LICENSE AGREEMENT
THIS LICENSE AGREEMENT ("Agreement") is made and entered into
as of August 2, 1995 (the "Effective Date") between VIRUS RESEARCH INSTITUTE,
INC., a Delaware corporation having its principal place of business at 61
Moulton Street, Cambridge, Mass 02138 (hereinafter referred to as "VRI"), and
PASTEUR MERIEUX SERUMS ET VACCINS, a French corporation having its registered
head office at 58 Avenue Leclerc, Lyon, France (hereinafter referred to as
"PMC").
RECITALS
A. VRI has certain proprietary rights relating to the use of
polyphosphazene for the mucosal delivery of vaccines against human diseases.
B. PMC desires to obtain a license to such rights and to
research, develop, manufacture, market, sell and distribute certain vaccines
which incorporate polyphosphazene, all under the terms and conditions set forth
below.
NOW THEREFORE, for and in consideration of the covenants,
conditions, and undertakings hereinafter sat forth, it is agreed by and between
the parties as follows:
ARTICLE 1
DEFINITIONS
1.1 "Affiliate" shall mean, with respect to any Person, (i) any
other Person of which securities or other ownership interests representing 50%
or more of the voting interests (or such lesser percentage which is the maximum
allowed to be owned by a foreign corporation in a particular jurisdiction) are,
at the time such determination is being made, owned, controlled or held directly
or indirectly, by such Person, or (ii) any other Person which, at the time such
determination is being made, is Controlling, Controlled by or under common
Control with, such Person.
For the purpose of this section 1.1, "Control," whether used as
a noun or verb, refers to the possession directly or indirectly, of the power to
direct, or cause the direction of, the management or policies of a Person,
whether through the ownership of voting securities, by contract or otherwise,
and "Person" means any natural person, corporation, firm, business trust, joint
venture, association, organization, company, partnership or other business
entity, or
<PAGE>
The information below marked by [****] has been omitted
pursuant to a request for Confidential Treatment. The omitted portion has been
separately filed with the Commission.
any government, or any agency or political subdivision thereof. The Joint
Venture companies known as Pasteur Merieux MSD Snc and MCM Vaccine Co. are
Affiliates of PMC.
1.2 "Co-Exclusive Vaccine" shall mean a mucosally administered
vaccine (other than a DNA vaccine) against one or more of the following
diseases: Respiratory Syncytial Virus ("RSV"), Para Influenza, Cytomegalovirus
("CMV"), Pneumococcal Pneumonia ("Pneumo") (including S. pneumoniae,
Branhamalla, non-typable Haemophilus Influenza and Otitis Media), Rabies, each
alone or in combination with each other, and specifically excluding a
combination of (a) one or more of the vaccines specifically enumerated as a
Co-Exclusive Vaccine or Exclusive Vaccine with (b) a vaccine which is not
specifically enumerated as an Exclusive Vaccine or Co-Exclusive Vaccine.
1.3 "Exclusive Vaccine" shall mean a mucosally administered
vaccine(s) (other than a DNA vaccine) against one or more of Lyme Disease,
Meningococcus and Influenza, each alone or in combination with each other or in
combination with a Co-Exclusive Vaccine and shall also include [****]
specifically excluding a combination of (a) one or more of the vaccines
specifically enumerated as a Co-Exclusive Vaccine or Exclusive Vaccine with (b)
a vaccine which is not specifically enumerated as an Exclusive Vaccine or
Co-Exclusive Vaccine.
1.4 "Field" shall mean the prevention of a disease in humans.
1.5 "Licensed Know-How" shall mean any biological materials,
and any research and development information, inventions, know-how,
pre-clinical, clinical and other technical data, in each case that are owned by
VRI, or possessed by VRI with the right to provide the same to others, from and
after the Effective Date and which is necessary or useful for the improving,
making, using or selling of Licensed Products as provided in this Agreement.
1.7 "Licensed Product(s)" shall mean, individually and
collectively, the Exclusive Vaccines and the Co-Exclusive Vaccines provided that
polyphosphazene is used for the mucosal administration of the product containing
such vaccine.
1.8 "Net Sales" shall mean the gross invoice price of Licensed
Products sold or distributed by PMC or its Affiliates or any of their
sublicensees, less: (i) normal and customary rebates, trade discounts, and
credits for returns and allowances, all to the extent actually allowed, (ii) to
the extent separately reported on the invoice, sales or other excise taxes or
duties imposed upon and paid by PMC, its Affiliates or sublicensees with respect
to such sales, and (iii) transportation charges and insurance for transportation
to the extent separately invoiced or separately reported on the invoice and paid
by the seller.
-2-
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In the event that Licensed Product is sold in other than an
arms length transaction, then Net Sales shall be the gross invoice price which
would be received in an arms length transaction, taking account of any
deductions for items referred to in clauses (i), (ii) and (iii) of the preceding
paragraph.
In the event that consideration in addition to or in lieu of
money is received for Licensed Product such consideration shall be added to Net
Sales.
Notwithstanding the provisions of this Section, Net Sales shall
not include sales to an Affiliate for resale by such Affiliate.
1.9 "Patent Rights" shall mean the following patents and patent
applications, and all subject matter claimed therein:
(a) All patents and applications listed in
Exhibit A; any continuations, continuations-in-part, divisions and substitutions
thereof, or of which such an application or patent is a successor; patents which
may issue upon any of the foregoing; and all renewals, reissues and extensions
thereof; and
(b) Any foreign patents and/or applications that
are counterparts of a patent or application described in paragraph (a) above,
including any patent or application that claims subject matter claimed in, or
that takes priority from, a patent or application described in paragraph (a)
above; and
(c) Any patent or application owned by VRI during
the term of this Agreement which claims polyphosphazene and/or the use thereof
in as part of a vehicle for the mucosal administration of vaccine.
1.10 "PMC Mucosal Delivery Technology" shall mean any and all
materials, information, data, improvements, patents and patent applications
directed to polyphosphazene and/or its use as part of a mucosal delivery system
including, but not limited to, data related to polymer safety (other than Drug
Master Files or clinical data, and excluding that which is unique to the
formulation of polyphosphazene with a specific PMC antigen) which are owned by
PMC or in the possession of PMC with the right to provide same to others during
the term of the Agreement.
1.11 "Significant Competition" with respect to each Licensed
Product in each country for each calendar year shall mean that a third party
sells a mucosally delivered vaccine which competes with a Licensed Product as to
a given indication, whether in single antigen or multivalent form and such third
party vaccine has a commercially recognized advantage in safety, immunogenicity
and/or therapeutic value over the competing Licensed
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The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
Product and that such third party vaccine has [****] vaccines for the indication
concerned. The sale of a Co-Exclusive Vaccine by a licensee of VRI or the sale
of a polyphosphazene adjuvanted parenteral vaccine shall not be a third party
vaccine for the purpose of this definition.
1.12 "Territory" shall mean (i) all countries included in the
continents of North and South America, including Central America and the islands
of the Caribbean, Europe, and Africa, including the dependencies and territories
of such countries; (ii) Thailand, and (iii) all countries previously part of the
U.S.S.R. [****]
1.13 "Valid Claim" shall mean a claim of an issued and
unexpired patent or pending patent application included within the Patent
Rights, which has not been held unenforceable, unpatentable or invalid by a
court or other governmental agency of competent jurisdiction from which no
appeal can be or is taken, and which has not been admitted to be invalid or
unenforceable through reissue, disclaimer or otherwise.
ARTICLE 2
GRANT OF RIGHTS
2.1 License to PMC. (a) Subject to the terms and conditions of
this Agreement, VRI hereby grants to PMC (i) a license under the Patent Rights
and Licensed Know-How to make, have made, and use the Licensed Products which
are Exclusive Vaccines outside of the Territory but only for sale in the Field
in the Territory and to make, have made, use, sell and distribute the Licensed
Products which are Exclusive Vaccines in the Field in the Territory, which
license under this Section 2.l(a)(i) shall be exclusive with respect to sale of
Exclusive Vaccines in the Field in the Territory and in all other respects the
license granted under this Section 2.1(a)(i) is non-exclusive, and (ii) a
license under the Patent Rights and Licensed Know-How to make, have made, and
use the Licensed Products which are Co-Exclusive Vaccines outside of the
Territory but only for sale in the Field in the Territory and to make, have
made, use and sell a Licensed Product which is a Co-Exclusive Vaccine in the
Field in the Territory which license under this Paragraph 2.1(a) shall be
exclusive to PMC for use, sale and distribution of Co-Exclusive Vaccine in the
Field in each country of the Territory but for one other entity which may, at
VRI's option, be VRI or an entity licensed by VRI, and in all other respects the
license granted under this Section 2.l(a)(ii) is non-exclusive. It is expressly
understood that only one entity other than PMC will be or be permitted to be
licensed by VRI, to use or sell any Co-Exclusive Vaccine in the Field in any
country of the Territory.
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The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
(b) Subject to the terms and conditions of this
Agreement, VRI hereby grants to PMC a non-exclusive license under the Patent
Rights and Licensed Know-How (i) to use, sell and distribute the Licensed
Products set forth in Exhibit B in the countries set forth in Exhibit B, but
only to the extent that all of the antigens contained therein are covered by
patent rights of PMC and/or its Affiliates which give PMC an exclusive position
with respect to those antigens in those countries, and (ii) to make and have
made and use Licensed Products set forth in Exhibit B in any country of the
world but only for use, sale and distribution in the countries set forth in
Exhibit B, and only to the extent that all of the antigens contained therein are
covered by patent rights of PMC and/or its Affiliates, which give PMC an
exclusive position with respect to all of the antigens contained in the Licensed
Product of Exhibit B in those countries of Exhibit B. Exhibit B is intended to
set forth the countries in which PMC holds exclusive rights in respect of a
given antigen and the antigens as to which such exclusive rights are held in
that country. Such Exhibit B shall be amended from time to time to take account
of any additional countries and/or additional Licensed Products which contain
only antigens as to which PMC obtains exclusive rights during the term of this
Agreement but only to the extent that VRI is able to grant such a license and
only to the extent VRI has not previously granted to a third party rights which
would prevent VRI from granting such rights to PMC.
(c) Upon written notice to VRI, PMC shall have
the right to be granted a non-exclusive license to use, sell and distribute each
Co-Exclusive Vaccine and each Exclusive Vaccine, in each country (other than
Japan) where PMC and/or its Affiliates have patent rights (as an owner or
exclusive licensee) which cover the antigen of such Exclusive Vaccine or
Co-Exclusive Vaccine provided that VRI has not granted rights to a third party
in such country which would prevent VRI from granting such license to PMC, which
non-exclusive license extension shall be limited to a Co-Exclusive Vaccine or
Exclusive Vaccine, as the case may be, which contains such antigen. The
non-exclusive license shall include the right to make and have made each such
Co-Exclusive Vaccine and Exclusive Vaccine but only for use and sale in the
countries specified in this Paragraph 2.1(c).
(d) [****]
(e) In order to assure PMC of the exclusive
rights granted in Section 2.1(a)(i), VRI shall not grant to a third party or
itself exercise any rights or licenses under Patent Rights and Licensed Know-How
to use, sell or distribute a mucosally administered vaccine [****] against Lyme
Disease, Meningococcus or Influenza in the Field in the Territory. In addition,
except as permitted in Section 2.1 (a (ii), VRI shall not grant to a third party
or itself exercise any rights or licenses under Patent Rights and Licensed
Know-How to use, sell or distribute a mucosally administered vaccine [****]
against RSV, Para Influenza, CMV Pneumo (including S. Pneumoniae, Branhamalla,
non-typable Haemophilus Influenza and Otitis Media) and Rabies in the Field in
the Territory.
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2.2 Licenses to VRI. Subject to the rights granted to and
maintained by PMC and to any existing rights of third-parties, PMC hereby grants
to VRI a worldwide, royalty free, license to use PMC Mucosal Delivery Technology
to make, have made, use and sell vaccine products, including the right to
sublicense such license to Affiliates. Such license of PMC Mucosal Delivery
Technology may also be sublicensed to third parties with the prior written
consent of PMC, which consent shall not be unreasonably withheld.
2.3 Sublicenses. With respect to the rights granted under
Section 2.1(a)(i) PMC shall have the right to grant sublicenses under this
Agreement with the prior approval of VRI as to the sublicensee, which approval
shall not be unreasonably denied. With respect to the rights granted under
Section 2.1(a)(ii), PMC shall have the right (without the approval of VRI) to
grant a sublicense to one other party in any country where PMC is not selling or
does not intend to sell Licensed Product. PMC shall advise VRI of the name of
such sublicensee when such sublicensee is selected. The rights granted under
Section 2.1(b) and (c) are not sublicensable, except to Affiliates of PMC.
2.4 (a) In case of any sublicense by PMC or VRI of the rights
and licenses granted in this Agreement, the sublicensee shall agree to be bound
by the terms, obligations and conditions identical to those of Articles 7 and 10
and Sections 2.5 and 12.5 of this Agreement (substituting the name of the
Sublicensee for that of the sublicensing party), with the other party being
expressly made a third party beneficiary thereof, and the sublicensing party
shall be responsible for the performance by the appointed sublicensee of such
terms, obligations and conditions.
(b) Each sublicense agreement concluded by PMC will
include a requirement that the sublicensee maintain records and permit
inspection on terms essentially identical to Article 10.4 of this Agreement.
At VRI's request, PMC shall arrange for an independent certified accountant
selected by VRI to inspect the records of its sublicensee(s) for the purpose
of verifying royalties due to VRI and shall cause such accountant to report
the results thereof to VRI.
(c) All sublicenses granted for a Licensed Product or
for the PMC Mucosal Delivery Technology in a country shall terminate upon
termination of the licenses granted hereunder with respect to such Licensed
Product or to PMC Mucosal Delivery Technology as the case may be, provided
that upon expiration of the full term of this Agreement pursuant to Paragraph
5.1, all parties shall have fully paid-up, non-cancelable licenses.
2.5 To the extent Patent Rights licensed to PMC under this
Agreement have been licensed by VRI from another party under an agreement with
another party ("Another Party Agreement(s)"), PMC understands and agrees as
follows:
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(i) The rights licensed to PMC by VRI are subject to
the terms, limitations, restrictions and obligations of the
Another Party Agreement(s).
(ii) PMC will comply with the terms, obligations,
limitations and restrictions of the Another Party Agreement(s)
to the extent PMC has been permitted to review such terms,
obligations, limitations and restrictions. VRI will give PMC,
upon request, a reasonable opportunity to review the same
except to the extent that confidentiality or other obligations
towards Another Party may prevent VRI from doing so. In any
event VRI shall act reasonably in advising PMC of the scope of
PMC's obligation pursuant to such Another Party Agreement. It
is expressly understood that PMC may refuse to accept a license
under one or more Another Party Agreements, in which case PMC
will not be bound thereby.
2.6 Disclosure of Technology. Upon the execution of this
Agreement, and periodically thereafter upon request by PMC, VRI shall provide to
PMC copies of all available information in tangible form within the Licensed
Know-How or related to the Patent Rights.
2.7 Subject to the terms and conditions of the Supply Agreement
to be negotiated under this Section 2.7, PMC is hereby granted a non-exclusive
right and license under the Patent Rights and Licensed Know-How to make and have
made polyphosphazene for use by PMC, its Affiliates and its sublicensees as part
of a mucosal delivery system in the manufacture of Licensed Product in
accordance with and to the extent that PMC retains its license to Licensed
Product under this Agreement.
PMC shall have the right at any time during the term of this
Agreement, but not the obligation, to exercise its right under the herein
granted manufacturing license. In the event that PMC decides to exercise such
rights, it shall so inform VRI in writing, and VRI shall promptly disclose to
PMC all applicable manufacturing technology in the possession of VRI at the time
of such disclosure. Subject to applicable confidentiality obligations, VRI and
PMC shall share and exchange any technology and know-how they shall generate
while establishing manufacturing processes and facilities.
When either PMC or VRI achieves manufacture of polyphosphazene
on a commercial basis, it shall have an obligation to use reasonable efforts in
good faith to assist the other to satisfy its reasonable requirements of
polyphosphazene for use as part of a vehicle for a mucosal delivery system for
vaccines on reasonable commercial terms, taking into account the respective
investments made and risks incurred by the parties in connection with such
manufacture.
PMC and VRI shall consult in good faith and in their mutual
interest as to an arrangement for the manufacture and supply of polyphosphazene
for clinical lots as well as in
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The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
commercial quantities for use as a part of a mucosal delivery system by PMC and
its Affiliates and authorized sublicensees in the Licensed Products as licensed
hereunder and for use by VRI, its Affiliates and licensees (other than PMC).
VRI shall use commercially reasonable efforts to establish a
process capable of yielding under GMP conditions consistent and validated
supplies of polyphosphazene in accordance with agreed upon specifications,
[****]
VRI shall use commercially reasonable efforts to obtain a
manufacturer of polyphosphazene. Thereafter, under the terms and conditions of a
supply agreement to be negotiated in good faith between the parties (the "Supply
Agreement"), VRI shall be
The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
responsible for scaling-up the process in an efficient, cost-effective GMP
manufacturing facility for production of polyphosphazene according to
agreed-upon specifications at industrial scale, which Supply Agreement [****]
PMC shall render all reasonable assistance to VRI in
identifying and selecting a third-party manufacturer. In the event that VRI
retains such manufacturer, VRI shall then, subject to appropriate
confidentiality provisions, transfer to it all of VRI's technology for
manufacture of polyphosphazene.
ARTICLE 3
MILESTONES AND ROYALTIES
3.1 Milestone Fees. PMC shall pay to VRI the non-refundable and
non-creditable amounts specified below within thirty (30) days following the
accomplishment by PMC, its Affiliates or sublicensees of the corresponding event
set forth below, or (ii) within thirty (30) days following receipt by PMC of
written notice of accomplishment by VRI or a VRI's Affiliate of such other
corresponding event set forth below:
(a) [****]
(b) [****]
3.2 Royalties. [****]
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The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
(a) [****]
(b) [****]
(c) [****]
(d) In the case of the earned royalties set forth
in paragraphs (a) and (b) above, the royalties would be adjusted in each country
for each calendar year for each Licensed Product in the event PMC was required
to pay royalties to a third party for use of polyphosphazene as part of a
mucosal delivery system in such Licensed Product in such a country for such year
utilizing the following method, but in no event shall [****]
(1) First determine the relationship between Net Sales in the
applicable country for the year and the total worldwide Net Sales in that same
category of sales for the year for the Licensed Product, i.e., divide Net Sales
in a country for the applicable Licensed Product, where, [****] by worldwide Net
Sales in all countries for such Licensed Product [****].
(2) Apply this percentage to total
royalties paid in all such countries for the Licensed Product for the year to
determine the VRI royalties in a country against which a credit for third party
royalties paid in such country may be taken.
(3) Subtract the amount of third party
royalties paid in the country in question from [****].
(e) Royalties shall be calculated and paid on a
country-by-country and product-by-product basis [****] provided, however, that
if at any time after the expiration [****], the making, using or selling of the
product is covered by Patent Rights, the royalties shall be paid until the
expiration if the last to expire of any such patent(s).
(f) [****]
3.3 Single Royalty: Non-Royalty Sales. It is understood that in
no event shall more than one royalty be payable under Section 3.2 with respect
to a particular unit of Licensed Product. No royalty be payable under Section 3
with respect to sales of Licensed Products among PMC, its Affiliates and/or
sublicensees, but royalty shall be due upon the subsequent sale of the Licensed
Product to an entity who is not an Affiliate or sublicensee provided, however,
that if there is no or is to be no subsequent sale of the Licensed Product to an
entity who is not an Affiliate or a sublicensee, then the royalty shall be due
and shall be based upon the higher of (i) the gross invoice price to such
Affiliate or sublicensee or (ii) the average gross invoice price with PMC
charges to its customers (other than Affiliates and
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The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
sublicensees) for the Licensed Product for the relevant reporting period of
Section 9.1 in the relevant country.
No royalty shall be payable for (i) Licensed Product used in
clinical trials, or (ii) Licensed Product used by PMC or its sublicensee for
research, or (iii) customary quantities of Licensed Product distributed by PMC
or its sublicensee as free samples.
3.4 Combination Products. In the event Licensed Products
contain vaccines licensed hereunder in combination, the royalty rate applicable
to said combination products shall be the rate [****]
ARTICLE 4
RESEARCH PROGRAM
4.1 Object. Pursuant to the mutually agreed upon research
program attached hereto as Exhibit D (the "Research Program"), VRI agrees to
conduct the research described therein and PMC agrees to support and fund such
Research Program in accordance with the terms and conditions set forth below.
4.2 Oversight of the Research Program
(a) Oversight. The Research Program will be
overseen and monitored by the Research Steering Committee as described herein
(the "Committee").
(b) Membership. [****] Such representatives will
be qualified, by reason of background and experience, to assess the scientific
progress of the Research Program. Each party will have the right to change its
representation on the Committee upon written notice sent to the other.
(c) Chair. [****]
(d) Responsibilities. The Committee will have
authority to:
(i) review and approve the draft
Research Program prepared by VRI and establish
the definitive Research Program;
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The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
(ii) make recommendations regarding the
performance of the Research Program and the conduct of
the research pursuant thereto, and monitor performance
thereunder;
(iii) modify the Research Program as it
determines, for each twelve (12) month period during
the term thereof;
(iv) review any and all proposed
publication[s] or communication[s] relating to the
Research Program and the results therefrom, in
accordance with the procedure set forth in this
Article 4;
(v) review any and all proposed filing of
patent application[s] in connection with the Research
Program.
4.3 Meetings. [****] Meetings in person will normally take
place at VRI's premises or such other pace as may be mutually agreed upon.
Meetings may be held by telephone. At such meetings, the Committee will discuss
the Research Program and the status of performance by VRI under the program,
evaluate the results thereof and set priorities therefor. [****] The Committee
will prepare written minutes of each meeting and a written record of all
decisions whether made at a formal meeting or not. Such minutes will incorporate
semi-annual research reports prepared for the parties by VRI. A quorum for a
meeting shall require [****]
4.4 Committee Deadlock. If there are issues on which the
Committee cannot reach agreement because of a Deadlock (as hereinafter
defined)[****]
4.5 The Principal Investigator.
(a) Principal Investigator. [****]
(b) Duties. The Principal Investigator will
direct the Research Program and coordinate the efforts of other researchers
involved in the performance of such Program. The Principal Investigator will sit
with the Committee as provided in Section 4.2 hereof, will perform the duties
set forth hereunder and will be afforded the opportunity to actively participate
in all Committee deliberations. The Principal Investigator will provide
reasonably detailed status reports of the Research Program to the Committee at
six-month intervals, as well as at the earliest practicable time whenever, in
the Principal Investigator's judgment, an invention is created or reduced to
practice. The Principal Investigator will devote such time and efforts as may be
required to fulfill his duties hereunder and to ensure the successful
administration and coordination of the Research Program.
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The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
(c) Replacement. The Principal Investigator may
be replaced in the event the then existing Principal Investigator is no longer
able or is unwilling to so serve or fails to perform the duties assigned. In
such circumstances VRI, with the consent of PMC shall appoint a substitute
Principal Investigator. PMC will not unreasonably withhold its consent to a
substitute Principal Investigator proposed by VRI. [****]
4.6 (a) Conduct of Research Program. The Research Program will
be conducted by VRI at VRI's laboratories. VRI will use all reasonable efforts
to complete research in accordance with the said Research Program [****]. Any
research work performed by VRI pursuant hereto will be in compliance with Good
Laboratory Practices as applicable in the United States of America. [****]
(b) Visitation. For the purpose of facilitating
PMC's understanding of the research activities conducted by VRI hereunder, VRI
will permit duly authorized employees or representatives of PMC to visit its
facilities where the research is conducted, at reasonable times and with
reasonable notice.
4.7 Financial Conditions.
(a) Support Commitment. PMC will provide funding
for and during the term of the Research Program up to a maximum of two million
five hundred thousand United States dollars (2,500,000 US$) (the "Maximum
Commitment"). The Maximum Commitment will be inclusive of all costs incurred by
VRI implementing the Research Program.
(b) Payment Schedule. Support payments will be
made by PMC to VRI in four (4) equal half-year payments of six hundred
twenty-five thousand United States dollars (625,000 US$) in advance with the
first payment to be made within eight (8) days of the Effective Date hereof.
4.8 VRI will provide an annual budget for the research program
and semi-annual financial reports of actual and budgeted expenditure.
[****]
[****] the records on which these reports are based shall be
open, no more than once each year, for inspection by an independent certified
accountant selected by PMC and acceptable to VRI, upon reasonable notice during
normal business hours and at PMC's expense, for the sole purpose of verifying
the accuracy of the reports.
[****]
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The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
4.9 No Conflict With Research Program. VRI agrees that the
Research Program funds provided by PMC will be applied to the Research Program
and may not, without PMC prior written approval, be used in support of any other
research at VRI.
4.10 Title to Equipment. VRI will retain title to any equipment
purchased with funds provided by PMC under this Agreement, if such purchase is
mutually agreed upon as part of the Research Program budget.
4.11 Term and termination.
(a) The term of the Research Program will be two
(2) years as from the Effective Date hereof.
(b) In addition to any other remedy which it may
have, PMC will be entitled to terminate the Research Program and cease funding
thereof in the event of a material breach by VRI of any of VRI's obligations and
covenants hereunder following written notice or such breach to VRI. If such
breach is not cured within thirty (30) days after written notice is given by PMC
to VRI specifying the breach, PMC may terminate the Research Program and cease
funding hereunder forthwith upon written notice to VRI after expiration of such
thirty (30) day period, and [****]
(c) In the event that the Research Program is
terminated pursuant to this Section 4.11, VRI's right to receive any unpaid
balance otherwise committed by PMC as support commitment pursuant to Section 4.7
hereof will become forfeited and no further payments with respect to the
Research Program will be due to VRI by PMC except to the extent that such funds
are needed to pay actual and non-cancelable obligations of VRI accrued to that
date.
4.12 Confidentiality. In order to facilitate the operation of
the Research Program, either party may disclose confidential or proprietary
information owned or controlled by it to the other. It is hereby understood and
agreed that such information shall be deemed "Proprietary Information" and
treated as such in accordance with Article 7.
4.13 Results of the Research Program
(a) [****]
(b) [****]
(c) [****]
(d) [****]
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The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
(e) [****]
(f) [****]
(g) [****]
(h) [****]
4.14 [****]
ARTICLE 5
TERM AND TERMINATION
5.1 Term. This Agreement shall become effective as of the
Effective Date and, unless earlier terminated pursuant to the other provisions
of this Article 5, shall continue in full force and effect as long as PMC is
obligated to pay royalties under this Agreement. PMC's license under Section 2.1
with respect to the Licensed Know-How shall survive the expiration, but not an
earlier termination, of this Agreement.
5.2 Termination for Breach. In the event of a material breach
of this Agreement the nonbreaching party in addition to any other remedy which
it may have shall be entitled to terminate this Agreement following written
notice of such breach to the breaching party. If such breach is not cured within
sixty (60) days after written notice is given by the non-breaching party to the
breaching party specifying the breach, the non-breaching party may terminate the
Agreement forthwith upon written notice to the breaching party after expiration
of such sixty (60) day period.
5.3 Termination by PMC. (a) Any provision herein
notwithstanding, after completing PMC's funding obligation under Article 4, PMC
may terminate this Agreement at any time by giving VRI at least one hundred and
eighty (180) days prior written notice.
(b) PMC may terminate its license with respect to
any Licensed Product by one hundred and eighty (180) days prior written notice
to VRI, and thereafter such Licensed Product(s) shall no longer be licensed
under this agreement.
(c) In the event of a termination under Section
5.3 (a) all rights granted herein to PMC shall forthwith revert to VRI [****].
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5.4 Survival.
5.4.1 Termination of this Agreement for any reason
shall not release either party hereto from any liability which at the time of
such termination has already accrued to the other party.
5.4.2 In the event this Agreement is terminated for
any reason, PMC and its Affiliates and sublicensees shall have the right to sell
or otherwise dispose of the stock of any Licensed Product then on hand, all
subject to the payment to VRI of fees and royalties pursuant to Article 3
hereof.
5.4.3 Articles 7, 11 and 12, and Sections 2.5, 5.,
5.5, 8.4, 10.3 and 10.4, shall survive the expiration and any termination of
this Agreement. Except as otherwise provided in Section 5.1 and Section 5.4.3,
all rights and obligations of the parties under this Agreement shall terminate
upon the expiration or termination of this Agreement.
5.5 In the event that PMC's rights and licenses under this
Agreement are terminated, PMC agrees not to make, use or sell Licensed Products
except as permitted by Article 5.4.2.
5.6 Either party may terminate this Agreement on notice if the
other party makes a general assignment for the benefit of creditors, is the
subject of proceedings in voluntary or involuntary bankruptcy or has a receiver
or trustee appointed for substantially all of its property; provided that in the
case of an involuntary bankruptcy proceeding such right to terminate shall only
become effective if the other party consents thereto or such proceeding is not
dismissed within ninety (90) days after the filing thereof. If, in connection
with bankruptcy proceedings involving a party, an election is made by or on
behalf of such party to reject the obligations of this Agreement and the other
party elects to retain its rights to intellectual property hereunder pursuant to
Section 365 n.1 of the Bankruptcy Code (USA), such other party shall be entitled
to enforce any rights exclusively granted to it in respect of intellectual
property hereunder by commencement of any action it deems necessary to that
effect against third-party infringers and may do so in the name and stead of the
bankrupt party.
ARTICLE 6
PATENTS AND INFRINGEMENTS
6.1 Prosecution by VRI. VRI shall have the right, at PMC's
expense, to control the filing for, prosecution and maintenance of the Patent
Rights in the Territory. In the event that VRI grants any license in a country
of the Territory with respect to any Patent Right, then thereafter PMC's
obligation to pay patent costs for Patent Rights in such country shall be an
amount equal to the total cost therefor multiplied by a fraction having as a
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The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
numerator one and as a denominator the total number of licenses granted by VRI
in respect of such Patent Rights in such country. VRI hall keep PMC reasonably
informed as to the status of the Patent Rights in the Territory, and shall
provide PMC with copies of all proposed filings and correspondence of a
substantive nature with respect to patents or applications within the Patent
Rights to be made with or sent to the United Sates Patent and Trademark Office
or its counterpart in any country of the Territory (each, a "Patent Authority").
VRI shall also provide to PMC copies of all correspondence that it receives from
a Patent Authority with respect to the Patent Rights and shall consider any
comments of PMC with respect thereto.
6.2 Infringement Claims. If the production, sale or use of a
Licensed Product results in any claim for infringement of a patent or other
proprietary right of a third party against PMC, its Affiliates or sublicensees,
PMC shall promptly notify VRI thereof in writing. As between the parties to this
Agreement, PMC shall have the right at its own expense to defend and control the
defense of any such claim against PMC, by counsel of PMC's own choice.
6.3 Enforcement of Patent Rights. (a) In the event that any
Patent Rights are infringed by a third party with respect to an Exclusive
Vaccine or Co-Exclusive Vaccine in the Field in the Territory, with the consent
and approval of VRI (which shall not be unreasonably denied and shall be deemed
to have been granted if VRI shall be in voluntary or involuntary bankruptcy
proceedings, other than a proceeding such as Chapter 11 where the debtor
continues to operate the business), PMC and/or its Affiliates or sublicensees
shall have the right (except as provided below), but not the obligation, to
institute, and prosecute any action or proceeding under the Patent Rights with
respect to such infringement, by counsel of its choice, including any
declaratory judgment action arising from such infringement. Any amounts
recovered from third parties with respect to the Patent Rights in such action
shall be applied first to reimburse the expenses of the action; then to the
extent the award [****]. PMC shall not have the right to settle, compromise or
take any action in such litigation which diminish, limit or inhibit the scope,
validity or enforceability of the Patent Rights without the express written
permission of VRI. PMC shall keep VRI advised of the progress of such
proceedings.
6.4 In the event that a third party is infringing the Patent
Rights with respect to an Exclusive Vaccine or Co-Exclusive Vaccine in the
Territory in the Field and PMC does not elect to institute an action, VRI shall
have the right, but not the obligation, to commence an infringement suit under
the Patent Rights against such infringer and retain any recovery; provided that
it so notifies PMC. If VRI commences a suit in accordance with this Section 6.4,
PMC shall have the [****] expenses thereof. If PMC elects to so
participate,[****]. VRI shall have the right to control such action with counsel
of its choice.
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6.5 VRI Participation. In VRI's sole discretion, VRI shall be
entitled to participate at its expense through counsel of its choosing in and
control any legal action by or against PMC affecting the validity or
enforceability of the patents on which Patent Rights are based, and PMC may
elect to participate in any such action to the extent necessary to defend its
own interests.
6.6 Each party agrees to cooperate with each other with respect
to any litigation under Sections 6.2, 6.3 or 6.4.
ARTICLE 7
CONFIDENTIALITY
7.1 Nondisclosure. Except as otherwise provided in this
Agreement, a party receiving (the "Receiving Party") any business or technical
information ("Proprietary Information") that is disclosed to it by the other
party the ("Disclosing Party") shall for a period beginning on the Effective
Date and ending ten (10) years after the termination of this Agreement hold in
confidence and not disclose to any third party the "Proprietary Information". In
addition, the Receiving Party shall not use Proprietary Information that it
receives from the Disclosing Party, except as is reasonably necessary to
exercise the rights granted to the Receiving Party under Article 2 or Article 6
of this Agreement. Notwithstanding the foregoing, with the prior written
permission of the Disclosing Party (which shall not be unreasonably withheld),
the Receiving Party may disclose information concerning the Patent Rights and/or
the Licensed Know-How to actual or prospective sublicensees or to other third
parties with whom the Receiving Party is considering or has entered into a
business relationship, all of whom are similarly bound in writing under a
reasonable confidentiality agreement. Proprietary Information of a party shall
not include:
7.1.1 Information which is or was published or has
become generally available to the public through no fault of the Receiving
Party;
7.1.2 Information which the Receiving Party can
document is or was in its possession at the time of disclosure or was
independently developed by the Receiving Party; or
7.1.3 Information which is rightfully acquired by
the Receiving Party from a third party who is not under an obligation of
confidentiality to the disclosing party, and to the best of the Receiving
Party's knowledge and belief is entitled to rightfully make such disclosure, but
only to the extent the Receiving Party complies with any restrictions imposed by
the third party.
7.2 Exceptions. The Receiving Party may disclose Proprietary
Information of the other, in connection with the order of a court of law or
administrative or governmental authority provided that the Receiving Party
exerts reasonable efforts to preserve the
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confidentiality thereof and the disclosing party is given an opportunity to
protect the confidentiality thereof, or as is reasonably necessary in connection
with the labeling of its products that are otherwise sold in compliance with
this Agreement or as required for obtaining regulatory approval of Licensed
Product, provided that the Receiving Party protects the confidentiality thereof
to the fullest extent possible.
7.3 Notwithstanding anything else to the contrary, PMC agrees
that Licensed Know-How, or Proprietary Information received from VRI shall be
used by PMC only in and for Licensed Products and their development for sale in
the Territory in the Field, all in accordance with this Agreement, and can only
be used by PMC for so long as and to the extent that PMC maintains a license
under this Agreement.
7.4 Notwithstanding anything else to the contrary and subject
to Section 5.1, in the event that PMC's rights and licenses under this Agreement
are terminated, PMC agrees a) not to use Licensed Know-How, or any Proprietary
Information provided to PMC by VRI or any information developed by PMC which is
derived from or is based on Licensed Know-How for the research, development,
making, or using or selling of any product or process, including, but not
limited to Licensed Products and (b) not to do any of the foregoing while this
Agreement is in force for any product except as licensed under this Agreement.
7.5 Notwithstanding anything else to the contrary, VRI agrees
that PMC Mucosal Delivery Technology licensed to it by PMC hereunder may be used
only in a manner consistent with the provisions of this Agreement. VRI's
licenses herein shall survive the expiration of the term hereof but not an
earlier termination of this Agreement except as provided in Section 5.3(c).
ARTICLE 8
REPRESENTATIONS AND WARRANTIES
8.1.1 VRI and PMC each represents and warrants to
the other that each has the full right and authority to enter into this
Agreement and grant the rights and licenses granted herein;
8.1.2 VRI represents and warrants to PMC that it
has not previously granted and, prior to termination of this Agreement, will not
grant any rights in the Patent Rights or the Licensed Know-How that are
inconsistent with the rights and licenses granted to PMC herein;
8.1.3 To the best of VRI's knowledge, there is no
pending or threatened claim or litigation to which VRI is a party contesting the
validity or right to use any of the Patent Rights, and VRI has not received any
notice of infringement with respect to Patent Rights.
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The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
8.2 Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN
SECTION 8.1 ABOVE, NEITHER PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY
WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NONINFRINGEMENT, OR VALIDITY OF ANY PATENT RIGHTS ISSUED OR PENDING.
8.3 Effect of Representations and Warranties. Subject to
Section 8.4, it is understood that if the representations and warranties under
this Article 8 are not true and accurate and PMC incurs liabilities, costs or
other expenses as a result of such falsity, VRI shall indemnify and hold PMC
harmless from and against any such liabilities, costs or expenses incurred,
provided that VRI receives prompt notice of any claim against PMC resulting from
or related to such falsity and the sole right to control the defense or
settlement thereof.
8.4 Limitation of Liability. Notwithstanding anything else to
the contrary, VRI's liability for any breach of this Agreement (including but
not limited to any liability which results from any breach of any representation
or warranty) is limited to the payments received or to be received from PMC
under this Agreement. This Limitation on Liability shall not be applicable to
intentional misconduct on the part of VRI or where PMC, as a result of such
breach, is liable to a third party in excess of such Limitation on Liability.
ARTICLE 9
DUE DILIGENCE
9.1 General. PMC shall use commercially reasonable efforts to
research, develop, register, market and sell and to continue to market and sell
each Licensed Product in each country of the Territory; [****]. Upon a failure
by PMC to meet its obligations under this Section 9.1 with respect to any
Licensed Product in any country (directly or through a sublicensee), VRI shall,
among other remedies available to it, [****]
9.2 PMC shall promptly notify VRI, in writing, if at any time
PMC does not intend to continue to research, develop and/or obtain regulatory
approval for and/or market and sell any Licensed Product in any country of the
Territory.
9.3 In the event that PMC provides VRI with notice pursuant to
Section 9.2 with respect to any Licensed Product or with respect to any
country(ies) the rights herein
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The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
granted by VRI to PMC to such Licensed Product in such country(ies), upon
written notice from VRI to PMC shall revert to VRI.
9.4 In the event that PMC does not meet any of the milestones
set forth in Exhibit C (as the same may be extended as indicated herein) for any
of the Licensed Products set forth in Exhibit C, VRI shall have the right to
[****]. PMC shall have the right to a [****] and the Parties shall agree on a
reasonable period for such extension. Exhibit C shall be appropriately revised
to reflect such extension. In addition, PMC shall have the right to extend each
of the milestones of Exhibit C, if not achieved, [****]. The parties agree to
set similar milestones for [****]
9.5 PMC shall provide written reports to VRI on June 30th and
December 31st of each year concerning the efforts being made in accordance with
Section 9.1 with respect to the Licensed Product. PMC shall provide VRI with any
additional information reasonably requested by VRI in this respect. Such reports
shall be considered to be Proprietary Information of PMC.
ARTICLE 10
ACCOUNTING AND RECORDS
10.1 Reports. PMC agrees to make quarterly written reports to
VRI within sixty (60) days after the end of each calendar quarter in which
royalties are due under this Agreement, stating in each such report the number,
description, and aggregate Net Sales of Licensed Products sold during the
calendar quarter and upon which a fee or royalty is payable under Article 3
above. The report shall also include the calculation of Net Sales all on a
country by country and Licensed Product by Licensed Product basis. The report
shall be due with respect to sales of Licensed Product sold by PMC sixty (60)
days after the end of the calendar quarter and with respect to sales of Licensed
Product by sublicensees, ninety (90) days after the end of a calendar quarter.
If no such sales have been made, by PMC, its Affiliates and sublicensees, the
report shall so state.
10.2 Payment. Concurrently with the making of each such report
of Section 10.1, PMC shall pay to VRI the royalties at the rate specified in
Article 3 above. All payments by PMC to VRI hereunder shall be made in U.S.
Dollars. If any currency conversion shall be required in connection with the
calculation of royalties hereunder, such conversion shall be made by using the
rate of exchange published in the Wall Street Journal for the last business day
of the applicable calendar quarter.
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<PAGE>
10.3 Withholding Taxes. Any withholding or other tax that PMC
or any of its Affiliates are required by statute to withhold and pay on behalf
of VRI with respect to the royalties payable to VRI under this Agreement shall
be deducted from said royalties and paid contemporaneously with the remittance
to VRI; provided, however, that in regard to any tax so deducted PMC shall
furnish VRI with proper evidence of the taxes paid on its behalf. VRI will
furnish PMC with appropriate documents to secure application of the favorable
rate of withholding tax under applicable tax treaties.
10.4 Records; Inspection.
10.4.1 PMC shall keep complete, true and accurate
books of account and records for the purpose of determining the amounts payable
to VRI under this Agreement. Such books and records shall be kept at PMC's
principal place of business for at least three (3) years following the end of
the calendar quarter to which they pertain, and will be open for inspection
during such three (3) year period by a representative of VRI for the purpose of
verifying PMC's royalty statements. Such inspections may be made no more than
once each calendar year, during normal business hours and upon thirty (30) days
prior notice. Any such information shall be considered to be Proprietary
Information of PMC.
10.4.2 Inspections conducted under this Section
10.4 shall be at the expense of VRI, unless an underpayment exceeding five
percent (5%) of the amount paid for the period covered by the inspection is
established in the course of any such inspection, whereupon all costs relating
thereto will be paid by PMC, as well as any unpaid royalties within the thirty
(30) days after requested by VRI.
ARTICLE 11
INDEMNIFICATION AND INSURANCE
11.1 PMC shall defend, indemnify and hold harmless VRI,
Affiliates or VRI and its licensors, and its respective directors, officers,
shareholders, agents, consultants and employees (collectively, the
"Indemnitees") from and against any and all liability, loss, damages and
expenses (including reasonable attorneys' fees) as the result of claims,
demands, costs or judgments which may be made or instituted against any of the
Indemnitees arising out of the manufacture, design, possession, distribution,
use, testing, sale or other disposition by or through PMC and/or Affiliates of
PMC and/or licensees of either PMC or Affiliates of PMC of any Licensed Product
and/or any product or process in connection with or arising out of the Patent
Rights or Licensed Know-How and/or any material provided by PMC or Affiliates of
PMC under this Agreement (in each case, other than any claims, demands, costs or
judgments arising out of, based upon or resulting from infringement of the
intellectual property rights of a third party based upon the use of
polyphosphazene as a part of a mucosally delivered vaccine PMC's obligation to
defend, indemnify and hold harmless shall include any and all such claims,
demands, costs or judgments, including but not limited to
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money damages arising from alleged personal injury (including death) to any
person or alleged property damage. PMC shall have the right to control the
defense of any action which is to be indemnified in whole by PMC hereunder,
including the right to select counsel (which shall be reasonably acceptable to
VRI) to defend the Indemnitees and to settle any claim as to which the
Indemnitees are fully indemnified by PMC. Notwithstanding the foregoing, PMC
shall have no obligation to indemnify or hold any Indemnitee harmless with
respect to any claim, demand, cost or judgment that results or is alleged to
result from the willful misconduct or negligence of an Indemnitee nor to the
extent that VRI has the obligation to indemnify under a Supply Agreement entered
into between the parties pursuant to Section 2.7. If PMC does not provide
counsel to defend the Indemnitees, VRI shall have the right to select counsel
and PMC shall pay the reasonable costs and expenses of said counsel. The
provisions of this paragraph shall survive and remain in full force and effect
after any termination, expiration or cancellation of this Agreement and PMC's
obligation hereunder shall apply whether or not such claims are rightfully
brought.
ARTICLE 12
MISCELLANEOUS
12.1 Publicity. VRI and PMC shall cooperate in the preparation
of a mutually agreeable press release and other publicity disclosing the
existence of this Agreement and their business relationship. Except for
information disclosed in such a mutually agreed press release or publicity,
neither PMC nor VRI shall disclose the existence or any terms of this Agreement
without the prior written consent of the other party, except for such limited
disclosure as may be reasonably necessary to either party's bankers, investors,
attorneys or other professional advisors, or in connection with a merger or
acquisition, or as may be required by law in the offering of securities or in
securities regulatory filings or otherwise.
12.2 Waiver. It is agreed that no waiver by either party hereto
of any breach or default of any of the covenants or agreements herein set forth
shall be deemed a Waiver as to any subsequent and/or similar breach or default.
12.3 Independent Contractors. The relationship of the parties
hereto is that of independent contractors. Neither party hereto is an agent,
partner or joint venturer of the other for any purpose.
12.4 Compliance with Laws. In exercising its rights under this
license, PMC shall fully comply with the requirements of any and all applicable
laws, regulations, rules and orders of any governmental body having jurisdiction
over the exercise of rights under this license.
12.5 Notices. Any notice required or permitted to be given to
the parties hereto shall be deemed to have been properly given if delivered in
person or when received if
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mailed by first-class certified mail or sent by facsimile to the other party at
the appropriate address as set forth below or to such other addresses as may be
designated in writing by the parties from time to time during the term of this
Agreement.
VRI: VIRUS RESEARCH INSTITUTE, INC.
61 Moulton Street
Cambridge, Mass. 02138
Attention: Chief Executive Officer
PMC: PASTEUR MERIEUX SERUMS El VACCINS
58 Avenue Leclerc
Lyon, France
Attention: V.P. Product Development
With Copy to: V.P. Secretary & General Counsel
12.6 Complete Agreement. It is understood and agreed between
VRI and PMC that this Agreement constitutes the entire agreement with respect to
the subject matter of this Agreement, both written and oral, between the
parties, and that all prior agreements respecting the subject matter hereof,
either written or oral, expressed or implied, shall be abrogated, cancelled, and
are null and void and of no effect. No amendment or change hereof or addition
hereto shall be effective or binding on either of the parties hereto unless
reduced to writing and executed by the respective duly authorized
representatives of each of the parties hereto.
12.7 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision and the parties shall exert best efforts to amend
this Agreement to include a provision which is valid, legal and enforceable and
which carries out the original intent of the parties. In the event that such a
provision cannot be included in the Agreement and the absence thereof materially
changes a party's obligations or rights under this Agreement, such party shall
have the right to terminate this Agreement.
12.8 Counterparts and Headings. This Agreement may be executed
in counterparts, each of which shall be deemed to be an original and both
together shall be deemed to be one and the same agreement. All headings and any
cover page or table of contents are inserted for convenience of reference only
and shall not affect its meaning or interpretation.
12.9 Governing Law. All matters affecting the interpretation,
validity and performance under this Agreement shall be governed by the internal
laws of the Commonwealth of Massachusetts without regard for its conflict of
laws principles.
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12.10 Force Majeure. If and to the extent that either party
hereto is prevented, by circumstances not now reasonably foreseeable and not
within its reasonable ability to control, from performing any of its obligations
under this Agreement (other than payment obligations) and promptly so notifies
the other party giving full particulars of the circumstances in question, then
the party affected shall be relieved of liability to the other for failure to
perform such obligations, but shall nevertheless use its best efforts to resume
full performance thereof without avoidable delay, and pending such resumption
shall consult with the other party and shall permit and shall use its best
efforts to facilitate any efforts the other party may make to effect the
performance of such obligations by other means. If such failure to perform
continues for a period of more than one (1) year, the other party may terminate
this Agreement by written notice to the non-performing party with respect to the
rights and licenses with respect to those Licensed Products and with respect to
the failure to obtain regulatory approval for a Licensed Product shall not be
considered to be circumstances within this Section 12.10.
ARTICLE 13
ASSIGNMENT; SUCCESSORS
13.1 This Agreement shall not be assignable by either of the
parties without the prior written consent of the other party (which consent
shall not be unreasonably withheld), except that either party may assign this
Agreement to an Affiliate or to a successor in interest or transferee of all or
substantially all of the portion of the business to which this Agreement
relates.
13.2 Subject to the limitations on assignment herein, this
Agreement shall be binding upon and inure to the benefit of said successors in
interest and assigns of VRI and PMC. In order for such assignment to be
effective any such successor or assignee of a party's interest shall expressly
assume in writing the performance of all the terms and conditions of this
Agreement to be performed by said party and such Assignment shall not relieve
the Assignor of any of its obligations under this Agreement.
IN WITNESS WHEREOF, both VRI and PMC have executed this
Agreement, in duplicate originals, by their respective officers hereunto duly
authorized, the day and year first above written.
VIRUS RESEARCH INSTITUTE, INC. PASTEUR MERIEUX SERUMS ET VACCINS
By: /s/ J. Barrie Ward By: /s/ Herve Tainturier
--------------------------- --------------------------------------
Print Name: J. Barrie Ward Print Name: Herve Tainturier
------------------- ------------------------------
Corporate Vice President, Secretary
Title: Chairman & CEO Title: and General Counsel
------------------------ -----------------------------------
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The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
EXHIBIT A
PATENT RIGHTS
1. [****]
2. [****]
3. U.S. PATENT NO. 5,053,451 licensed from The Pennsylvania Research
Corporation
4. U.S. APPLICATION SERIAL NO. [****]
I. M.I.T. Case No. 5400
U.S. Patent 5,149,543
"Ionically Cross-Linked Polymeric Mirocapsules"
By Samdar Cohen, Carmen Bano, Karyn B. Visscher, Marie Chow, Harry B.
Allcock and Robert S. Langer
U.S. Patent 5,308,701
"Ionically Cross-Linked Polymeric Microcapsules"
By Samdar Cohen, Carmen Bano, Karyn B. Visscher, Marie Chow, Harry B.
Allcock and Robert S. Langer
Foreign Patent Applications pending:
[****]
II. M.I.T. Case 5743
U.S. Patent 4,880,662
"Water-Soluble Phosphazene Polymers Having Pharmacological Applications"
By Harry R. Allcock, Paul E. Austin and Sukky Kwon
U.S.S.N.: 434,145 - ABANDONED
"Water-Soluble Phosphazene Polymers Having Pharmacological Applications"
By Harry K. Allcock, Paul E. Austin and Sukky Kwon
Jointly owned with Pennsylvania Research Corporation.
II. M.I.T. Case No. 3985
U.S. Patent No. 4,900,556
"Systems For Delayed And Pulsed Release of Biologically Active
Substances"
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By Herman N. Eisen, Robert S. Langer, Jr. and Margaret A. Wheatley
U.S. Patent No. 4,921,757
"System and Apparatus For Delayed And Pulsed Release of Biologically
Active Substances"
By Herman N. Eisen, Robert S. Langer, Jr. and Margaret A. Wheatley
IV. M.I.T. Case No. 3986
U.S. Patent No. 4,933,185
"System For Controlled Release of Biologically Active Compounds"
By Herman N. Eisen, Robert S. Langer, Jr. and Margaret A. Wheatley
Explanatory Notes
M.I.T. Case No. 4433 -- All patent rights abandoned.
"Polyphosphazene Matrix System for Drug Delivery Applications"
By Cato T. Laurencin, Robert S. Langer, Harry R. Allcock and Thomas X.
Neenan U.S.S.N. 737,921
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<PAGE>
The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
EXHIBIT B
PMC PROPRIETARY RIGHTS
[****]
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<PAGE>
The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
EXHIBIT C
MILESTONES TO BE MET BY PMC
[****]
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<PAGE>
The information below marked by [****] has been omitted pursuant to a request
for Confidential Treatment. The omitted portion has been separately filed with
the Commission.
EXHIBIT D
RESEARCH PROGRAM
[****]
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EXHIBIT 10.20
LICENSE AGREEMENT
This License Agreement ("Agreement") is made effective as of this first
day of December 1997, between VIRUS RESEARCH INSTITUTE, Inc., having a place of
business at 61 Moulton Street, Cambridge, MA 02138, USA (herein referred to as
"LICENSOR") and SmithKline Beecham P.L.C., having a place of business at New
Horizons Court, Brentford, Middlesex TW8 9EP, United Kingdom (herein referred to
as "LICENSEE"),
WITNESSETH THAT:
WHEREAS, LICENSOR is the owner of and/or controls all right, title and
interest in certain patents, identified in Appendix A hereto, and know-how in
the field of Rotavirus; and
WHEREAS, LICENSEE desires to obtain certain worldwide licenses from
LICENSOR under the aforesaid patents and know-how, and LICENSOR is willing to
grant to LICENSEE such licenses;
NOW, THEREFORE, in consideration of the covenants and obligations
expressed herein and intending to be legally bound, and otherwise to be bound by
proper and reasonable conduct, the parties agree as follows:
1. DEFINITIONS
1.01 "AFFILIATE(S)" shall mean any corporation, firm, partnership
or other entity, whether de jure or de facto, which directly
or indirectly owns, is owned by or is under common ownership
with a party to this Agreement to the extent of at least fifty
percent (50%) of the equity (or such lesser percentage which
is the maximum allowed to be owned by a foreign corporation in
a particular jurisdiction) having the power to vote on or
direct the affairs of the entity and any person, firm,
partnership, corporation or other entity actually controlled
by, controlling or under common control with a party to this
Agreement.
1.02 "BLOCKING PATENTS" shall mean patents owned and/or controlled
by THIRD PARTIES which are needed by LICENSEE for the making,
having made, using, having used, importing, offering for sale,
selling or having sold VACCINES
<PAGE>
2.
and/or technology owned and/or controlled by THIRD PARTIES
which is necessary for LICENSEE in order to practice the
license(s) granted by LICENSOR hereunder. For the avoidance of
doubt any patents and/or patent applications and/or technology
owned and/or controlled by DynCorp to which LICENSEE may
acquire a licence will be considered for the purpose of this
Agreement as BLOCKING PATENTS.
1.03 "COMBINATION" shall mean VACCINE wherein (a) Rotavirus
antigen(s) is (are) formulated in combination with one or more
additional therapeutically and/or prophylactically active
antigens.
1.04 "FDA" shall mean the United States Food and Drug
Administration.
1.05 "KNOW-HOW" shall mean all present and future technical
information, materials and know-how which relate to (a)
Rotavirus antigen(s) for use in a live attenuated vaccine
against rotavirus which are now and/or at anytime during the
term of this Agreement developed, owned, proprietary to and/or
controlled by LICENSOR and/or to which LICENSOR has otherwise
the right to grant license, which are both secret and
substantial. KNOW-HOW shall include the Rotavirus 89.12 strain
and any other live attenuated Rotavirus strain(s) useful or
necessary for VACCINE, owned and/or controlled by LICENSOR
and/or to which LICENSOR has otherwise the right to grant
license and, without limitation, all chemical,
pharmacological, toxicological, clinical, assay, control and
manufacturing data and any other information relating thereto.
KNOW-HOW shall not include any information, materials and/or
know-how which are generally ascertainable from publicly
available information or which subsequently become publicly
available. KNOW-HOW existing as of the Effective Date is
listed in Appendix B attached hereto which shall, as
appropriate, be updated from time to time. LICENSOR shall
identify KNOW-HOW in writing at the time of disclosure to
LICENSEE.
1.06 "LICENSEE" shall mean SmithKline Beecham P.L.C.
1.07 "LICENSOR" shall mean Virus Research Institute, Inc.
1.08 "MAJOR MARKETS" shall mean the United States of America,
United Kingdom, France, Germany and Italy.
<PAGE>
3.
1.09 "NET SALES" shall mean the gross receipts from sales of
VACCINE in the TERRITORY by LICENSEE, its AFFILIATES and/or
sublicensees to THIRD PARTIES under this Agreement after
deducting:
(i) reasonable transportation charges, including insurance;
and
(ii) LICENSEE's costs for syringes and other administration
devices combined with, or contained in, commercial
packaging; and
(iii) sales and excise taxes and duties paid by a selling
party and any other governmental charges imposed upon
the production, importation, use or sale of VACCINE
including, without limitation, contributions and
payments collected by any governmental authorities as
liability provisions and/or made pursuant to
governmental injury compensation schemes; and
(iv) trade, quantity and cash discounts (other than cash
discounts for early payments), commissions and other
customary rebates; and
(v) allowances or credits to customers or charges back from
customers on account of rejection or return of VACCINE
subject to royalty under this Agreement or on account
of retroactive price reductions affecting such VACCINE;
and
(vi) the difference between fifty percent (50%) of the
royalties paid to THIRD PARTIES as referred to in
Paragraph 4.02 and the amount of royalties actually
deducted under Paragraph 4.02; and
(vii) the royalties payable by LICENSEE to THIRD PARTIES on
the manufacture, use and/or sale of VACCINE for
adjuvants and/or other technology contained in VACCINE
to the extent they are not otherwise deducted pursuant
to the provisions of Section 4 hereof or under
Paragraph 1.09 (vi) above.
Sales between or among LICENSEE and its AFFILIATES or
sublicensees shall be excluded from the computation of NET
SALES except where such AFFILIATES or sublicensees are end
users, but NET SALES shall include the subsequent final sales
to THIRD PARTIES by such AFFILIATES or sublicensees.
<PAGE>
4.
If VACCINE is sold as a COMBINATION, NET SALES for purposes of
determining royalties on COMBINATION shall be calculated by
multiplying NET SALES by the fraction A/B, where A is the
invoice price of a monovalent form of VACCINE sold separately
and B is the invoice price of COMBINATION.
If the invoice price of a monovalent form of VACCINE is not
available and the parties are unable to agree on an
alternative arrangement, then royalty on COMBINATION shall be
determined by multiplying NET SALES by a fraction X/Y wherein
X is one (1) and Y is the total number of active antigens
included in COMBINATION with all the Rotavirus antigens being
counted as only one (1) antigen.
1.10 "PATENTS" shall mean all patents and patent applications which
are or become owned and/or controlled, in whole or in part, by
LICENSOR or to which LICENSOR otherwise has, now or in the
future, the right to grant licenses, which generically or
specifically claim VACCINE, a process for manufacturing
VACCINE and intermediates used in such process, or a use of
VACCINE. Included within the definition of PATENTS are any
continuations, continuations-in-part, divisions, patents of
addition, reissues, renewals or extensions (other than SPC)
thereof. Also included within the definition of PATENTS are
any patents and patent applications which generically or
specifically claim any improvements of VACCINE or
intermediates or manufacturing processes required or useful
for production of VACCINE which are developed by LICENSOR
and/or under which LICENSOR otherwise has the right to grant
licenses or sublicenses, now or in the future, during the term
of this Agreement. For the avoidance of doubt PATENTS do not
include patents or patent applications which claim adjuvants,
delivery systems, or other delivery vehicles or vaccines which
include solely antigens other than Rotavirus antigens. The
current list of patent applications and patents encompassed
within PATENTS is set forth in Appendix A attached hereto.
1.11 "SPC" shall mean all Supplementary Protection Certificates for
medicinal products and their equivalents provided under the
Council Regulation (EEC) No. 1768/92 of June 18, 1992 which
are directed to a VACCINE.
1.12 "VACCINE" shall mean any and all live attenuated Rotavirus
vaccines or components thereof licensed hereunder which
contain the Rotavirus 89.12 strain and/or a strain derived
from the Rotavirus 89.12 strain, developed and/or owned by
LICENSOR and/or to which LICENSOR has otherwise, now or in the
<PAGE>
5.
future, the right to grant license and/or any and all live
attenuated Rotavirus vaccines or components thereof licensed
hereunder which are developed and/or owned by LICENSOR and/or
to which LICENSOR has otherwise, now or in the future, the
right to grant license.
1.13 "VALID CLAIM" shall mean a claim of a granted PATENT which has
not lapsed or been abandoned and which has not been declared
invalid or unenforceable by a court of competent jurisdiction
or administrative agency from which no appeal is or can be
taken.
1.13 "TERRITORY" shall mean all the countries and territories of
the world.
1.14 "THIRD PARTY(IES)" shall mean any person or party other than a
party to this Agreement or an AFFILIATE.
"Interpretative Rules". For purposes of this Agreement, except as
otherwise expressly provided herein or unless the context otherwise
requires: (a) defined terms include the plural as well as the singular
and the use of any gender shall be deemed to include the other gender;
(b) references to "Articles", "Sections", "Paragraphs" and other
subdivisions and to "Appendices", "Schedules" and "Exhibits" without
reference to a document, are to designated Articles, Sections,
Paragraphs and other subdivisions of, and to Appendices, Schedules and
Exhibits to, this Agreement; (c) the use of the term "including" means
"including but not limited to"; and (d) the words "herein", "hereof",
"hereunder" and other words of similar import refer to this Agreement
as a whole and not to any particular provision.
2. GRANT
2.01 LICENSOR hereby grants to LICENSEE and its AFFILIATES an
exclusive license, with the right subject to Paragraph 2.02 to
grant sublicenses, under PATENTS, KNOW-HOW and any SPC to
make, have made, use, have used, sell, offer for sale, have
sold, keep, import and export VACCINE and COMBINATION, in the
TERRITORY, in any formulation, configuration, combination
and/or delivery system, subject to the terms and conditions of
this Agreement.
2.02 LICENSEE agrees to notify LICENSOR of any sublicense under
PATENTS and/or KNOW-HOW it shall grant to any THIRD PARTY(IES)
and, at
<PAGE>
CONFIDENTIAL TREATMENT
6.
LICENSOR's request, agrees to provide LICENSOR with suitably
redacted versions of the sublicense agreements LICENSEE may
enter into with said THIRD PARTY(IES).
2.03 Notwithstanding anything else to the contrary herein, LICENSEE
agrees that PATENTS and KNOW-HOW shall be used by LICENSEE
only in and for VACCINES and in accordance with this Agreement
and can only be used by LICENSEE for so long as and to the
extent this Agreement and the licences and rights granted
hereunder are not terminated pursuant to Paragraph 10.02,
10.03, 10.04 or 10.06.
2.04 To the extent that any rights and licenses granted to LICENSEE
under this Agreement are rights and licenses obtained by
LICENSOR under an agreement with a THIRD PARTY ("Third Party
Agreement"), then any such rights and licenses granted to
LICENSEE will be subject to the terms, conditions and
obligations of such Third Party Agreement. LICENSEE
specifically acknowledges that the obligations contained in
Sections 2.4 (c), 8 and 10 (attached hereto as Appendix E) of
a certain License and Clinical Trials Agreement between
LICENSOR and the James N. Gamble Institute of Medical Research
("the Gamble Agreement") will be binding on LICENSEE.
3. PAYMENTS AND ROYALTIES
3.01 LICENSEE shall make the following license fee payment to
LICENSOR, which payment shall be non-refundable to LICENSEE
for any reason: [*]
3.02 As consideration for the license under PATENTS granted to
LICENSEE under this Agreement, LICENSEE shall pay to LICENSOR
the following royalties ("Patent Royalty(ies)"):
(a) [*]
(b) [*]
(c) [*] ; and
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
<PAGE>
CONFIDENTIAL TREATMENT
7.
(d) [*]
provided that the VACCINE sold is covered by a VALID CLAIM in
the particular country where sales are made.
3.03 As consideration for the license to KNOW-HOW granted to
LICENSEE under this Agreement, LICENSEE shall pay to LICENSOR
royalties on NET SALES in those countries wherein there is no
granted PATENT or wherein a patent application is pending or
wherein there is no VALID CLAIM ("Know-How Royalty(ies)"),
provided that the making, using or selling of VACCINE actually
use KNOW-HOW which LICENSOR has identified in writing as being
secret and substantial at the time of disclosure to LICENSEE.
The rate of the Know-How Royalties payable under this
Paragraph 3.03 shall, on a country-by-country basis, be [*]
that would be payable under paragraph 3.02 hereto considering
the applicable portion of annual NET SALES. In the event
LICENSEE, in a specific country, faces competition with a
vaccine which represents [*] of NET SALES in such country, the
sale of which vaccine would infringe PATENTS if sold in
patented countries (a "Competitive Vaccine"), the rate of the
Know-How Royalties payable by LICENSEE to LICENSOR on NET
SALES in such country shall only be [*] that, considering the
applicable portion of annual NET SALES, would be payable under
Paragraph 3.02 hereof. LICENSEE acknowledges that the supply
of the Rotavirus 89.12 strain by LICENSOR to LICENSEE shall
constitute supply of KNOW-HOW which is secret, substantial and
identified as being secret and substantial and that Know-How
Royalties due under this Paragraph 3.03, subject to Paragraph
3.05, shall be payable on NET SALES of VACCINE which contains
such strain(s) or any strain derived therefrom.
3.04 LICENSEE's royalty obligations under Paragraph 3.02 shall
become effective in each country in the TERRITORY, on a
country-by-country basis, at such time as there is a VALID
CLAIM in such country covering the VACCINE sold and shall be
applicable until expiry of the last remaining PATENT in such
country. In the event that any THIRD PARTY initiates any legal
or administrative proceedings challenging the validity, scope
or enforceability of a PATENT in any country in the TERRITORY
and a THIRD PARTY sells a Competitive Vaccine in such
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
<PAGE>
CONFIDENTIAL TREATMENT
8.
country, then the Patent Royalties on NET SALES pursuant to
Paragraph 3.02 in such country shall be suspended during
pendency of the proceedings while such Competitive Vaccine is
sold in such country and a Know-How Royalty calculated
pursuant to Paragraph 3.03 shall be due instead for the period
specified in Paragraph 3.05 with the Know-How Royalty being
[*]. If the validity, scope and enforceability of claims
in the PATENT which cover VACCINE are upheld by a court or
other legal or administrative tribunal from which no appeal is
or can be taken, then the amount of Patent Royalties which
would have been due during the period of suspension, less any
amount of paid Know-How Royalties, shall be promptly paid with
interests, the interest rate being the Interbank Bank of
America base rate. If the claims in the PATENT which cover
VACCINE are held to be invalid or otherwise unenforceable by a
court or other legal or administrative tribunal from which no
appeal is or can be taken then LICENSOR shall retain the
Know-How Royalties paid under this Paragraph 3.04 and no
further royalties under Paragraph 3.02 shall be owed in such
country provided that in the event LICENSEE has paid to
LICENSOR a Know-How royalty pursuant to this Paragraph 3.04
after the expiration of the period specified in Paragraph
3.05, the amount of such Know-How Royalties paid by LICENSEE
shall be promptly reimbursed by LICENSOR to LICENSEE with
interests.
3.05 LICENSEE's Know-How Royalty obligations under Paragraph 3.03
shall be effective, on a country-by-country basis, for a
period of ten (10) years from LICENSEE's first commercial sale
of VACCINE as part of a nationwide introduction of VACCINE in
such country of the TERRITORY.
3.06 In the event the only remaining patent protection afforded to
a PRODUCT in any country of the TERRITORY where it is sold is
a SPC, LICENSEE shall pay to LICENSOR a royalty on NET SALES
in that country at the applicable Patent Royalty rate pursuant
to Paragraph 3.02 if LICENSEE does not face competition from a
Competitive Vaccine with respect to VACCINE in that country
and at the applicable Know-How royalty rate pursuant to
Paragraph 3.03 if LICENSEE does face competition from a
Competitive Vaccine with respect to VACCINE in that country.
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
<PAGE>
CONFIDENTIAL TREATMENT
9.
3.07 In the event that LICENSOR secures rights to any live
attenuated Rotavirus strain(s) other than the Rotavirus 89.12
strain which LICENSEE considers is(are) useful or necessary
for VACCINE, LICENSOR shall, at LICENSEE's sole option,
transfer such other live attenuated Rotavirus strain(s) to
LICENSEE with unrestricted rights to use such strain(s)
whereupon LICENSEE shall contribute to [*] of the procurement
costs of LICENSOR.
In the event that LICENSOR is offered a license to
improvements on Inventions (as defined in the Gamble
Agreement) under paragraph 2.5 of the Gamble Agreement,
LICENSOR shall notify LICENSEE forthwith and provide all
information with respect thereto received by LICENSOR. If
requested in writing by LICENSEE, LICENSOR shall exercise the
option provided that LICENSEE pays the costs and expenses
thereof. Any licensing rights obtained by LICENSOR as a result
of the exercise of the option upon LICENSEE's request shall
automatically be included in the license granted to LICENSEE
hereunder. Any costs and expenses paid by LICENSEE in relation
to the exercise of the option for licensing rights to
improvements on Inventions shall be fully creditable against
any royalties paid hereunder.
4. COMPULSORY LICENSES, BLOCKING PATENTS AND OTHER ROTAVIRUS ANTIGENS
4.01 In the event that a governmental agency in any country or
territory grants or compels LICENSOR or LICENSEE to grant a
license under PATENTS and/or KNOW-HOW to any THIRD PARTY for
any vaccine(s) that compete(s) with VACCINE sold by LICENSEE,
LICENSEE shall have the benefit in such country or territory
of the terms granted to such THIRD PARTY to the extent that
such terms as a whole are more favourable to the THIRD PARTY
than those granted to LICENSEE under this Agreement.
4.02 The parties recognize that BLOCKING PATENTS may exist. If at
any time during the term of this Agreement LICENSEE, in its
sole discretion, deems it necessary to seek a license under
any BLOCKING PATENT(S) from any THIRD PARTY in order to
practice the rights and licenses granted by LICENSOR to
LICENSEE hereunder in any particular country(ies), [*]
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
<PAGE>
CONFIDENTIAL TREATMENT
10.
4.03 In the event that Rotavirus antigens (other than Rotavirus
antigens produced from strain 89.12 or derivatives thereof)
are required to provide and/or to increase protection against
any specific Rotavirus serotype, the royalties payable to
LICENSOR pursuant to Paragraph 3.02 or pursuant to Paragraph
3.03, as appropriate, shall be reduced by [*].
4.04 In no event shall the combined royalty reductions and
deductions pursuant to Paragraphs 4.02 and 4.03 cause the
level of royalties otherwise due to LICENSOR pursuant to
Paragraph 3.02 or pursuant to Paragraph 3.03, as appropriate,
to be reduced by [*] with respect to any VACCINE in any
country for any calendar quarter.
5. DEVELOPMENT AND MILESTONES
5.01 Subject to the provisions of Paragraph 5.02 below, LICENSEE
will, in accordance with LICENSEE's reasonable business and
scientific judgement, exercise its reasonable efforts and
diligence in developing VACCINE and in undertaking
investigations and actions required to obtain appropriate
governmental approvals to market VACCINE in at least the MAJOR
MARKETS and in commercialising VACCINE in such MAJOR MARKETS.
All such activity shall be undertaken at LICENSEE's expense.
At LICENSEE's request and expense, LICENSOR shall supply
LICENSEE with reasonable technical assistance in undertaking
such investigations and actions.
5.02 The parties shall institute a development program with the
objective of advancing VACCINE to commercial launch. The
responsibilities of the parties shall be as follows:
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
<PAGE>
CONFIDENTIAL TREATMENT
11.
(a) FIRST PHASE
LICENSOR has initiated a Phase II clinical trial to
demonstrate proof of concept of VACCINE and shall
complete such trial at LICENSOR's cost and expense.
The parties shall agree on acceptable end points
concerning immunogenicity, safety and efficacy for
proof of concept which end points shall be attached
hereto as Appendix C and the meeting of such end
points shall establish proof of concept.
In parallel with said Phase II trial, LICENSEE
shall at its expense perform feasibility studies to
produce VACCINE with a commercial cell line. The
feasibility studies will have the purpose of (i)
demonstrating that a commercially viable yield is
obtainable from the chosen cell line(s), (as
defined in Appendix D attached hereto) and (ii)
subject to prior successful completion of (i),
optimizing the manufacturing process, and, if
necessary and feasible, producing GMP commercial
products for use in a Phase III clinical study and
in Phase II/III bridging studies.
(b) MILESTONE - PHASE II/MANUFACTURING
Contingent upon (i) LICENSOR establishing proof of
concept under Paragraph 5.02 (a) and (ii) LICENSEE
demonstrating that VACCINE can be produced in
commercially viable yields under Paragraph 5.02 (a)
LICENSEE shall pay LICENSOR a development milestone
fee of [*] unless LICENSEE notifies LICENSOR in
writing that LICENSEE has decided not to pursue the
development of VACCINE within sixty (60) days after
successful completion of first phase by both
parties.
If however LICENSOR is not able to demonstrate
satisfactory proof of concept at the end of Phase
II trial and/or LICENSEE cannot demonstrate in
accordance with Paragraph 5.02 (a) within six (6)
months after proof of concept in the Phase II trial
that a commercially viable yield can be obtained,
then the parties shall negotiate in good faith to
determine whether further joint development is
warranted and, if no agreement can be reached, this
Agreement may be terminated at the option of
LICENSEE if LICENSOR has
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
<PAGE>
CONFIDENTIAL TREATMENT
12.
been unable to demonstrate satisfactory proof of
concept at the end of Phase II trial and at the
option of LICENSOR if LICENSEE has been unable to
demonstrate that a commercially viable yield can be
obtained.
(c) MILESTONE - PHASE III/TRIAL INITIATION
Contingent upon satisfactory completion of the
Phase II clinical and manufacturing milestone in
accordance with Paragraph 5.02 (b), LICENSEE shall
prepare a clinical development plan and discuss the
suitability of such plan with the FDA and shall
exert reasonable efforts to obtain FDA's approval
of such plan under an IND within a reasonable
timeframe to be agreed upon in good faith between
the parties.
If LICENSEE, after discussion with the FDA, is
satisfied with the economics of such plan and
decides to advance to pivotal Phase III, it shall
at its expense conduct a pivotal Phase III clinical
trial. LICENSOR shall be consulted in the design of
such trial and shall participate in the running of
the trial but LICENSEE shall exercise the ultimate
control and management of the trial.
Upon initiation of the Phase III clinical study
under an IND the design of which has been discussed
with and approved by the FDA, LICENSEE shall pay
LICENSOR a second milestone fee of [*].
If LICENSEE, after discussion with the FDA, is not
satisfied with the economics of such plan and
decides to discontinue the VACCINE development, the
second milestone fee shall not be due.
However, should LICENSEE decide to conduct the
Phase III clinical study with, and pursue the
development of, VACCINE in a MAJOR MARKET of Europe
rather than in the USA, the second milestone fee
shall be reduced to [*].
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
<PAGE>
CONFIDENTIAL TREATMENT
13.
(d) MILESTONE - PHASE III/COMPLETION
Provided that the pivotal Phase III study on
completion provides satisfactory results that in
LICENSEE's opinion can be used for submission of a
registration file in a MAJOR MARKET, then LICENSEE
shall pay LICENSOR a third milestone fee of [*]. In
the event that the results of the Phase III study
are not acceptable for registration purpose, such
third milestone fee shall be payable only when a
regulatory submission is first made in a MAJOR
MARKET.[*]
(e) REGISTRATION MILESTONE
LICENSEE shall pay a milestone fee of [*]
5.03 LICENSEE shall report to LICENSOR on the status and progress
of LICENSEE's efforts to develop and commercialise VACCINE at
such times and in such manner as LICENSOR may reasonably
request.
5.04 LICENSOR shall provide to LICENSEE, at LICENSEE's request and
expense, technical assistance within its area of expertise
concerning development, production and commercialisation of
VACCINE. Provision of such technical assistance shall include,
but not be limited to, visits by LICENSOR personnel to
LICENSEE and visits by LICENSEE personnel to LICENSOR at times
and for periods of time upon which the parties will agree.
5.05 In the event that LICENSEE's development of VACCINE is
terminated at any time under the provisions of this Section 5
other than for failure by LICENSOR to establish satisfactory
proof of concept, LICENSEE shall, to the extent that it is
allowed and free to do so, grant LICENSOR a license under its
manufacturing
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
<PAGE>
14.
technology specific for VACCINES in exchange for a reasonable
compensation to be discussed and agreed upon in good faith by
the parties.
In the event LICENSEE, at its sole option, elects not to
market VACCINE itself or through its AFFILIATES in any MAJOR
MARKET(S), LICENSEE shall give LICENSOR a first option for the
grant of marketing sub-licensing rights in any such MAJOR
MARKET upon terms and conditions to be negotiated and agreed
upon in good faith by the parties.
In the event LICENSEE, at its sole option, elects not to
market VACCINE itself or through its AFFILIATES and/or
sublicensees in any MAJOR MARKET(S), the rights and licenses
granted to LICENSEE under this Agreement shall be terminated
with respect to any such MAJOR MARKET(S).
6. EXCHANGE OF INFORMATION AND CONFIDENTIALITY
6.01 During the term of this Agreement, LICENSOR shall promptly
disclose to LICENSEE and/or supply LICENSEE with all
KNOW-HOW. LICENSOR shall not be authorized to make any
publication with respect to the KNOW-HOW nor disclose it to
any THIRD PARTY provided that, LICENSOR shall, upon LICENSEE's
prior consent in writing which consent shall not be
unreasonably withheld, be authorized to publish the data from
the Phase II clinical trial referred to in Paragraph 5.02
hereof and prior studies and, without consent, be authorized
to disclose KNOW-HOW to its licensor as per the Gamble
Agreement.
6.02 During the term of this Agreement, the parties shall promptly
inform each other of any information that a party obtains or
develops regarding the utility and safety of VACCINE and shall
promptly report to the other party any confirmed information
of serious or unexpected reactions or side effects related to
the utilisation or medical administration of VACCINE.
6.03 During the term of this Agreement and for seven (7) years
thereafter, irrespective of any termination earlier than the
expiration of the term of this Agreement, LICENSOR and
LICENSEE shall not reveal or disclose to THIRD PARTIES any
confidential information received from the other party without
first obtaining the written consent of the disclosing party,
except as may be required for purposes of investigating,
developing, manufacturing or marketing VACCINE
<PAGE>
15.
or for securing essential or desirable authorisations,
privileges or rights from governmental agencies, or is
required to be disclosed to a governmental agency, or is
necessary to file or prosecute patent applications concerning
VACCINE or to carry out any litigation concerning VACCINE
provided that in each case the disclosing party exerts best
efforts to maintain the confidentiality thereof under such
circumstances and notifies the owner of the confidential
information prior to any such disclosure. This confidentiality
obligation shall not apply to such information which is or
becomes a matter of public knowledge, or is already in the
possession of the receiving party, or is disclosed to the
receiving party by a THIRD PARTY having the right to do so, or
is subsequently and independently developed by employees of
the receiving party or AFFILIATES thereof who had no knowledge
of the confidential information disclosed. The parties shall
take reasonable measures to assure that no unauthorised use or
disclosure is made by others to whom access to such
information is granted.
6.04 Nothing herein shall be construed as preventing a party hereto
from disclosing any information received from the other party
to an AFFILIATE, sublicensee, distributor or to a THIRD PARTY
as may be required for purposes of investigating, developing,
manufacturing or marketing VACCINE, provided such AFFILIATE,
sublicensee, distributor or THIRD PARTY has undertaken a
similar obligation of confidentiality with respect to the
disclosed confidential information.
6.05 All confidential information disclosed by one party to the
other shall remain the intellectual property of the disclosing
party. In the event that a court or other legal or
administrative tribunal, directly or through an appointed
master, trustee or receiver, assumes partial or complete
control over the assets of a party to this Agreement based on
the insolvency or bankruptcy of such party, the bankrupt or
insolvent party shall promptly notify the court or other
tribunal (i) that confidential information received from the
other party under this Agreement remains the property of the
other party and (ii) of the confidentiality obligations under
this Agreement. In addition, the bankrupt or insolvent party
shall, to the extent permitted by law, take all steps
necessary or desirable to maintain the confidentiality of the
other party's confidential information and to insure that the
court, other tribunal or appointee maintains such information
in confidence in accordance with the terms of this Agreement.
6.06 No public announcement or other disclosure to THIRD PARTIES
concerning the existence of or the terms of or the subject
matter covered by this Agreement
<PAGE>
16.
shall be made, either directly or indirectly, by any party to
this Agreement, without first obtaining the approval of the
other party and agreement upon the nature and text of such
announcement or disclosure. The party desiring to make any
such public announcement or other disclosure shall inform the
other party of the proposed announcement or disclosure in
reasonable sufficient time prior to public release, and shall
provide the other party with a written copy thereof, in order
to allow such other party to comment upon such announcement or
disclosure. If such public announcement or other disclosure is
required under securities laws or rules or pursuant to a
public or private financing the concerned party needs not
obtain the consent of the other party but shall provide the
other party with a five (5) working days notice allowing the
other party to review and comment upon such proposed
disclosure and/or announcement and such other party shall
cooperate fully with the concerned party with respect to all
disclosures regarding this Agreement to the United States
Securities Exchange Commission and any other governmental or
regulatory agencies, including requests for confidential
treatment of proprietary information of either party included
in any such disclosure.
6.07 Neither LICENSEE nor LICENSOR shall submit for written or oral
publication any manuscript, abstract or the like which
includes data or other information generated and provided by
the other party without first obtaining the prior written
consent of the other party, which consent shall not be
unreasonably withheld. The contribution of each party shall be
noted in all publications or presentations by acknowledgement
or coauthorship, whichever is appropriate.
7. PATENT PROSECUTION AND LITIGATION
7.01 LICENSOR, or any entity having granted or granting rights to
LICENSOR, shall be responsible for the filing, prosecution and
maintenance of PATENTS which, subject to Paragraph 7.02, shall
be at the cost and expense of LICENSOR (or the entity having
granted or granting rights to LICENSOR). LICENSOR shall
disclose to LICENSEE the complete texts of all patent
applications within PATENTS as well as all information
received concerning the institution or possible institution of
any interference, opposition, re-examination, reissue,
revocation, nullification or any official proceedings
involving a PATENT anywhere in the TERRITORY. LICENSEE shall
have the right to review all such pending applications and
other proceedings and to make comments and/or recommendations
to LICENSOR concerning them and their conduct and
<PAGE>
17.
LICENSOR shall consider, in good faith, all such LICENSEE's
comments and/or recommendations. LICENSOR agrees to keep
LICENSEE promptly and fully informed of the course of patent
prosecution or other proceedings including by providing
LICENSEE with copies of substantive communications, search
reports and THIRD PARTY observations submitted to or received
from patent offices throughout the TERRITORY. LICENSOR shall
provide such patent consultation to LICENSEE at no cost to
LICENSEE. LICENSEE shall hold all information disclosed to it
under this section as confidential subject to the provisions
of Paragraphs 6.03 and 6.04.
7.02 LICENSOR shall notify LICENSEE in sufficiently reasonable time
in advance of any PATENT or subject matter or claim contained
in PATENT which LICENSOR intends to abandon or otherwise cause
or allow to be forfeited and LICENSEE shall have the right to
assume responsibility for filing, prosecution and maintenance
of any such PATENT or subject matter or claim contained in
PATENT at LICENSEE's expense provided LICENSOR has the right
to permit LICENSEE to assume such responsibility.
7.03 In the event of the institution of any suit by a THIRD PARTY
against LICENSOR, LICENSEE or its AFFILIATES or sublicensees
for patent infringement involving the manufacture, use, sale,
distribution or marketing of VACCINE anywhere in the
TERRITORY, the party sued shall promptly notify the other
party in writing. Subject to Section 21 below, LICENSEE shall
have the right but not the obligation to defend such suit at
its own expense. LICENSOR and LICENSEE shall reasonably assist
one another and cooperate in any such litigation at the
other's request without expense to the requesting party.
7.04 In the event that LICENSOR or LICENSEE becomes aware of actual
or threatened infringement of a PATENT anywhere in the
TERRITORY, that party shall promptly notify the other party in
writing. LICENSEE shall have the first right but not the
obligation to bring, at its own expense, an infringement
action against any THIRD PARTY and to use LICENSOR's name in
connection therewith. If LICENSEE does not commence a
particular infringement action within ninety (90) days,
LICENSOR, after notifying LICENSEE in writing, shall be
entitled, but not obligated, to bring such infringement action
at its own expense. The party conducting such action shall
have full control over its conduct, including settlement
thereof provided that LICENSEE shall not take any steps,
including settlement, which would have an adverse effect on
PATENTS unless LICENSOR's consent is obtained. In any event,
LICENSOR and LICENSEE
<PAGE>
18.
shall reasonably assist one another and cooperate in any such
litigation at the other's request without expense to the
requesting party.
7.05 LICENSOR and LICENSEE shall recover their respective actual
out-of-pocket expenses, or equitable proportions thereof,
associated with any litigation or settlement thereof, from any
recovery made by any party. Any excess amount shall before the
party which has conducted the litigation or settlement
thereof.
7.06 The parties shall keep one another informed of the status of
and of their respective activities regarding any litigation or
settlement thereof concerning VACCINE.
7.07 LICENSOR shall authorise LICENSEE to act as LICENSOR's agent
for the purpose of making any application for any extensions
of the term of PATENTS, including SPC, and shall provide
reasonable assistance therefor to LICENSEE, at LICENSEE's
expense. (In the United States of America as permitted under
Title 35 of the United States Code).
7.08 LICENSOR, on behalf of itself, its officers, agents and
successors hereby waives any and all actions and causes of
action, claims and demands whatsoever in law or equity of any
kind against LICENSEE'S and its AFFILIATES' exercize of
LICENSEE's rights under Paragraphs 7.02 and 7.07, and, subject
to LICENSEE's obligations under Paragraph 7.04, against
LICENSEE's and its AFFILIATES' exercize of LICENSEE's rights
under Paragraph 7.04.
8. TRADEMARKS
8.01 LICENSEE, at its expense, shall be responsible for the
selection, registration and maintenance of all trademarks
which it employs in connection with VACCINE and COMBINATION
and shall own and/or control such trademarks. Nothing in this
Agreement shall be construed as a grant of rights, by license
or otherwise, to LICENSOR to use such trademarks for any
purpose.
<PAGE>
19.
9. STATEMENTS AND REMITTANCES
9.01 LICENSEE shall keep and require its AFFILIATES and
sublicensees to keep complete and accurate records of all
sales of VACCINE and COMBINATION under the licenses granted
herein. LICENSOR shall have the right, at LICENSOR's expense,
through a certified public accountant or like person
reasonably acceptable to LICENSEE, to examine such records
during regular business hours during the life of this
Agreement and for six (6) months after its termination;
provided, however, that such examination shall not take place
more often than once a year and shall not cover such records
for more than the preceding two (2) years and provided further
that such accountant shall report to LICENSOR only as to the
accuracy of the royalty statements and payments. In the event
that such inspection shall indicate in any calendar year that
the royalties which should have been paid by LICENSEE are at
least five percent (5%) greater than those which were
actually paid by LICENSEE, then LICENSEE shall pay the cost of
such inspection in addition to the underpaid royalties.
9.02 Within sixty (60) days after the close of each calendar
quarter, LICENSEE shall deliver to LICENSOR a true accounting
of all VACCINES and COMBINATION sold by LICENSEE, its
AFFILIATES and its sublicensees during such quarter, and shall
at the same time pay all royalties due. Such accounting shall
show sales, NET SALES and deductions against royalties on NET
SALES on a country-by-country and product-by-product basis.
9.03 Any tax paid or required to be withheld by LICENSEE on behalf
of LICENSOR on account of royalties payable to LICENSOR under
this Agreement shall be deducted from the amount of royalties
otherwise due. LICENSEE shall secure and send to LICENSOR
proof of any such taxes withheld and paid by LICENSEE or its
sublicensees for the benefit of LICENSOR.
9.04 All royalties due under this Agreement shall be payable in
United States Dollars. Monetary conversions from the currency
of a foreign country in which VACCINE is sold into US currency
shall be made at the exchange rate in force on the last
business day of the period for which the royalties are being
paid as published by Banque Generale de Belgique, Brussels,
Belgium, or on another basis mutually agreed to by both
parties in writing.
<PAGE>
20.
10. TERM AND TERMINATION
10.01 Unless otherwise terminated, this Agreement shall expire upon
the expiration, lapse or invalidation of the last remaining
PATENT in the TERRITORY. Expiration of this Agreement under
this provision shall not preclude LICENSEE from continuing to
market VACCINE and to use KNOW-HOW without any further royalty
or other payments to LICENSOR.
10.02 If either party fails or neglects to perform covenants or
provisions of this Agreement and if the party in default has
not corrected such default within sixty (60) days (the period
shall be thirty (30) days for a payment default) after
receiving written notice from the other party with respect to
such default, such other party shall have the right to
terminate this Agreement by giving written notice to the party
in default provided the notice of termination is given within
six (6) months of the default and prior to correction of the
default. If the default other than a payment default is not
curable in sixty (60) days and the defaulting party in good
faith notifies the other party in writing prior to the sixty
(60) days that it is initiating cure of the default and
initiates cure of such default within the sixty (60) days and
in good faith continues to attempt to cure the default, and in
fact cures the default within one hundred and twenty (120)
days, then this Agreement shall not be terminable hereunder.
10.03 LICENSEE may terminate this Agreement in its entirety or with
respect to any country by giving LICENSOR at least three (3)
months prior written notice thereof.
10.04 Either party may terminate this Agreement if, at any time, the
other party shall file in any court or agency pursuant to any
statute or regulation of (the United States or of) any
(individual) state or (foreign) country, a petition in
bankruptcy or insolvency or for reorganisation or for an
arrangement or for the appointment of a receiver or trustee of
the party or of its assets, or if the other party proposes a
written agreement of composition or extension of its debts, or
if the other party shall be served with an involuntary
petition against it, filed in any insolvency proceeding, and
such petition shall not be dismissed with sixty (60) days
after the filing thereof, or if the other party shall propose
or be a party to any dissolution or liquidation, or if the
other party shall make an assignment for the benefit of
creditors.
<PAGE>
21.
10.05 Notwithstanding the bankruptcy of LICENSOR, or the impairment
of performance by LICENSOR of its obligations under this
Agreement as a result of bankruptcy or insolvency of LICENSOR,
LICENSEE, if it has not then been notified for breach by
LICENSOR, shall be entitled to retain the licenses granted
herein, subject to LICENSOR's right to terminate this
Agreement for reasons other than bankruptcy or insolvency as
expressly provided in this Agreement.
10.06 LICENSEE shall be entitled to terminate this Agreement by
written notice to LICENSOR in the event of change of control
of LICENSOR, provided such notice is given within thirty (30)
days after LICENSOR has notified LICENSEE of such change of
control or after the date which LICENSOR can demonstrate is
the date on which LICENSEE has been otherwise informed of such
change of control.
11. RIGHTS AND DUTIES UPON TERMINATION
11.01 Upon termination of this Agreement, LICENSOR shall have the
right to retain any sums already paid by LICENSEE hereunder,
and LICENSEE shall pay all sums accrued hereunder which are
then due.
11.02 Upon termination of this Agreement in its entirety or with
respect to any country under Paragraph 10.02, 10.03 or 10.04,
LICENSEE shall notify LICENSOR of the amount of VACCINE
LICENSEE and its AFFILIATES, sublicensees and distributors
then have on hand, the sale of which would, but for the
termination, be subject to royalty, and LICENSEE and its
AFFILIATES, sublicensees and distributors shall thereupon be
permitted to sell that amount of VACCINE provided that
LICENSEE shall pay the royalty thereon at the time herein
provided for.
11.03 Termination of this Agreement shall terminate all outstanding
obligations and liabilities between the parties arising from
this Agreement except those described in Paragraphs 2.03,
6.03, 6.04, 6.05, 6.06, 6.07, 7.03, 7.06, 7.08, 8.01, 9.01,
9.02, 9.03, 9.04, 9.05, 11.01, 11.02, 11.03, 14.01, 15.01,
18.01, 20.01 and 21.01.
11.04 Upon termination of this Agreement by LICENSOR pursuant to
Paragraph 10.02 for breach of LICENSEE, LICENSEE agrees not to
use KNOW-HOW and/or
<PAGE>
22.
PATENTS for the research, development, making, using or
selling of any product or process, including, but not limited
to, VACCINES.
12. WARRANTIES AND REPRESENTATIONS
12.01 LICENSOR warrants that it has the right to grant the rights
and licences under PATENTS and KNOW-HOW as provided throughout
this Agreement including, but not limited to, the Rotavirus
89.12 strain and that it has the right to enter into this
Agreement.
12.02 Nothing in this Agreement shall be construed as a warranty
that PATENTS are valid or enforceable or that their exercise
does not infringe any patent rights of THIRD PARTIES. Without
having made an investigation or search, LICENSOR hereby
warrants and represents that it has no present knowledge from
which it can be inferred that PATENTS are invalid or that
their exercise would infringe patent rights of THIRD PARTIES
or that the Rotavirus 89.12 strain or the use thereof in
VACCINE infringes any patent rights of THIRD PARTIES. Subject
to other provisions contained herein, a holding of invalidity
or unenforceability of any PATENT, from which no further
appeal is or can be taken, shall not affect any obligation
already accrued hereunder, but shall only eliminate royalties
otherwise due under such PATENT from the date such holding
becomes final.
12.03 LICENSOR acknowledges that, in entering into this Agreement,
LICENSEE has relied upon technical and clinical information
and KNOW-HOW disclosed and/or supplied by or on behalf of
LICENSOR and that LICENSEE has relied upon LICENSOR's
obligation to disclose and/or supply further information
pursuant to Paragraph(s) 6.01 and/or 6.02 hereof. LICENSOR
warrants and represents that LICENSOR has no knowledge that
the technical and/or clinical information and/or KNOW-HOW
disclosed and/or supplied to LICENSEE prior to the date of
this Agreement is inaccurate in any material respect. LICENSOR
warrants and represents that it will use its reasonable
efforts to review the technical and/or clinical information
and/or KNOW-HOW to be disclosed and/or supplied to LICENSEE
under Paragraph(s) 6.01 and/or 6.02 hereof after the date of
this Agreement for any inaccuracies therein and that, to the
extent LICENSOR has any knowledge of any material inaccuracies
in such technical and/or clinical information and/or KNOW-HOW,
it shall inform LICENSEE of such inaccuracies. LICENSOR and
LICENSEE warrant and represent to each other that they have
not, up to the date of this Agreement, omitted to disclose
and/or supply to each
<PAGE>
23.
other any information known to them concerning VACCINE or the
transactions contemplated by this Agreement which would, to
the best of their knowledge, be material to the other's
decision to enter into this Agreement and to undertake the
commitments and obligations set forth herein.
12.04 LICENSOR warrants and represents that it has no present
knowledge of the existence of any pre-clinical or clinical
data or information concerning VACCINE which suggests that
there may exist toxicity, safety and/or efficacy concerns
which may materially impair the utility and/or safety of
VACCINE.
13. FORCE MAJEURE
13.01 If the performance of any part of this Agreement by either
party, or of any obligation under this Agreement other than a
payment provision, is prevented, restricted, interfered with
or delayed by reason of any cause beyond the reasonable
control of the party liable to perform, unless conclusive
evidence to the contrary is provided, the party so affected
shall, upon giving written notice to the other party, be
excused from such performance to the extent of such
prevention, restriction, interference or delay, provided that
the affected party shall use its reasonable best efforts to
avoid or remove such causes of non-performance and shall
continue performance with the utmost dispatch whenever such
causes are removed. When such circumstances arise, the parties
shall discuss what, if any, modification of the terms of this
Agreement may be required in order to arrive at an equitable
solution. In the event agreement is not reached or the force
majeure event cannot be cured within six (6) months, the other
party shall have the right to terminate this Agreement by
serving a written notice to the party affected by the force
majeure event.
14. GOVERNING LAW
14.01 This Agreement shall be deemed to have been made in the United
States of America and its form, execution, validity,
construction and effect shall be determined in accordance with
the laws of the Commonwealth of Massachusetts, USA, without
regard to its choice of law principles.
<PAGE>
24.
15. RESOLUTION OF DISPUTES
15.01 Prior to initiating legal action, the parties agree to attempt
to settle any dispute by discussions between the parties,
provided, however that this Paragraph 15.01 shall not prevent
either party from seeking injunctive relief where necessary.
If the parties have not resolved the dispute amicably, legal
action may be introduced.
16. SEPARABILITY
16.01 In the event any portion of this Agreement shall be held
illegal, void or ineffective, the remaining portions hereof
shall remain in full force and effect.
16.02 If any of the terms or provisions of this Agreement are in
conflict with any applicable statute or rule of law, then such
terms or provisions shall be deemed inoperative to the extent
that they may conflict therewith and shall be deemed to be
modified to conform with such statute or rule of law.
16.03 In the event that the terms and conditions of this Agreement
are materially altered as a result of Paragraphs 16.01 or
16.02, the parties will renegotiate the terms and conditions
of this Agreement to resolve any inequities.
17. ENTIRE AGREEMENT
17.01 This Agreement, entered into as of the date first written
above, constitutes the entire agreement between the parties
relating to the subject matter hereof and supersedes all
previous writings and understandings. No terms or provisions
of this Agreement shall be varied or modified by any prior or
subsequent statement, conduct or act of either of the parties,
except that the parties may amend this Agreement by written
instruments specifically referring to and executed in the same
manner as this Agreement.
<PAGE>
25.
18. NO WAIVER
18.01 The failure of either party at any time to exercise any of
their respective rights under this Agreement shall not be
deemed a waiver thereof, nor shall such failure in any way
prevent either party, as the case may be, from subsequently
asserting or exercising such rights.
19. NOTICES
19.01 Any notice required or permitted under this Agreement shall be
sent by certified mail, return receipt requested, postage
pre-paid to the following addresses of the parties:
if to LICENSOR:
Virus Research Institute, Inc.,
61 Moulton Street
Cambridge, MA 02138,
USA
Attention: President
cc: Elliot M. Olstein, Esq.
Carella, Byrne, Bain, Gilfillan, Cecchi,
Stewart & Olstein
6 Becker Farm Road
Roseland, New Jersey 07068
USA
if to LICENSEE:
SmithKline Beecham P.L.C.
New Horizons Court
Brentford
Middlesex TW8 9EP
United Kingdom
with a copy to :
SmithKline Beecham Biologicals Manufacturing
S.A.
rue de l'Institut 89
<PAGE>
26.
1330 Rixensart, Belgium
Attention : Senior Vice President,
General Manager
19.02 Any notice required or permitted to be given concerning this
Agreement shall be effective upon receipt by the party to whom
it is addressed.
20. ASSIGNMENT
20.01 Without prejudice to Paragraph 10.06, this Agreement and the
licenses herein granted shall be binding upon and inure to the
benefit of the successors in interest of the respective
parties. Neither this Agreement nor any interest hereunder
shall be assignable by either party without the written
consent of the other provided, however, that LICENSEE may,
without the consent of LICENSOR, assign this Agreement to any
AFFILIATE or to any corporation with which it may merge or
consolidate or to which it may sell all or substantially all
of its assets, and that LICENSOR may without obtaining the
consent of LICENSEE assign this Agreement to any corporation
with which it may merge or consolidate or to which it may sell
all or substantially all of its assets.
20.02 In the event of a permitted assignment hereunder the assignee
must accept in writing the obligations of this
Agreement, whereupon the assignor shall be relieved of its
obligations under this Agreement.
21. INDEMNIFICATION
21.01(a) LICENSEE agrees to defend, indemnify and hold harmless
LICENSOR, its AFFILIATES and any of their licensors that have
granted a license under which LICENSEE has received a license
under this Agreement as well as each of their respective
directors, officers, employees, shareholders, and agents
(hereinafter individually and collectively referred to as
"Indemnitee") against any and all actions, claims
(specifically including, but not limited to, any damages based
on product liability claims), suits, losses, demands,
judgments, and other liabilities (including attorneys' fees
until LICENSEE assumes the defense as described below)
asserted by THIRD PARTIES, government and non-government,
resulting from or arising out of the manufacture, use or sale
of VACCINES by LICENSEE, its AFFILIATES or sublicensees
provided however that LICENSEE's indemnification to an
<PAGE>
27.
Indemnitee hereunder shall not apply to any liability, damage,
loss or expense to the extent that it is directly or
indirectly attributable to the gross negligence or intentional
misconduct of such Indemnitee. If any such claims or actions
are made, Indemnitee shall be defended at LICENSEE's sole
expense by counsel selected by LICENSEE and reasonably
acceptable to LICENSOR; provided that LICENSOR may, at its own
non-refundable expense, also be represented by counsel of its
own choosing.
(b) Any such Indemnitee shall notify LICENSEE promptly of any
claim or threatened claim under this Section 21, shall fully
cooperate with all reasonable requests of LICENSEE with
respect thereto, and shall give LICENSEE the right to control
the defence and settlement of any such claim provided such
Indemnitee shall be fully indemnified under this Section 21.
(c) The provision of this Section 21 shall apply whether or not an
act or claim is rightly brought or asserted.
IN WITNESS WHEREOF, the parties, through their authorised officers, have
executed this Agreement as of the date first written above.
VIRUS RESEARCH INSTITUTE Inc.
/s/ William A. Packer
-----------------------------
BY: WILLIAM A. PACKER
TITLE: PRESIDENT
SMITHKLINE BEECHAM P.L.C.
/s/ Jean Stephenne
-----------------------------
BY: JEAN STEPHENNE
TITLE: Senior Vice President, General Manager
<PAGE>
CONFIDENTIAL TREATMENT
APPENDIX A
PATENT INFORMATION
[*]
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
<PAGE>
CONFIDENTIAL TREATMENT
APPENDIX B
VRI PROPRIETARY INFORMATION AND KNOW-HOW,
89-12 ROTAVIRUS VACCINE
8 October 1997
[*]
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
<PAGE>
CONFIDENTIAL TREATMENT
APPENDIX C
PHASE II CLINICAL ENDPOINTS
[*]
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
<PAGE>
APPENDIX D
MANUFACTURING ENDPOINT
- - - Yield a minimum of 1 dose/ml
- - - This yield should be achieved in a cell line acceptable for commercial
production and acceptable to regulatory authorities.
<PAGE>
APPENDIX E
EXCERPTS OF LICENSE AND CLINICAL TRIALS AGREEMENT
DATED FEBRUARY 27, 1995 BETWEEN VIRUS RESEARCH INSTITUTE, INC AND JAMES N.
GAMBLE INSTITUTE OF MEDICAL RESEARCH
2.4 (a)
(b)
(c) VRI agrees to forward to GAMBLE a copy of any and all fully
executed sublicense agreements within thirty (30) days of execution thereof, and
further agrees to forward to Gamble annually a copy of such reports received by
VRI from its Sublicensee during the preceding twelve (12) month period under the
sublicenses as shall be pertinent to a royalty accounting under said sublicense
agreements. VRI may delete from copies of sublicense agreements provided to
GAMBLE hereunder commercial, research and development, manufacturing, financial
and other provisions unrelated to VRI's or the Sublicensee's obligations to
Gamble.
8. INDEMNIFICATION AND INSURANCE.
8.1 VRI shall defend, indemnify and hold harmless GAMBLE and its trustees,
officers, medical and professional staff, employees, and agents and their
respective successors, heirs and assigns against all losses, damages, expenses,
including attorney's fees and against any claims, suits, actions, demands or
judgments brought against any one or more of them, arising out of any theory of
product liability (including, but not limited to, action in the form of tort,
warranty, or strict liability) or negligence concerning any product, process or
service made, used or sold pursuant to any right or license granted under this
AGREEMENT. VRI shall have the right to control the defense settlement and/or
compromise of any such claims or actions.
8.2 VRl's obligations under Section 8.1 above shall not apply to any
liability, damage, loss or expense to the extent that it is directly
attributable to the negligence or intentional misconduct of GAMBLE or any of its
trustees, officers, medical and professional staff, employees, agents or their
respective successors, heirs or assigns.
8.3 VRI shall add, at VRl's expense, GAMBLE as an additional insured on
VRI's clinical trial insurance policy, which provides limits of liability of
$2,000,000 per incident and aggregate, effective upon the Effective Date of this
AGREEMENT, to provide insurance coverage for GAMBLE for the clinical trials.
8.4 VRI, at VRl's expense, shall maintain policies of comprehensive
general liability insurance and will obtain product liability insurance in
amounts not less than $1,000,000 per incident and $2,000,000 annual aggregate
and shall add GAMBLE as an additional insured on VRI's policy, which provides
such limits of liability. Such insurance shall provide (i) product liability
coverage, (ii) negligence, and (iii) broad form contractual liability coverage,
for VRI's indemnification under Section 8.1 of this AGREEMENT. The minimum
amounts of insurance coverage required under these provisions shall not be
construed to create a limit of VRI's liability with respect to VRI's
indemnification obligation under Section 8.1 of this AGREEMENT. VRI shall
maintain such comprehensive general liability insurance and product liability
insurance beyond the expiration or termination of this AGREEMENT and for a
reasonable period after the termination of the clinical trials, which in no
event shall be less than fifteen (15) years after the clinical trials.
8.5 This Section 8 shall survive expiration or termination of this
AGREEMENT.
<PAGE>
10. CONFIDENTIALITY
10.1 CONFIDENTIAL INFORMATION. As used in this AGREEMENT, "Confidential
Information" means all information transmitted by a party hereto or obtained by
a party hereto in connection with the performance of the clinical trials and
other services described in Section 3 hereof or of any such other services to be
provided by the parties as described herein, subject to the exceptions specified
below. "Confidential Information" means information of any type, not generally
known, about the business, processes, services, products, suppliers, customers,
clients or plans of GAMBLE or VRI ("the parties hereto") of any client of the
parties hereto (regardless of whether the parties hereto have executed a
confidentiality agreement with such customer), which is used or useful in the
conduct of business of the parties hereto, or which confers or tends to confer a
competitive advantage over one who does not possess such information. Such
information includes, but is not limited to, information relating to trade
secrets, Technical Information, patent applications, know-how, research,
development, design, engineering, quality control or service techniques,
information about existing, new or envisioned products, processes or services
and their development, performance, scientific, engineering or technical
information, laboratory notebooks, notes, computer programs, source codes,
object codes, software manuals, sketches, drawings, reports, formulae, gels,
slides, sequences, biological materials living or otherwise, photographs,
negatives, prototypes, models, correspondence, and other documents and things,
and information relating to purchasing, sales, marketing, licensing, contracts
with third parties, and pricing, whether or not in writing and whether or not
labeled or identified as confidential or proprietary. Confidential Information
may be disclosed in writing or orally or may be obtained by observation or
inspection. All data, materials, information, and records developed by a party
hereto in the course of performing this AGREEMENT shall be considered
Confidential Information. However, Confidential Information shall not include
information that a party hereto can demonstrate: (i) is in or enters the public
domain through no fault of such party; (ii) is disclosed to a party hereto by a
third party entitled to disclose it; (iii) was known to a party hereto before
the date of this AGREEMENT; OR (iv) is required by law to be disclosed, provided
reasonable advance notice of such requirement is given to a party hereto before
such disclosure.
10.2 CONFIDENTIALITY. Without prior written consent, the parties hereto
will not disclose the other party's Confidential Information to any third party
other than employees, agents or others of the parties hereto who must
necessarily be informed thereof, but only if and to the extent that any such
person has a need for such information. A party hereto will only use
Confidential Information for the purpose of fulfilling its obligations under
this AGREEMENT. The parties hereto agree that they will take such reasonable
steps as may be necessary to prevent the disclosure or use of any such materials
by their officers, employees or agents except as provided herein, including but
not limited to obtaining and enforcing appropriate confidentiality agreements
with such persons. All obligations of confidentiality and nondisclosure set
forth in this AGREEMENT shall survive the termination or expiration of this
AGREEMENT.
10.3 The parties agree that clinical trial data generated by GAMBLE under
the terms of the AGREEMENT will not be published by VRI prior to its publication
by GAMBLE's principal investigators. To the extent not published, the results of
the clinical trials will be held in confidence by GAMBLE. Subject to the
foregoing, VRI will have the unrestricted right to use or disclose such clinical
trial data.
<PAGE>
EXHIBIT 10.21
LICENSE AGREEMENT
This Agreement is made and entered into between President and Fellows of
Harvard College (hereinafter HARVARD) having offices at the Office for
Technology and Trademark Licensing, 124 Mt. Auburn Street, Suite 410 South,
Cambridge, MA 02138 and Virus Research Institute (hereinafter LICENSEE), a
corporation of Massachusetts, having offices at 61 Moulton Street, Cambridge,
MA 02139.
Whereas HARVARD is the owner by assignment of the entire right, title and
interest in a patent application [*] in the foreign patent applications
corresponding, thereto, and in the inventions described and claimed therein and
any patents issuing thereon:
Whereas HARVARD is committed to a policy that ideas or creative works produced
at HARVARD should be used for the greatest possible public benefit; and
Whereas HARVARD accordingly believes that every reasonable incentive should be
provided for the prompt introduction of such ideas into public use, all in a
manner consistent with the public interest; and
Whereas LICENSEE is desirous of obtaining, an exclusive worldwide license in
order to practice the above-referenced invention covered by PATENT RIGHTS in
the United States and in certain foreign countries, and to manufacture, use and
sell in the commercial market the products made in accordance therewith; and
Whereas HARVARD is desirous of granting a license to LICENSEE in accordance
with the terms of this Agreement.
Now therefore, in consideration of the foregoing premises, the parties agree as
follows:
ARTICLE I
DEFINITIONS
1.1 PATENT RIGHTS shall mean any and all patents or patent applications
attached hereto in Appendix A, the inventions described and claimed
therein, and any divisions, continuations, continuations-in-part
directed to subject matter specifically described in the applications
and patents listed in Appendix A, patents issuing thereon, foreign
counterparts thereof or reissues or reexaminations thereof, which will
1
<PAGE>
be automatically incorporated in and added to this Agreement and shall
periodically be added to Appendix A and made a part thereof.
1.2 LICENSED PRODUCTS shall mean products which in the country where sold
or manufactured are covered by (i) an issued, unexpired claim contained
in PATENT RIGHTS which has not been declared invalid or unenforceable
by a court of competent jurisdiction or administrative agency or (ii) a
claim of a pending patent application of PATENT RIGHTS which
application has been pending for a period of no more than five years
including the pendency of any parent application in which the claim is
supported. The period of pendency of a United States provisional
application shall not be considered in determining such five (5) year
period.
1.3 LICENSED PROCESSES shall mean processes which in the country where used
are covered by (i) an issued, unexpired claim contained in PATENT
RIGHTS which has not been declared invalid or unenforceable by a court
of competent JURISDICTION OR administrative agency or (ii) a claim of a
pending patent application of PATENT RIGHTS which application has been
pending for a period of no more THAN FIVE YEARS including the pendency
of any parent application in which the claim is supported. The period
of pendency of a United States provisional application shall not be
CONSIDERED IN determining such five (5) year period.
1.4 NET SALES means the total received by LICENSEE from sale of LICENSED
PRODUCTS less transportation charges and insurance, sales taxes, use
TAXES, EXCISE taxes, value added taxes, customs duties or other
imports, to the extent itemized on invoice, normal and customary
quantity and cash discounts (to THE EXTENT ALLOWED), allowances and
credits on account of rejection or return of LICENSED PRODUCTS and
rebates including but not limited to those REQUIRED BY A GOVERNMENT OR
AGENCY THEREOF. In the event that a LICENSED PRODUCT includes, a
component which has therapeutic and/or prophylactic activity ("Active
Component(s)") covered by a PATENT RIGHT (Patented Component(s)) and
Active Components not covered by a PATENT RIGHT (Unpatented
Component(s)) (such PRODUCT being a Combined Product), then NET SALES
shall be the amount which is normally received by LICENSEE FROM A SALE
OF THE PATENTED Component(s) when sold separately in an arm's length
transaction with an unaffiliated third party. If the Patented
Component(s) are not sold SEPARATELY, THEN NET SALES upon which royalty
is paid shall be the NET SALES of the Combined Produce multiplied by a
fraction, the numerator of which is the cost for producing the Patented
Components and the denominator of which is the cost for PRODUCING THE
COMBINED Product.
1.5 AFFILIATES shall mean any company, corporation, or business (i) in
which LICENSEE directly or indirectly owns or controls at least fifty
percent (50%) of the VOTING STOCK, or (ii) which directly or indirectly
owns or controls at least fifty percent (50%) of the voting stock of
LICENSEE or (iii) the majority ownership of which is DIRECTLY or
indirectly under common control with LICENSEE.
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1.6 BIOLOGICAL MATERIAL shall mean the materials supplied by HARVARD
(identified in Appendix B).
1.7 TECHNOLOGY shall mean any and all information or PATENT RIGHTS, or
BIOLOGICAL MATERIAL supplied by HARVARD to LICENSEE.
1.8 The term "SUBLICENSEE" shall mean any non-AFFILIATE third party
licensed by LICENSEE to make, have made, use or sell any product or use
any process under PATENT RIGHTS.
1.9 NON-ROYALTY SUBLICENSE INCOME shall mean sublicense issue fees,
sublicense maintenance fees, sublicense milestone payments other than
those listed in Article 3.6, and similar lump-sum royalty payments
made by SUBLICENSEES to LICENSEE on account of sublicenses pursuant to
this Agreement but excluding any payments by SUBLICENSEES constituting
(i) bona fide product research and development expenses and (ii) loans.
1.10 IMPROVEMENT INVENTIONS shall mean any inventions or discoveries that
ENHANCE, substitute for, or are useful with the products, procedures or
processes described in PATENT RIGHTS (and which are not included in
PATENT RIGHTS) to the extent they are (i) dominated by any claims of a
pending and/or issued patent or patent application which is then
included in the PATENT RIGHTS, and HARVARD'S OWNERSHIP INTEREST in any
United States or foreign patents and patent application thereon, and
(ii) made (i.e., conceived and reduced to practice) by Dr. John Collier
and/or Michael Starnbach solely or jointly with others directly
supervised in their laboratories at Harvard Medical School.
ARTICLE II
GRANT
2.1 For the term of this Agreement, HARVARD hereby grants to LICENSEE and
LICENSEE accepts, subject to the terms and conditions hereof, a
worldwide license under PATENT RIGHTS and a worldwide license to use
the BIOLOGICAL MATERIAL, to make and have made, to use and have used,
to sell and have sold the LICENSED PRODUCTS, and to practice the
LICENSED PROCESSES. SUCH LICENSE shall include the right to grant
sublicenses. HARVARD agrees it will not grant licenses to others except
as required or as permitted in paragraph 2.2 (b). To the extent
required by an agreement with a government agency that funded research
which LED TO PATENT RIGHTS, LICENSEE agrees during the period of
exclusivity of this license in the United States that any LICENSED
PRODUCT produced for sale in the United States will be manufactured
substantially in the United States.
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2.2 The granting and acceptance of this license is subject to the following
conditions:
(a) HARVARD's "Statement of Policy in Regard to Inventions, Patents and
Copyrights" dated March 17, 1986, Public Law 96-517, Public Law 98-620.
Any right granted in this Agreement greater than that permitted under
Public Law 96-517 or Public Law 98-620 shall be subject to modification
as may be required to conform to the provisions of that statute.
(b) HARVARD's right to make and to use and to grant non-exclusive
licenses to make and to use, for academic research purposes only and
not for any commercial purpose, the subject matter described and
claimed in PATENT RIGHTS, or the BIOLOGICAL MATERIAL.
2.3 HARVARD hereby grants to LICENSEE the right to extend the licenses
granted or to be granted in paragraph 2.1 to an AFFILIATE subject to
the terms and conditions hereof.
2.4 All rights reserved to the United States Government and others under
Public Law 96-517 and 98-620 shall remain and shall in no way be
affected by this Agreement.
2.5 LICENSEE has provided HARVARD with a development plan for developing
and obtaining regulatory approval of the LICENSED PRODUCT selected BY
LICENSEE, which development plan includes milestones.
LICENSEE shall exert reasonable efforts under THE CIRCUMSTANCES TO
ACHIEVE SUCH milestones. In the event LICENSEE subsequently indicates
in writing to HARVARD that such milestones cannot be met or fails to
meet such milestones, LICENSEE shall promptly notify HARVARD, and
LICENSEE and HARVARD shall promptly ENTER INTO good faith negotiations
to reconsider such milestones. In the event that the parties cannot
agree to the milestones within sixty (60) days after beginning good
FAITH NEGOTIATIONS, THE matter shall be submitted to arbitration to
determine the milestones and the time period therefor which should be
met pursuant to this Section. THE ARBITRATOR IN SETTING AND determining
milestones shall consider the state of technology; the efforts exerted
by LICENSEE, the business circumstances of LICENSEE and the public
INTEREST OBJECTIVES to HARVARD'S licensing program; and technical and
regulatory problems. Thereafter, LICENSEE shall exert reasonable
efforts to achieve such milestones.
In the event that LICENSEE cannot meet the milestones set by
arbitration because of technological or regulatory problems, HARVARD
shall not unreasonably deny an extension of time to meet the
milestones, upon a showing by LICENSEE that it has made good faith
reasonable efforts to meet the milestones.
If LICENSEE (i) fails to meet the milestones established by agreement
of the parties and (ii) fails to obtain extensions of such milestones
established by arbitration and (iii)
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LICENSEE has not exerted good faith reasonable efforts to meet such
milestones, as its sole and exclusive remedy HARVARD shall have the
right to terminate or convert the licenses to non exclusive licenses by
providing to LICENSEE sixty (60) days prior written notice.
LICENSEE shall ensure that for any PRODUCT being developed or
commercialized by a SUBLICENSEE, such SUBLICENSEE shall assume the
obligations imposed on LICENSEE under this paragraph.
The efforts of an AFFILIATE, SUBLICENSEE or collaborator of LICENSEE
shall be considered as efforts of LICENSEE.
2.6 The above licenses to sell any LICENSED PRODUCT include the right of
LICENSEE, its AFFILIATES, and SUBLICENSEES to grant to the purchaser
thereof the right to use or resell such purchased LICENSED PRODUCT
without payment of a further royalty.
2.7 HARVARD hereby grants to LICENSEE an exclusive option to negotiate an
exclusive license to IMPROVEMENT INVENTIONS. It is the intent of the
parties that such license shall be under substantially the same terms
and conditions as this LICENSE AND THAT LICENSEE shall only be required
to pay one royalty for each LICENSED PRODUCT. HARVARD shall notify
LICENSEE promptly, in writing, of any IMPROVEMENT INVENTION, and
LICENSEE shall notify HARVARD, in writing, within thirty (30) days
after receipt of the written notification from HARVARD as to whether or
not LICENSEE is exercising the option. If the option is not exercised
within such thirty (30) day period, LICENSEE shall no longer have ANY
RIGHTS TO THE IMPROVEMENT INVENTION as to which notice was received. If
the option is exercised, the parties shall negotiate a license in
accordance with this PARAGRAPH 2.7, in good faith, and if an agreement
is not reached within six (6) months thereafter, the rights granted
under this paragraph 2.7 with respect to SUCH IMPROVEMENT INVENTION
shall terminate. If during such thirty (30) days or six month period,
HARVARD desires to file a patent application with respect TO THE
IMPROVEMENT INVENTION, LICENSEE shall bear the cost of filing thereof
if LICENSEE still desires a license thereunder, provided that the
filing of such patent APPLICATION IS NECESSITATED BY A BAR DATE or the
parties have reached final agreement as to the financial terms of the
license or LICENSEE has requested such filing.
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CONFIDENTIAL TREATMENT
ARTICLE III
ROYALTIES
3.1 LICENSEE shall pay to HARVARD a non-refundable license fee as follows:
[*]
3.2 (a) LICENSEE shall pay HARVARD, during the term of the license granted
in Section 2.1, (i) a running royalty of [*], and (ii) [*] of running
royalties [*] received by LICENSEE or its AFFILIATES from a SUBLICENSEE
for LICENSED PRODUCTS sold by a SUBLICENSEE.
(b) In the event that a sublicense agreement does not require a
SUBLICENSEE to pay running royalties, LICENSEE shall pay HARVARD [*].
3.3 Beginning in calendar year 2005 and each calendar year thereafter,
HARVARD shall have the right to terminate or render non-exclusive this
license IN THE EVENT that LICENSEE does not pay to HARVARD at least
[*] in ROYALTIES.
In the event that actual royalties are not at least equal to the above
amounts for a specified calendar year, LICENSEE shall have the right to
pay any DIFFERENCE BETWEEN such minimum amounts and the actual
royalties paid in satisfaction of its obligations under this Agreement,
which shall be due and payable within sixty (60) days of the end of the
applicable calendar year.
3.4 In the event that LICENSEE is required to pay royalties to one or more
third parties under patents other than PATENT RIGHTS COVERING LICENSED
PRODUCTS OR LICENSED PROCESSES, LICENSEE shall be entitled to a credit
against royalties due HARVARD in an amount equal to [*].
3.5 LICENSEE shall pay HARVARD the following amounts within sixty (60) DAYS
AFTER THE following milestone is achieved by LICENSEE or its
SUBLICENSEE for each LICENSED PRODUCT:
(i) [*]
(ii) [*]
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT
(iii) [*]
3.6 Only one royalty shall be due and payable for a LICENSED PRODUCT and
use thereof irrespective of the number of patents included within
PATENT RIGHTS which are applicable to such LICENSED PRODUCT and use.
3.7 Unless this agreement is earlier terminated, the initial payment under
paragraph 3.1 and the payments due under paragraph 6.1 shall be due and
payable on the earlier of (i) six (6) months after the effective date
of this agreement or (ii) the date on which LICENSEE is granted a
license under U.S. Patent No. [*] by the UNITED STATES Government.
ARTICLE IV
REPORTING
4.1 LICENSEE shall provide written annual reports within sixty (60) days
after JUNE 30 of each calendar year which shall include but not be
limited to: reports of PROGRESS on research and development, regulatory
approvals, manufacturing, sublicensing, marketing and sales during the
preceding twelve (12) months.
4.2 LICENSEE shall report to HARVARD the date of first sale of LICENSED
PRODUCTS in each country within thirty (30) days of occurrence.
4.3 Commencing with the calendar year half in which NET SALES first occur,
LICENSEE agrees to submit to HARVARD within sixty (60) days after the
calendar half years ending June 30 and December 31, reports setting
forth for the preceding six (6) month period the amount of the LICENSED
PRODUCTS sold by LICENSEE, its AFFILIATES and SUBLICENSEES in each
country, the NET SALES thereof, and the amount of royalty due thereon
and with each such report pay the amount of royalty due. Such report
shall be certified as correct by an officer of LICENSEE and SHALL
INCLUDE a detailed listing of all deductions from NET SALES, or from
royalties as specified herein. Such report shall also specify which
PATENT RIGHTS are used in or by each LICENSED PRODUCT generating
royalty income. If no royalties ARE DUE to HARVARD for any reporting
period, the written report shall so state. If ROYALTIES FOR any
calendar year do not equal or exceed the minimum royalties established
in paragraph 3.3, LICENSEE shall include the balance of the minimum
royalty with the PAYMENT for the half year ending December 31. All
royalties due hereunder shall be PAYABLE in United States dollars and
shall be made payable to President and Fellows of Harvard College.
Conversion of foreign currency to U.S. dollars shall be made at the
CONVERSION rate existing in the United States on the last business day
in the reporting period as reported in the Wall Street Journal. All
such reports shall be maintained in CONFIDENCE by HARVARD, except as
required by law, including Public Law 96-517 and 98-620.
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
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4.4 If by law, regulation, or fiscal policy of a particular country,
conversion into United States dollars or transfer of funds of a
convertible currency to the United States is restricted or forbidden,
LICENSEE shall give HARVARD prompt notice in writing and shall pay the
royalty and other amounts due through such means or methods as are
lawful in such country as HARVARD may reasonably designate. Failing the
designation by HARVARD of such lawful means or methods within thirty
(30) days after such notice is given to HARVARD, LICENSEE shall deposit
such royalty payment in local currency to the credit of HARVARD in a
recognized banking institution designated by HARVARD, or if none is
designated by HARVARD within the thirty (30) day period described
above, in a recognized banking institution selected by LICENSEE and
identified in a written notice to HARVARD by LICENSEE, and such deposit
shall fulfill all obligations of LICENSEE to HARVARD with respect to
such royalties.
4.5 Any tax required to be withheld by LICENSEE under the laws of any
FOREIGN COUNTRY for the account of HARVARD, shall be promptly paid by
LICENSEE for and on behalf of HARVARD to the appropriate governmental
authority, and LICENSEE shall use its best efforts to furnish HARVARD
with proof of payment of such tax. Payments to HARVARD shall be net of
any such payments of taxes.
ARTICLE V
RECORD KEEPING
5.1 LICENSEE shall keep, and shall require its AFFILIATES AND SUBLICENSEES
TO KEEP accurate and correct records of LICENSED PRODUCTS made, used or
sold under this Agreement, appropriate to determine the AMOUNT OF
ROYALTIES DUE HEREUNDER to HARVARD. Such records shall be retained for
at least three (3) years following a given reporting period. They shall
be available during normal business hours FOR INSPECTION at the expense
of HARVARD by HARVARD's Internal Audit Department or by a Certified
Public Accountant selected by HARVARD and approved by LICENSEE for the
sole purpose of verifying reports and payments hereunder. Such
accountant shall not disclose to HARVARD any information other than
information relating to accuracy of reports and payments made under
this Agreement. In THE EVENT THAT ANY SUCH INSPECTION shows an under
reporting and underpayment in excess of five percent (5%) for any
twelve (12) month period, then LICENSEE shall pay the cost of such
EXAMINATION.
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ARTICLE VI
DOMESTIC AND FOREIGN PATENT FILING
AND MAINTENANCE
6.1 LICENSEE shall reimburse HARVARD for all reasonable expenses HARVARD
has incurred and shall incur for the preparation, filing, prosecution
and maintenance of PATENT RIGHTS for which HARVARD has not been, and is
not eligible to be reimbursed by any third party. HARVARD shall take
responsibility for the preparation, filing, prosecution and maintenance
of any and all patent applications and patents included in PATENT
RIGHTS using patent counsel reasonably acceptable to LICENSEE, provided
however that HARVARD shall first consult with LICENSEE as to the
preparation, filing, prosecution and maintenance of such patent
applications and patents and shall furnish to LICENSEE copies of
documents relevant to any such preparation, filing, prosecution or
maintenance.
6.2 HARVARD and LICENSEE shall cooperate fully in the preparation, filing,
prosecution and maintenance of PATENT RIGHTS and of all patents and
patent applications licensed to LICENSEE hereunder, executing all
papers and instruments or requiring members of HARVARD to execute such
papers and instruments so as to enable HARVARD to apply for, to
prosecute and to maintain patent applications and patents in HARVARD's
name in any country. Each party shall provide to the other prompt
notice as to all matters which come to its attention and which may
affect the preparation filing, prosecution or maintenance of any such
patent applications or patents.
6.3 If LICENSEE elects not to pay the expenses OF A PATENT APPLICATION OR
PATENT INCLUDED within PATENT RIGHTS in a particular country, LICENSEE
shall notify HARVARD not less than sixty (60) days prior to such action
and shall thereby surrender its rights under such patent or patent
application in such country.
6.4 HARVARD agrees not to allow any PATENT RIGHT to become abandoned or to
lapse without the written permission of LICENSEE.
ARTICLE VII
INFRINGEMENT
7.1 With respect to any PATENT RIGHTS under which LICENSEE is exclusively
licensed pursuant to this Agreement, LICENSEE or its SUBLICENSEE shall
have the right to prosecute in its own name and at its own expense any
infringement of such patent, so long as such license is exclusive at
the time of the commencement of such action. HARVARD agrees to notify
LICENSEE promptly of each infringement of such patents of which HARVARD
is or becomes aware. Before LICENSEE or its SUBLICENSEES
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CONFIDENTIAL TREATMENT
commences an action with respect to any infringement of such patents,
LICENSEE shall give careful consideration to the views of HARVARD and
to potential effects on the public interest in making its decision
whether or not to sue and in the case of a SUBLICENSE, shall report
such views to the SUBLICENSEE.
7.2 (a) If LICENSEE or its SUBLICENSEE elects to commence an action
described above and HARVARD is a legally indispensable party to such
action, HARVARD shall join the action as a co-plaintiff. Upon doing so,
LICENSEE shall reimburse HARVARD for reasonable legal expenses and
other out-of-pocket costs incurred by HARVARD for its participation in
such action as a nominal plaintiff.
(b) To the extent permitted by law, HARVARD shall have the right to
intervene in any such action, and if HARVARD elects to do so, HARVARD
shall jointly control such action with LICENSEE.
7.3 If LICENSEE or its SUBLICENSEE elects to commence an action as
described above, LICENSEE may reduce, by [*], the royalty due to
HARVARD EARNED UNDER THE patent subject to suit by the amount of the
expenses and costs of such action, including reasonable attorney fees.
In the event that such expenses and costs exceed the amount of
royalties withheld by LICENSEE for any calendar YEAR, LICENSEE MAY TO
THAT extent reduce the royalties due to HARVARD from LICENSEE in
succeeding calendar years, but never by [*].
7.4 Recoveries or reimbursements from such action shall first be APPLIED TO
REIMBURSE LICENSEE and HARVARD for litigation costs not paid from
royalties (if any) and then to reimburse HARVARD for royalties
withheld. Any REMAINING RECOVERIES or reimbursements shall be
distributed as follows:
(i) If the amount is lost profits, LICENSEE shall RECEIVE AN AMOUNT
EQUAL TO THE damages the court determines LICENSEE has suffered as a
result OF THE INFRINGEMENT less the amount of any royalties that would
have been due HARVARD ON SALES of LICENSED PRODUCTS lost by LICENSEE as
a result of THE INFRINGEMENT HAD LICENSEE made such sales and HARVARD
shall receive an amount equal to the royalties they would have received
if such sales had been made by LICENSEE; OR
(ii) As to awards other than lost profits, 80% to LICENSEE and 20% to
HARVARD.
7.5 In the event that LICENSEE and its SUBLICENSEE, if any, elect not to
exercise their right to prosecute an infringement of the PATENT RIGHTS
pursuant to the above paragraphs, or does not do so within sixty (60)
days after written NOTICE FROM HARVARD, HARVARD may do so at its own
expense, controlling such action and retaining all recoveries
therefrom, and LICENSEE shall cooperate with HARVARD with respect
thereto.
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
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ARTICLE VIII
TERMINATION OF AGREEMENT
8.1 This Agreement, unless extended or terminated as provided herein, shall
remain in effect for the life of the last to expire of PATENT RIGHTS
licensed hereunder, at which time LICENSEE shall have a fully paid up
license.
8.2 In the event that one party to this Agreement shall be in default in
the performance of any obligations under this Agreement, and if the
default has not been remedied within ninety (90) days after the date of
notice in writing of such default, the party giving such notice may
terminate this Agreement by written notice.
8.3 In the event that LICENSEE shall cease to carry on its business,
HARVARD SHALL HAVE the right to terminate this entire Agreement by
giving LICENSEE written notice of such termination.
8.4 In the event that the licenses granted to LICENSEE under this Agreement
are terminated, any granted sub-licenses shall remain in full force and
effect as a direct license from HARVARD to the SUBLICENSEE, provided
that the SUBLICENSEE is not then in breach of its sub-license agreement
and the SUBLICENSEE agrees to be BOUND (as a licensee) to HARVARD (as a
licensor) under the terms and conditions of THE SUB-LICENSE agreement.
8.5 LICENSEE shall have the right to terminate this Agreement or its
LICENSE UNDER ANY PATENT RIGHT in any country by giving thirty (30)
days advance written notice to HARVARD to that effect. Upon
termination, a formal report shall be submitted and any royalty
payments and unreimbursed patent expenses due to HARVARD become
immediately payable.
8.6 Sections 8.4, 8.6, 9.2, 9.3 and 9.4 of this Agreement shall survive
termination.
8.7 In the event that LICENSEE disputes the termination of this Agreement
or any license granted hereunder and initiates legal proceedings in
this respect, then this Agreement or any such license shall not be
terminated until there is a final decision from WHICH no appeal has
been or can be taken.
ARTICLE IX
GENERAL
9.1 HARVARD represents and warrants that the entire right, title, and
interest in the patent applications or patents comprising the PATENT
RIGHTS have been or will be assigned
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to it and that HARVARD has the authority to issue the licenses under
said PATENT RIGHTS set forth herein and that there are and will be no
rights and/or licenses inconsistent with the rights and licenses
granted to LICENSEE under this Agreement. HARVARD does not warrant the
validity of the PATENT RIGHTS licensed hereunder and makes no
representations whatsoever with regard to the scope of the licensed
PATENT RIGHTS or that such PATENT RIGHTS may be exploited by LICENSEE,
an AFFILIATE, or sublicensee without infringing other patents.
9.2 EXCEPT AS PROVIDED IN SECTION 9.1, HARVARD EXPRESSLY DISCLAIMS ANY AND
ALL IMPLIED OR EXPRESS WARRANTIES AND MAKES NO EXPRESS OR IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS OF THE TECHNOLOGY, LICENSED
PROCESSES OR LICENSED PRODUCTS CONTEMPLATED BY THIS AGREEMENT.
9.3 (a) LICENSEE shall indemnify, defend and hold harmless HARVARD and its
directors, governing board members, trustees, officers, faculty,
medical and professional staff, employees, students, and agents and
their respective successors, heirs and assigns (the "Indemnitees"),
against any liability, damage, loss or expenses (including REASONABLE
attorneys' fees and expenses of litigation) incurred by or imposed upon
the Indemnitees or any one of them in connection with any claims,
suits, actions, demands or judgments arising out of any theory of
product liability (including, but not limited to, ACTIONS IN THE form
of tort, warranty, or strict liability) concerning any product, process
or service used or sold pursuant to any right or license granted UNDER
THIS AGREEMENT.
(b) LICENSEE'S indemnification under (a) above shall not apply to any
liability, damage, loss or expense t the extent to apply to any
liability, damage, loss OR EXPENSE to the extent that it is
attributable to the negligent activities or willful misconduct of the
Indemnitees.
(c) HARVARD shall notify LICENSEE promptly of any claim OR THREATENED
CLAIM under this Paragraph 9.3 and shall fully cooperate with all
REASONABLE REQUESTS OF LICENSEE with respect thereto.
(d) LICENSEE agrees, at its own expense, to provide attorneys
reasonably acceptable to HARVARD to defend against any actions brought
or filed against any party indemnified hereunder with respect to the
indemnity contained HEREIN, WHETHER OR NOT such actions are rightfully
brought and LICENSEE shall have the right to control the defense,
settlement or compromise of any such claim or action.
(e) At such time as any LICENSED PRODUCT is being commercially
DISTRIBUTED or sold (other than for research purposes or for the
purpose of obtaining regulatory approvals) by LICENSEE, or by an
AFFILIATE, SUBLICENSEE or agent of LICENSEE (hereunder "Other Seller"),
LICENSEE shall itself or in the ALTERNATIVE SHALL ensure that Other
Seller either (i) at its sole cost and expense, procure(s) and
maintain(s)
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comprehensive general liability insurance in amounts not less than
$2,000,000 per incident and $2,000,000 annual aggregate and naming the
Indemnitees as additional insureds or (ii) pay(s) for the procurement
and maintenance by HARVARD of insurance in the amounts and in the form
set forth in this paragraph. Such comprehensive general liability
insurance shall provide (i) product liability coverage and (ii) broad
form contractual liability coverage for LICENSEE'S indemnification
under Paragraph 9.3(a) of this Agreement. LICENSEE shall ensure that if
LICENSEE or the Other Seller elects to self-insure all or part of the
limits described above (including deductibles or retentions which are
in excess of $250,000 annual aggregate) such self-insurance program
must be acceptable to HARVARD and the Risk Management Foundation. The
minimum amounts of insurance coverage required under this Paragraph
9.3(c) shall not be construed to create a limit of LICENSEE'S liability
with respect to its indemnification under Paragraph 9.3(a) of this
Agreement. At such time, or at any time, LICENSEE can request that
HARVARD ascertain whether Risk Management Foundation has in effect
Uniform Indemnification and Insurance Provisions more favorable than
those of this Agreement, in which event LICENSEE and HARVARD shall
amend this AGREEMENT TO include such more favorable provisions.
(f) LICENSEE shall provide HARVARD with written evidence of such
INSURANCE upon request of HARVARD. LICENSEE shall provide HARVARD with
written notice of at least thirty (30) days prior to the cancellation,
non-renewal or MATERIAL CHANGE IN such insurance; if LICENSEE does not
obtain replacement insurance providing comparable coverage within such
thirty (30) days period, HARVARD SHALL HAVE THE RIGHT to terminate this
Agreement effective at the end of such thirty (30) day period by
written notice to LICENSEE.
(g) LICENSEE shall itself maintain, or shall ENSURE THAT OTHER SELLER
MAINTAINS OR that payments are made for the maintenance by HARVARD of,
as the case may be, such comprehensive general liability insurance
beyond the expiration or termination of this Agreement during (i) the
period that any LICENSED PRODUCT is being COMMERCIALLY distributed or
sold (other than for research purposes or the purpose of obtaining
regulatory approvals) by Other Seller and (ii) a reasonable period
after period referred to in (g) (i) above which shall in no event be
less than ten (10) years. The obligations of (g) (ii) above can be
satisfied by the purchase of insurance by LICENSEE or a third party
which covers claims resulting from occurrences during such period of
(g)(ii) above for LICENSED PRODUCT commercially distributed or sold by
LICENSEE or Other Seller during the period referred to in (g) (i)
above.
9.4 LICENSEE shall not use HARVARD's name or any adaptation of it in any
ADVERTISING, promotional or sales literature without the prior written
assent of HARVARD.
9.5 Without the prior written approval of HARVARD, the entire license
GRANTED PURSUANT to this Agreement shall not be transferred by LICENSEE
to any party other than to a successor to the business interest of
LICENSEE relating to the PATENT RIGHTS with
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such transfer including but not being limited to mergers,
consolidations, and transfer or sale of assets. This Agreement shall be
binding upon the successors, legal representatives and assignees of
HARVARD and LICENSEE.
9.6 The interpretation and application of the provisions of this Agreement
shall be governed by the laws of the Commonwealth of Massachusetts.
9.7 LICENSEE agrees to comply with all applicable laws and regulations. In
particular, it is understood and acknowledged that the transfer of
certain commodities and technical data is subject to United States laws
and regulations controlling the export of such commodities and
technical data, including all Export Administration Regulations of the
United States Department of Commerce. These laws and regulations, among
other things, prohibit or require a license for the export of certain
types of technical data to certain specified countries. LICENSEE hereby
agrees and gives written assurance that it will comply with all United
States laws and regulations controlling the export of commodities and
technical data, that it will be solely responsible for any violation of
such by LICENSEE or its AFFILIATES or sublicensees, and that it will
defend and hold HARVARD harmless in the event of any legal action of
any nature occasioned by such violation.
9.8 Written notices required to be given under this Agreement shall be
addressed as follows:
If to HARVARD: Office of Technology and
Trademark Licensing
Harvard University
124 Mt. Auburn Street
Suite 410 South
Cambridge, MA 02138
CC: Office of Technology Licensing
and Industry Sponsored Research
Harvard Medical School
333 Longwood Ave.
Boston, MA 02115
If to LICENSEE: Virus Research Institute
61 Moulton Street
Cambridge, MA 02139
Attn: President
or such other address as either party may request in writing.
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9.9 Should a court of competent jurisdiction later consider any provision
of this Agreement to be invalid, illegal, or unenforceable, it shall be
considered severed from this Agreement. All other provisions, rights
and obligations shall continue without regard to the severed provision,
provided that the remaining provisions of this Agreement are in
accordance with the intention of the parties.
9.10 Any matter under Section 2.3 of this Agreement which is to be resolved
by arbitration shall be submitted to a mutually-selected single
arbitrator to so decide any such matter or disagreement. The arbitrator
shall conduct the arbitration in accordance with the then applicable
Rules of the American Arbitration Association, unless the parties agree
otherwise. If the parties are unable to mutually select an arbitrator,
the arbitrator shall be selected in accordance with the procedures of
the American Arbitration Association. The decision and award rendered
by the arbitrator shall be final and binding. Judgment upon the award
may be entered pursuant to this section and arbitration shall be held
in Boston, MA, or such other place as may be mutually agreed upon in
writing by the PARTIES.
9.11 This Agreement constitutes the entire understanding between the parties
and neither party shall be obligated by any condition or representation
other than those expressly stated herein or as may be subsequently
agreed to by the parties hereto in writing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement TO BE
EXECUTED BY their duly authorized representatives.
The effective date of this Agreement is March 28, 1997.
PRESIDENT AND FELLOWS OF HARVARD COLLEGE
By: /s/ JOYCE BRINTON
----------------------
Name and Title: Joyce Brinton, Director
Virus Research Institute:
By: /s/ WILLIAM A. PACKER
----------------------------
Name and Title: William A. Packer, President
15
<PAGE>
CONFIDENTIAL TREATMENT
Appendix A
The following comprise PATENT RIGHTS:
[*]
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
16
<PAGE>
Exhibit 21.0
LIST OF SUBSIDIARIES
Name State of Incorporation
---- ----------------------
Polmerix, Inc. Delaware
<PAGE>
Exhibit 23.0
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Forms S-8, (Nos. 333-43640, 333-54372, 333-80036, 333-80048,
333-62017), in the Prospectus constituting part of the Registration Statement on
Forms S-3 (Nos. 333-72172, 333-69950, 333-64021, 333-08607, 333-56755, 333-64761
and 333-89341) and in the Prospectus constituting part of the Registration
Statement on Form S-4 (No. 333-59215) of AVANT Immunotherapeutics, Inc. (f/k/a T
Cell Sciences, Inc.) of our report dated February 14, 2000 appearing in this
Annual Report on Form 10-K for the year ended December 31, 1999.
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 27, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed financial statements of AVANT Immunotherapeutics, Inc. for the Twelve
Months Ended December 31, 1999 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 13,619,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14,489,700
<PP&E> 4,710,300
<DEPRECIATION> (3,453,500)
<TOTAL-ASSETS> 19,882,700
<CURRENT-LIABILITIES> 2,200,500
<BONDS> 0
0
0
<COMMON> 48,100
<OTHER-SE> 17,364,900
<TOTAL-LIABILITY-AND-EQUITY> 19,882,700
<SALES> 0
<TOTAL-REVENUES> 1,483,500
<CGS> 0
<TOTAL-COSTS> 13,427,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (635,200)
<INCOME-PRETAX> (11,309,100)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,309,100)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,309,100)
<EPS-BASIC> (0.26)
<EPS-DILUTED> (0.26)
</TABLE>
