SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
October 7, 1997
-------------------------------------------
(Date of Report)
NEORX CORPORATION
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(Exact Name of Registrant as Specified in Charter)
Washington 0-16614 91-1261311
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(State or Other Jurisdiction (Commission File No.) (IRS Employer
of Incorporation) Identification No.)
410 West Harrison Street, Seattle, Washington 98119
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(Address of principal executive offices) (Zip Code)
(206) 281-7001
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(Registrant's telephone number, including area code)
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Item 5. Other Events.
NeoRx Corporation (the "Company") entered into an Agreement on August
8, 1997 (the "Agreement") with Janssen Pharmaceutica N.V. ("Janssen"), a wholly
owned subsidiary of Johnson & Johnson, for the worldwide development,
manufacture and distribution of the Company's Avicidin(R) cancer therapy
product. As a result of the Agreement, the Company received an initial payment
of $10 million, of which fifty percent was for the purchase of equity pursuant
to the preferred stock purchase agreement described below. The Company may
receive up to an additional $50 million in payments for achieving certain
milestones. In addition, Janssen has agreed to assume responsibility for
registration and commercialization of the product and to fund an estimated
ninety-five percent of the remaining costs for product development and clinical
trials. In exchange, Janssen receives a worldwide exclusive license to Avicidin
and the right of first negotiation to subsequent oncology products employing the
Company's proprietary Pre-Targeting technology. Additional oncology products
that fall under the Agreement will trigger royalty obligations and may result in
additional milestone payments to the Company. The Company has retained broad
development and marketing rights for its Pre-Targeting technology.
In connection with the Agreement, the Company also on August 8, 1997
entered into a Preferred Stock Purchase Agreement with Johnson & Johnson
Development Corporation ("JJDC"), pursuant to which the Company issued to JJDC
1,000 shares of its Series 4 Convertible Preferred Stock, par value $.02 per
share (the "Series 4 Stock"), for an aggregate purchase price of $5,000,000. The
Series 4 Stock converted automatically into 833,333 shares of the Company's
common stock, par value $.02 per share (the "Common Stock"), on September 12,
1997, the date on which the average market price of the Common Stock for 15
consecutive trading days was equal to or greater than $6.00. As restricted
stock, the shares of Common Stock are subject to certain trading restrictions
for two years.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
10.1* Agreement, entered into as of July 1, 1997, between Janssen Pharmaceutica,
N.V., and the Company.
10.2 Preferred Stock Purchase Agreement, dated as of August 8, 1997, between
the Company and Johnson & Johnson Development Corporation.
*Confidential portions of this exhibit have been omitted and have been
files separately with the Securities and Exchange Commission pursuant to an
application for confidential treatment under Rule 24b-2 under the Securities
Exchange Act of 1934 as amended.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NEORX CORPORATION
Dated: October 7, 1997 By /s/ RICHARD L. ANDERSON
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Richard L. Anderson
Senior Vice President, Chief
Financial Officer, Secretary and
Treasurer
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<CAPTION>
EXHIBIT INDEX
Exhibit Number Description
<S> <C>
10.1* Agreement, entered into as of July 1, 1997, between
Janssen Pharmaceutica, N.V., and the Company.
10.2 Preferred Stock Purchase Agreement, dated as of August
8, 1997, between the Company and Johnson & Johnson
Development Corporation.
</TABLE>
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* Confidential portions of this exhibit have been omitted and have been
filed separately with the Securities and Exchange Commission pursuant to an
application for confidential treatment under Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.
4
EXHIBIT 10.1
TO
NeoRx Corporation's
Report on Form 8-K
Dated
October 7, 1997
"[ * ]" = omitted, confidential material, which material has been
separately filed with the Securities and Exchange Commission pursuant to a
request for confidential treatment.
<PAGE>
AGREEMENT
between
Janssen Pharmaceutica, N.V.
and
NeoRx Corporation
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
AGREEMENT ........................................................................................... 1
RECITALS ............................................................................................ 1
I. DEFINITIONS ................................................................................ 1
II. DEVELOPMENT ................................................................................ 11
2.1 Janssen's Responsibilities ........................................................ 11
2.2 NeoRx's Responsibilities .......................................................... 11
2.3 Development Committee ............................................................. 12
2.4 Additional Products ............................................................... 13
2.5 FDA ............................................................................... 13
2.6 IND Transfer ...................................................................... 13
2.7 Research Audit .................................................................... 14
2.8 Capital Expenditures .............................................................. 14
III. LICENSE GRANTS ............................................................................. 14
3.1 License for Pre-Targeting Products ................................................ 14
3.2 Sublicense Rights ................................................................. 15
3.3 Distribution ...................................................................... 15
3.4 Nonexclusive Know-How License to NeoRx ............................................ 15
3.5 Nonexclusive Know-How License to Janssen .......................................... 15
3.6 Third-Party Agreements ............................................................ 15
3.7 No Other Rights ................................................................... 16
3.8 Prohibition ....................................................................... 16
IV. PAYMENTS ................................................................................... 16
4.1 Upfront Payments .................................................................. 16
4.2 Milestone Payments for the First Pre-Targeting Product ............................ 16
4.3 Milestones for a Second Type of Pre-Targeting Product ............................. 17
4.4 Earned Royalties for Primary Pre-Targeting Products ............................... 18
4.5 Royalty Adjustment in U.S. for Primary Pre-Targeting Products ..................... 18
4.6 Earned Royalties for Additional Products .......................................... 20
4.7 Royalty Adjustment in U.S. for Additional Products ................................ 20
4.8 Duration of Royalty Payments ...................................................... 20
4.9 Reduction in Royalty Rate in Response to Generic Competition ...................... 21
4.10 Reduction in Royalty Rate in Response to Substitute Product Competition ........... 21
4.11 Reduction in Royalty Rate for Jointly Owned Patents ............................... 22
4.12 Foreign Exchange .................................................................. 22
4.13 [Intentionally Left Blank] ........................................................ 22
<PAGE>
4.14 Taxes ............................................................................. 22
4.15 Records, Reports and Payment ...................................................... 23
4.16 Accounting ........................................................................ 23
4.17 Third Party Patents ............................................................... 24
4.18 Compulsory License ................................................................ 25
4.19 No Multiple Royalties; Third Party Royalties ...................................... 25
4.20 Value of Collaboration in NeoRx Know-How .......................................... 26
4.21 No Multiple Reductions ............................................................ 26
4.22 Allocation of Annual Net Sales [ * ] .......................................... 26
V. JANSSEN'S OPTION TO EXPAND FIELD AND INDEPENDENT DEVELOPMENT ............................... 27
5.1 Janssen's Option to Expand the Field .............................................. 27
5.2 Exercise of Janssen's Option ...................................................... 27
5.3 Limitation on NeoRx Right to Assign or License Prior to Exercise by
Janssen of Its Option ............................................................. 27
5.4 NeoRx Right to Independently Develop Pre-Targeting Products Within the
Field ............................................................................. 28
5.5 NeoRx Obligation to Re-Offer ...................................................... 28
5.6 Limitations on NeoRx Rights During Re-Offer Period ................................ 29
5.7 Janssen's Right of First Negotiation to Expand the Field Further .................. 30
VI. CO-PROMOTION ............................................................................... 30
6.1 Co-Promotion Option of NeoRx ...................................................... 30
6.2 Co-Promotion Limitation of Scope .................................................. 31
6.3 NeoRx Is Not a Distributor ........................................................ 33
6.4 Joint Marketing and Sales Committee ............................................... 33
6.5 Co-Promotion Obligations .......................................................... 33
6.6 Costs Associated With Co-Promotion ................................................ 34
6.7 Co-Promotion Compliance ........................................................... 34
6.8 Co-Promotion Audit of Performance ................................................. 34
6.9 Co-Promotion Termination for Cause ................................................ 35
6.10 Co-Promotion Is Through Independent Organizations ................................. 36
6.11 Co-Promotion Does Not Affect Certain Responsibilities ............................. 36
6.12 NeoRx Right to Terminate .......................................................... 37
6.13 Trademarks ........................................................................ 37
6.14 Indemnification for Products ..................................................... 38
[ * ] Confidential Treatment Requested
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6.15 Marketing Liaison ................................................................. 38
6.16 Dispute Resolution ................................................................ 39
6.17 Transferability of Co-Promotion Right ............................................. 39
VII. MANUFACTURE ................................................................................ 40
7.1 Janssen's Responsibility .......................................................... 40
7.2 Janssen's Obligation .............................................................. 40
VIII. PATENTS .................................................................................... 40
8.1 Maintenance of NeoRx Patents ...................................................... 40
8.2 Failure by NeoRx to Prosecute and/or Maintain ..................................... 41
8.3 Ownership of Patents .............................................................. 41
8.4 Disclosure of Patentable Inventions ............................................... 41
8.5 Jointly Owned Patent Filings ...................................................... 42
8.6 Parties' Cooperation in Obtaining Patent Extensions ............................... 42
IX. INFRINGEMENT ............................................................................... 42
9.1 Infringement of Third Party Patents ............................................... 42
9.2 Infringement by Third Parties of NeoRx Patents .................................... 43
9.3 Infringement by Third Parties of Jointly Owned Patents ............................ 43
X. TRADEMARKS AND CORPORATE NAME .............................................................. 44
XI. CONFIDENTIALITY ............................................................................ 44
11.1 Confidentiality; Exceptions ....................................................... 44
11.2 Authorized Disclosure ............................................................. 45
11.3 Survival ......................................................................... 45
XII. REPRESENTATIONS AND WARRANTIES; PERFORMANCE................................................. 45
12.1 Representations and Warranties .................................................... 45
12.2 Disclaimer ........................................................................ 46
12.3 Performance by Affiliates ......................................................... 46
XIII. TERM AND TERMINATION ....................................................................... 46
13.1 Term .............................................................................. 46
13.2 Termination for Breach ............................................................ 46
13.3 Termination for Bankruptcy ........................................................ 47
13.4 Janssen's Termination Without Cause ............................................... 47
13.5 Rights and Obligations Upon Termination Under Paragraph 13.2 or 13.3 by
NeoRx or Under Paragraph 13.4 by Janssen .......................................... 47
13.6 Survival .......................................................................... 48
13.7 Accrued Rights, Surviving Obligations ............................................. 48
13.8 Termination Not Sole Remedy ....................................................... 48
XIV. INDEMNIFICATION ............................................................................ 48
14.1 Research and Development Indemnification .......................................... 48
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14.2 Janssen Indemnification ........................................................... 49
14.3 Notification ...................................................................... 49
V. DISPUTE RESOLUTION .......................................................................... 49
15.1 Alternative Dispute Resolution .................................................... 49
15.2 Arbitration Procedure ............................................................. 49
(a) Arbitrator ............................................................... 50
(b) Proceedings .............................................................. 50
(c) Award .................................................................... 52
(d) Costs .................................................................... 52
(e) Confidentiality .......................................................... 52
15.3 Survivability ..................................................................... 52
15.4 Jurisdiction ...................................................................... 52
XVI. LICENSOR BANKRUPTCY ........................................................................ 53
XVII. NOTICES .................................................................................... 53
XVIII. PUBLICITY .................................................................................. 54
18.1 Publicity ......................................................................... 54
18.2 Scientific Publications ........................................................... 55
XIX. FORCE MAJEURE .............................................................................. 55
XX. INTEGRATION ................................................................................ 56
XXI. MISCELLANEOUS .............................................................................. 56
21.1 Amendments ....................................................................... 56
21.2 Laws .............................................................................. 56
21.3 Severability ...................................................................... 56
21.4 Headings .......................................................................... 57
21.5 Waiver ............................................................................ 57
21.6 Representations ................................................................... 57
21.7 Compliance With Laws .............................................................. 57
21.8 Relationship of Parties ........................................................... 57
21.9 Interest .......................................................................... 58
21.10 Counterparts ...................................................................... 58
EXHIBIT A COST OF GOODS SOLD ....................................................................... 1
EXHIBIT B NEORX PATENTS ............................................................................ 1
EXHIBIT C NEORX COST CATEGORIES .................................................................... 1
EXHIBIT D 12/4/96 Letter from P. Verheyen .......................................................... 1
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AGREEMENT
This Agreement is entered into as of this 1st day of July, 1997 by and
between Janssen Pharmaceutica, N.V., having its principal place of business at
Turnhoutseweg 30, 2340 Beerse, Belgium ("Janssen"), and NeoRx Corporation,
having its principal place of business at 410 West Harrison Street, Seattle,
Washington 98119-4004 ("NeoRx"). Janssen and NeoRx are sometimes referred to
herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, NeoRx has begun Development (hereinafter defined) of NeoRx
Pre-Targeting Technology (hereinafter defined) for the delivery of a [ * ]
Effector Molecule (hereinafter defined) localized at a tumor, which may be
particularly useful in cancer therapy.
WHEREAS, this NeoRx Pre-Targeting Technology has resulted in a product
called Avicidin(R) (hereinafter defined) now in Development by NeoRx for small
cell lung cancer.
WHEREAS, Janssen is a pharmaceutical company with a worldwide
development and marketing organization.
WHEREAS, Janssen desires to develop Pre-Targeting Product(s)
(hereinafter defined) employing NeoRx Pre-Targeting Technology, including, but
not limited to, Avicidin, with NeoRx and to receive license rights to develop,
manufacture and market the Pre-Targeting Product(s) that result therefrom.
NOW, THEREFORE, the Parties agree as follows:
I. DEFINITIONS
The following terms shall have the following meanings as used in this
Agreement:
1.1......"Actual Cost of Goods Percentage" or "Al" shall have the mean-
ing recited in Paragraph 4.5(a).
1.2 ....."Additional Product" means a Pre-Targeting Product that is not
a Primary Pre-Targeting Product, [ * ]. Additional Products are developed
pursuant to Paragraph 2.4.
[ * ] Confidential Treatment Requested
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1.3......"Affiliate" means an entity that, directly or indirectly,
through one or more intermediaries, controls, is controlled by or is under
common control with Janssen or NeoRx. As used in this definition, "control"
shall be presumed if there is ownership, directly or indirectly, of thirty
percent (30%) or more (or, if less, the maximum permitted by applicable law) of
the voting stock, equity or income interest of an entity.
1.4......"Anti-Ligand" means a composition of matter that demonstrates
high affinity, and, preferably, multivalent binding, of the complementary
Ligand. Avidin is an example of an Anti-Ligand.
1.5......"Avicidin" means a product designed for administration to a
patient as three separate components comprising a first component comprising
NR-LU-10 bound to Avidin, a second component comprising a Clearing Agent and a
third component comprising yttrium-90 bound to biotin or its functional analog.
1.6......"Avidin" means avidin, streptavidin and derivatives and
analogs thereof that are capable of high affinity, multivalent or univalent
binding to biotin or its functional analogs.
1.7......"Bind(s)" means, solely with respect to Paragraph 1.25(b) and
the binding to a cell line, that an antibody demonstrates a greater than or
equal to [ * ] increase in medium channel fluorescence intensity over a negative
control in a flow cytometry system using directly labeled antibody when tested
on that cell line in the presence of human IgG. [ * ].
1.8......"BLA" means a Product License Application filed with the FDA,
as more fully defined in 21 C.F.R. Part 600 et seq., or any replacement
application for Regulatory Approval in the United States.
1.9......"Clearing Agent" means a composition of matter capable of
binding, complexing or otherwise associating with an administered moiety (e.g.,
Targeting Agent-Ligand, Targeting Agent-Anti-Ligand or Anti-Ligand alone)
present in the recipient's circulation, thereby facilitating circulating moiety
clearance from the recipient's body, removal from blood circulation or
inactivation thereof in circulation.
1.10....."Control" means possession of the ability to grant a license
or sublicense as provided for herein without violating the terms of an agreement
or other arrangement.
[ * ] Confidential Treatment Requested
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1.11....."Co-Promote" or "Co-Promotion" means to promote jointly
Avicidin or another Pre-Targeting Product hereunder through Janssen's and
NeoRx's respective sales forces under a single trademark in the United States.
1.12....."Cost of Goods Sold" means the cost of Pre-Targeting Product
(excluding the Ligand/Effector Molecule conjugate) inventory sold and other
manufacturing-related costs with respect to the Pre-Targeting Product. These
costs shall be defined as the sum of the applicable expenditures incurred
directly in bringing goods acquired and/or manufactured to their existing
condition or location. Cost of Goods Sold shall be calculated in the manner set
forth in Exhibit A attached hereto.
1.13....."Crossover Field" means the field described in Paragraph
1.25(c).
1.14....."Date of First Sale" means the day on which Janssen, its
Affiliate or its sublicensee first sells a Pre-Targeting Product to a Third
Party (excluding sublicensees) in a commercial arm's-length transaction after
Regulatory Approval.
1.15....."Details" shall mean face-to-face presentations made to
physicians, nurses, P&T committee members and other individuals who provide
direct health care services to patients, in their capacity as such. Details
shall not include calls on managed care organizations in an attempt to secure a
contract with such organization. Details shall also not include calls on
administrators or other such individuals in charge of deciding what is placed on
a formulary in hospitals or teaching institutions. Once, however, the
Pre-Targeting Product is on a formulary of such hospital or teaching
institution, Details shall include calls to health care professionals in the
hospital or teaching institution. Details may also include, if agreed in advance
by Janssen and NeoRx, calls on P&T committee members of such hospitals and
teaching institutions in an attempt to get the Pre-Targeting Product on a
formulary.
1.16....."Development" means all activities relating to obtaining
Regulatory Approval of a Pre-Targeting Product, line extensions, alternate
delivery systems and new indications therefor and all activities relating to
developing the ability to manufacture the same. This includes, but is not
limited to, preclinical testing, toxicology, formulation, bulk production
fill/finish, manufacturing process development, manufacturing and quality
assurance technical support, clinical studies and regulatory affairs. In
addition, Development also includes those research activities necessary to
develop certain new or different components of the Pre-Targeting Product such as
the Clearing Agent or fusion protein.
1.17 ...."Development Committee" means that committee described in
Paragraph 2.3.
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1.18 ...."Development Costs" means the costs, including allocable
overhead, incurred by a Party or for its account, specifically identifiable to
the Development of a Pre-Targeting Product or an Independent Product that is
aimed at achieving Regulatory Approval of such Product, including, but not
limited to, [ * ].
1.19....."Development Plan" means the plan for Development of a Primary
Pre-Targeting Product agreed to by the Parties and attached to a separate letter
exchanged between the Parties concurrently herewith, as amended and revised in
accordance with this Agreement, and plans for Development of other Pre-Targeting
Products.
1.20....."Drug Approval Application" means an application for
Regulatory Approval required before commercial sale or use of a Pre-Targeting
Product as a drug in a regulatory jurisdiction.
1.21....."Effective Date" means the date first written above.
1.22....."Effector Molecule" means a therapeutic agent, including, but
not limited to, [ * ].
1.23....."Expansion Field" means the therapeutic applications in
oncology of NeoRx Pre-Targeting Technology outside of the Field where the
specific antibody and the Effector Molecule are owned or Controlled by (or are
covered by an option to acquire or license, with right to sublicense, held by)
NeoRx or its Subsidiaries. Janssen has a right of first negotiation to the
Expansion Field pursuant to Paragraph 5.7.
1.24....."FDA" means the United States Food and Drug Administration or
any successor agency.
1.25....."Field" means:
[ * ] Confidential Treatment Requested
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(a)......All therapeutic applications in oncology of NeoRx
Pre-Targeting Technology that use NR-LU-10 or any antibody that binds to the
NR-LU-10 antigen and any Effector Molecule.
(b)......All therapeutic applications in oncology of NeoRx Pre-Target-
ing Technology that use [ * ].
(c)......Notwithstanding the limitation to oncology therapy in either
(a) or (b) above, (i) if a Pre-Targeting Product comprising NR-LU-10, or any
antibody that binds to the NR-LU-10 antigen, and any Effector Molecule has
reached the stage in Development wherein [ * ].
The Field may be expanded in accordance with, and subject to the terms
of, Paragraphs 5.1 and 5.7.
1.26....."FTE" means a full-time scientific person dedicated to
Development or, in the case of less than a full-time dedicated scientific
person, a full-time, equivalent scientific person year based upon a total of
forty-six (46) weeks or one thousand eight hundred forty (1,840) hours per year
of scientific work, on or directly related to Development, carried out by an
employee. No FTE shall be a postdoctoral trainee of NeoRx. Scientific work on or
directly related to Development to be performed by employees can include, but is
not limited to, experimental laboratory or clinical work, recording and writing
up results, reviewing literature and references, holding scientific discussions,
attending appropriate seminars and symposia, managing and leading scientific
staff, and carrying out management duties related to Development. Excluded are
administrative facilities support, laboratory administrative support,
information and computer support, and other internal or external support
personnel involved in Development.
1.27....."Generic Product" means a product sold in a particular country
(a) after the expiration in such country of [ * ] or its corresponding foreign
equivalent that (i) was not made or sold by Janssen, its Affiliate or its
sublicensee and (ii) has the same components and configuration as a
Pre-Targeting Product sold in the country or (b) that (i) is competitive with a
Pre-Targeting Product sold in the country, (ii) employs the technology described
in [ * ] or its corresponding foreign equivalent in such country, (iii) is sold
under the license rights granted under the [ * ], and (iv) is sold in any
quantity in the country.
[ * ] Confidential Treatment Requested
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1.28....."IND" means an investigational new drug application filed with
the FDA as more fully defined in 21 C.F.R. ss. 312.3.
1.29....."Independent Product" means any product in the Field
(excluding the Crossover Field) for pharmaceutical use in humans employing NeoRx
Pre-Targeting Technology that is developed by NeoRx in accordance with
Paragraphs 5.4, 5.5 and 5.6. An Independent Product may become a Pre-Targeting
Product at the election of Janssen in accordance with Paragraph 5.4 or 5.5.
1.30....."Information" means (a) information generally not known to the
public relating to the Field (excluding the Crossover Field), including, but not
limited to, techniques and data, including, but not limited to, inventions,
practices, methods, knowledge, know-how, skill, experience, test data including
pharmacological, toxicological and clinical test data, analytical and quality
control data, marketing, pricing, distribution, costs, sales, manufacturing, and
patent and legal data or descriptions, and (b) reasonable research quantities of
compounds, assays, Clearing Agents, Ligand/Anti-Ligand Pairs and biological
materials generally not known to the public relating to the Field (excluding the
Crossover Field); provided, however, that "Information" does not include
information, compounds, assays, Clearing Agents, Ligand/Anti-Ligand Pairs or
biological materials relating to Targeting Agents (other than NR-LU-10) or [ * ]
Effector Molecules and not relating to NR-LU-10 or [ * ] Effector Molecules.
1.31....."Janssen Know-How" means Information that (a) Janssen
discloses to NeoRx under this Agreement and (b) is now or hereafter within the
Control of Janssen; provided, however, "Janssen Know-How" does not include
rights under any patents or patent applications.
1.32....."Joint Marketing and Sales Committee" means a committee
consisting of members from the marketing and/or sales functions of Janssen and
NeoRx.
1.33....."Ligand" means a small, soluble molecule that exhibits rapid
serum, blood and/or whole body clearance when administered intravenously in an
animal. Biotin is an example of a Ligand.
1.34....."Ligand/Anti-Ligand Pair"means a complementary/anti-complemen-
tary set of molecules that demonstrates specific binding, generally of
relatively high affinity. Biotin/streptavidin is an example of a Ligand/Anti
- -Ligand Pair.
[ * ] Confidential Treatment Requested
6
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1.35....."Major European Market Country" means France, Germany, Great
Britain or Italy.
1.36....."Marketing Approval" means all allowances and approvals,
including, but not limited to, Regulatory Approval and pricing and reimbursement
approvals granted by the appropriate federal, state and local regulatory
agencies, departments, bureaus or other governmental entities within a country
necessary to market and sell a product.
1.37....."NeoRx Know-How" means Information that (a) NeoRx discloses to
Janssen under this Agreement and (b) is now or hereafter (subject to Janssen's
election under Paragraph 4.19) within the Control of NeoRx; provided, however,
"NeoRx Know-How" does not include rights under any patents or patent
applications.
1.38....."NeoRx Patents" means all the patents and patent applications
now or hereafter (subject to Janssen's election under Paragraph 4.19) owned or
Controlled by NeoRx including its interest in any jointly owned patents
hereunder relating to NeoRx Pre-Targeting Technology at any time, prior to or
during the term of this Agreement, a partial listing of which is identified in
Exhibit B, attached hereto, and which shall be updated by NeoRx from time to
time, any foreign counterparts thereof, as well as all continuations,
continuations-in-part, divisions, provisional applications and renewals thereof,
all patents that may be granted thereon, and all reissues, re-examinations,
extensions, patents of addition and patents of importation thereof; provided,
however, that "NeoRx Patents" does not include patents or patent applications
relating to Targeting Agents (other than NR-LU-10) or [ * ] Effector Molecules.
1.39....."NeoRx Pre-Targeting Technology" means the technology now or
hereafter (subject to Janssen's election under Paragraph 4.19) owned or
Controlled by NeoRx that involves: (a) target site localization in the patient
by administering a Targeting Agent that is conjugated with one member of a
Ligand/Anti-Ligand Pair (a first component) and allowing a time period
sufficient for optimal target accumulation of this Targeting Agent conjugate;
and preferably after removing the nontarget bound Targeting Agent conjugate from
the patient with a Clearing Agent (a second component); and (b) administering to
the patient an Effector Molecule conjugated to the opposite member of the
Ligand/Anti-Ligand Pair (a third component) that binds (directly or indirectly)
to the Targeting Agent conjugate at the target site.
[ * ] Confidential Treatment Requested
7
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1.40....."Net Sales" means the gross sales price billed by a Party or
an Affiliate thereof or a sublicensee thereof for sales of Pre-Targeting
Products (including all components thereof) to a Third Party, less (in each case
as may be applicable thereto and consistent with such Party's then existing
standard business practices): (a) standard trade discounts, including cash
discounts or rebates actually allowed or granted from the billed amount; (b)
credits or allowances actually granted upon claims, rejections or returns of
Pre-Targeting Products, including recalls, regardless of the Party requesting
such recall; (c) charges included as part of the gross sales price for freight,
postage, shipping and insurance charges, to the extent billed, and separately
stated on the invoice; (d) taxes, duties or other governmental charges levied on
or measured by the billing amount when included in billing, as adjusted for
rebates and refunds, and separately stated on the invoice; and (e) accounts that
are uncollectible and written off such Party's books as uncollectible; provided,
however, that any uncollectible accounts excluded pursuant to this clause (e)
that are subsequently collected by such Party shall be included in Net Sales for
the royalty period in which such amounts are collected. Each reference to a
Party set forth above in this Paragraph 1.40 shall be deemed to include and
apply to such Party's Affiliates and sublicensees, as applicable. Any
Pre-Targeting Product sold or otherwise disposed of in other than an
arm's-length transaction or for other property (e.g., barter) shall be deemed
billed at its fair market value in the country of sale or disposition. In the
event a Party is receiving royalties under this Agreement from any Product sold
in the form of a combination Product containing or together with one or more
active ingredients or devices in addition to a Pre-Targeting Product (including
all its components), Net Sales for such combination Product will be calculated
by multiplying Net Sales of such combination Product by the fraction A/(A+B),
where A is the invoice price of the applicable Pre-Targeting Product, if sold
separately, and B is the total invoice price of the active ingredients or
active, nonconsumable devices (such as, for example, implantable pumps or
electronic stimulators; however, items such as disposable transdermal patches or
prefilled syringes shall constitute consumable devices) in the combination, if
sold separately. If, on a country-by country basis, the other active component
or components in the combination are not sold separately in said country, Net
Sales for the purpose of determining royalties of the combination Product shall
be calculated by multiplying Net Sales of such combination Product by the
fraction A/C, where A is the invoice price of the applicable Pre-Targeting
Product, if sold separately, and C is the invoice price of the combination
Product. If, on a country-by-country basis, neither the combination Product nor
the other active component or components of the combination Product are sold
separately in said country, Net Sales for the purposes of determining royalties
of the combination Product shall be determined by the Parties in good faith.
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1.41....."NR-LU-10" means the antibody whose binding sequences have
been provided in writing to Janssen by NeoRx in a letter of even date and any
functional analog of such antibody that binds to the same tumor-specific antigen
(including, but not limited to, F(ab)'2, Fab, single chain fv and human
antibodies).
1.42....."Phase II" means that portion of the clinical development
program that provides for the initial trials of a product on a limited number of
patients for the purposes of determining dose and evaluating safety and efficacy
in the proposed therapeutic indication as more fully defined in 21 C.F.R.
ss. 312.21(c) or foreign equivalent.
1.43....."Pivotal Phase II/III" means that portion of the clinical
development program that provides for a clinical trial(s) of a product on a
sufficient number of patients to establish the safety and efficacy of a product
and generate pharmacoeconomic data necessary to support Regulatory Approval in
the proposed therapeutic indication(s) in the United States or a Major European
Market Country, it being recognized and agreed that, with respect to the United
States, [ * ].
1.44....."Pre-Targeting Product" means any product in the Field for
pharmaceutical use in humans employing NeoRx Pre-Targeting Technology that is
developed with NeoRx as provided herein. Pre-Targeting Products are either
Primary Pre-Targeting Products or Additional Products, but are not Independent
Products.
1.45....."Primary Pre-Targeting Product" means a Pre-Targeting Product
that comprises a [ * ] Effector Molecule used with NR-LU-10 or any other
Targeting Agent that binds to the NR-LU-10 antigen.
1.46....."[ * ] Effector Molecule" means an Effector Molecule that
is a [ * ].
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1.47....."Regulatory Approval" means any approvals (including, but not
limited to, pricing and reimbursement approvals, product and/or establishment
licenses, registrations or authorizations of any federal, state or local
regulatory agency, department, bureau or other governmental entity) necessary
for the manufacture, use, storage, import, export, transport or sale of a
Pre-Targeting Product in a regulatory jurisdiction.
1.48....."Standard Cost of Goods Reference Percentage" or "S1" shall
have the meaning recited in Paragraph 4.5.
1.49....."Subsidiary" means an entity that, directly or indirectly, is
controlled by Janssen or NeoRx. As used in this definition, "control" shall be
presumed under the same conditions as Paragraph 1.3.
1.50....."Substitute Product" means a product sold in a particular
country after the expiration in such country of the equivalent of [ * ] that (a)
was not made or sold by Janssen, its Affiliate or its sublicensee, (b) can be
substituted for, and is competitive with, a Pre-Targeting Product sold in the
country, (c) has the same [ * ], and (e) does not infringe a Valid Claim of a
NeoRx Patent in the country because of the change described in clause (d).
1.51....."Targeting Agent" means a composition of matter, including,
but not limited to, an antibody, that binds to a cell or defined population of
cells. A Targeting Agent may bind to a receptor, an oligonucleotide, an
enzymatic substrate, an antigenic determinant or other binding site present or
in the target cell population.
1.52....."Third Party" means any entity other than Janssen or NeoRx,
and their respective Affiliates.
1.53....."Third Party Patents" means those patents and patent
applications (including foreign counterparts) identified by NeoRx prior to the
Effective Date in writing to Janssen.
1.54....."Third Party Royalties" means those royalties and other
amounts that are or may be payable to those Third Parties previously identified
by NeoRx in writing to Janssen as a result of the use of NeoRx Pre-Targeting
Technology or the manufacture, use or sale of a Pre-Targeting Product hereunder.
1.55....."Third Party Royalty Rates" are those royalty rates associated
with the Third Party Royalties.
1.56....."U.S. Marketing Plan" means a marketing plan or plans,
including, but not limited to, premarketing plans for specified periods of time,
that shall set forth promotion, detailing and marketing strategies related to
each Pre-Targeting Product to be sold in the United States, including proposed
pricing and detailing.
1.57....."Valid Claim" means a claim of a pending patent application
being pursued in good faith or an issued, unexpired patent that has not been (a)
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held invalid or unenforceable by a final decision of a court or governmental
agency of competent jurisdiction, which decision is unappealable or was not
appealed within the time allowed therefor, or (b) admitted in writing to be
invalid or unenforceable by the holder(s) by reissue, disclaimer or otherwise.
II. DEVELOPMENT
2.1 Janssen's Responsibilities
As of the Effective Date, Janssen shall use reasonable efforts
consistent with its normal business practices to develop and commercialize at
least one Pre-Targeting Product (Avicidin is the initial Pre-Targeting Product
to be developed by Janssen) and, with support from NeoRx described in Paragraphs
2.2 and 2.4, shall be solely responsible for the Development of Pre-Targeting
Product(s), including, but not limited to, preparing and filing Drug Approval
Applications in its own name and seeking Regulatory Approvals for Pre-Targeting
Product(s). All costs associated with its Development and manufacturing
activities shall be borne solely by Janssen, except to the extent described in
Paragraph 2.2. Janssen shall keep NeoRx informed of its Information related to
Development of Pre-Targeting Products.
2.2 NeoRx's Responsibilities
Promptly following the Effective Date, NeoRx shall disclose to Janssen
Information within NeoRx's Control relating to NeoRx Pre-Targeting Technology,
including, but not limited to, Avicidin, and from time to time, as Information
becomes available, is generated or is learned, update such disclosure with
additional Information that it obtains throughout the term of this Agreement.
Upon request, NeoRx will provide reasonable quantities of physical materials
(e.g. compounds) for evaluation. In order to assure a smooth transfer of the
responsibilities for Development from NeoRx to Janssen for the Primary
Pre-Targeting Product, NeoRx will commit up to [ * ] FTEs/year as assigned by
the Development Committee until December 31, 1998. Such FTEs shall carry out the
activities that are reasonably assigned to them as described in the Development
Plan and that are within their capabilities (i.e., NeoRx is not obligated to
hire additional scientists, but is obligated to provide, as needed, up to [ * ]
FTEs having the general background and skills of NeoRx's current scientific
staff and having a mix of Ph.D. to non-Ph.D. degrees comparable to NeoRx's
current staff working on Avicidin). It is expected that such FTEs shall, subject
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to Development Committee approval, [ * ], the maximum level of FTE support at
NeoRx shall be reduced to [ * ] FTEs for the Primary Pre-Targeting Product. All
internal, nonproject-related costs associated with employing FTEs, including,
but not limited to, [ * ], shall be to the account of NeoRx with the costs
associated with any capital investments being treated as set forth in Paragraph
2.8. All costs associated with the Development conducted or coordinated by
NeoRx, such as having material produced by a Third Party, which work is
preapproved by Janssen, and any other costs specifically budgeted in the
Development Plan as Janssen expenses, shall be to the account of Janssen.
Janssen has approved and will reimburse NeoRx within twenty (20) days of the
date hereof for [ * ] of costs previously incurred by NeoRx. In carrying out the
activities assigned to it pursuant to the Development Plan, NeoRx shall use
reasonable efforts consistent with its normal business practices and the budget
set forth in the Development Plan. NeoRx shall have no obligation to incur costs
or perform work not in the Development Plan budget. Any additional cost or cost
overruns of NeoRx not provided for in the quarterly Development Plan budget
shall be to the account of NeoRx, unless approved in writing in advance. NeoRx
shall invoice Janssen each calendar quarter for the Development expenses
incurred by it that are within the budget recited in the Development Plan or
that have been otherwise approved in advance, together with a detailed statement
describing the costs and expenses billed. Janssen shall make payment of the
amount invoiced within thirty (30) days of receipt of the invoice. It is
recognized and agreed that budgeting will be done on a monthly basis; however,
invoicing and calculation of cost overruns will be done on a calendar quarter
basis. The initial budget against which NeoRx may commence incurring expenses is
included in the Development Plan. After the first Marketing Approval in the
United States, NeoRx shall have no obligation to provide FTEs or perform other
activities with respect to Development of a Primary Pre-Targeting Product,
unless the Parties mutually agree to a compensation arrangement for NeoRx for
such services.
2.3 Development Committee
In order to coordinate activities between Janssen and NeoRx, a
Development Committee shall be promptly established after the Effective Date.
The Development Committee shall be comprised of representatives from each Party
with the size of the Development Committee to be agreed upon by the Parties from
time to time. The purpose of the Development Committee shall be to monitor the
Development of each Pre-Targeting Product, facilitate the flow of Information
with respect to Development being conducted for each Pre-Targeting Product,
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oversee the preparation of any revised Development Plans, including Development
timelines, and submit Development Plans to the Janssen Research Management Board
for review and budget approval. Any disputes that arise at the Development
Committee shall be discussed by the president of the Janssen Research Foundation
or its successor organization and the president of NeoRx. If the two individuals
cannot resolve the dispute after good faith discussions, the president of the
Janssen Research Foundation or its successor organization shall make the final
decision. It is recognized and agreed that the Development Committee cannot
change the rights or obligations of the parties under this Article II with
respect to research and Development.
2.4 Additional Products
Both Janssen and NeoRx shall be involved in the research and
Development of Additional Products based on the then-current expertise and
resources of both Parties. In case Janssen decides to develop an Additional
Product, both Parties shall discuss how they can best capitalize on their joint
expertise in the Field and determine resources. To the extent of its
participation, NeoRx shall receive full reimbursement of its Development Costs
(including FTEs) from Janssen, such participation being similar to the extent it
has participated to date and is expected to participate in the future in the
research and Development of the Primary Pre-Targeting Product. Janssen shall be
responsible for all regulatory filings in connection with such Additional
Products. In developing Additional Products, Janssen shall use reasonable
efforts consistent with its normal business practices. In carrying out its
activities, NeoRx shall use reasonable efforts consistent with its normal
business practices.
2.5 FDA
NeoRx shall have right to participate as an observer in any planned
meetings (whether by phone, video conferencing, face-to-face or otherwise)
between Janssen (or its Affiliates or sublicensees) and the FDA with respect to
regulatory matters pertaining to Pre-Targeting Products. Janssen shall give
sufficient advance notice to NeoRx, to the extent possible, to allow it to
observe such meetings. It is recognized that there are some circumstances where
it may be impractical to include NeoRx as an observer (e.g., acute toxicity
reports and encounter at conferences), but the intention is, whenever possible,
to allow NeoRx to participate as an observer. At its discretion, Janssen may
allow NeoRx to participate actively in such meetings. NeoRx shall have an
opportunity to review all documents and filings with the FDA, and communications
from the FDA.
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2.6 IND Transfer
NeoRx agrees to promptly transfer and assign any IND or equivalent
foreign regulatory filing relating to a Pre-Targeting Product that it has filed
prior to the Effective Date upon written request from Janssen.
2.7 Research Audit
NeoRx will maintain complete and accurate records relevant to its
expenditure of Development funding provided to it by Janssen pursuant to
Paragraphs 2.2 and 2.4. Such records shall be open during reasonable business
hours for a period of three (3) years from creation of the individual records
for examination, at Janssen's expense and not more often than once each year, by
an independent certified public accountant appointed by Janssen and reasonably
acceptable to NeoRx for the purpose of verifying for Janssen the use of the
funding. Such accountant may retain or utilize independent consultants with
expertise necessary to assist such accountant in examining such records and
making such determination.
2.8 Capital Expenditures
NeoRx shall not be required to purchase any item of a capital nature
reasonably required by NeoRx to conduct Development unless it is covered by the
budget or otherwise approved by Janssen, in which event NeoRx shall be
reimbursed by Janssen. For the purpose of this Paragraph 2.8, the term "item"
refers to a complete operational unit or a related group of cell lines. For
example, if the instrument being purchased requires the purchase of a computer
(including the acquisition, by license or otherwise, of computer software) to
run the instrument, the operational unit is the combination of the two.
All purchases or acquisitions of capital items that cost [ * ] or more
shall be to the account of Janssen; provided, however, that Janssen approves in
advance each such purchase or acquisition. The determination of whether Janssen
purchases or acquires an item exceeding [ * ] or NeoRx purchases or acquires
such item and is reimbursed by Janssen shall be made by the Parties prior to the
purchase. Any items purchased or otherwise acquired and charged one hundred
percent (100%) to Janssen's account shall be solely owned by Janssen, maintained
and insured at Janssen's expense and, if not consumed during the development,
transferred to Janssen, at its expense, by NeoRx upon termination or expiration
of this Agreement.
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III. LICENSE GRANTS
3.1 License for Pre-Targeting Products
Subject to the terms of this Agreement, NeoRx hereby grants to Janssen
an exclusive, worldwide right and license under NeoRx Patents and NeoRx Know-How
to develop, make, have made, use, sell, have sold and distribute any
Pre-Targeting Products in the Field. NeoRx shall not knowingly do anything that
would jeopardize Janssen's ability to obtain exclusive rights to a specific
Pre-Targeting Product in the Crossover Field prior to [ * ].
3.2 Sublicense Rights
The right and license granted under Paragraph 3.1 with respect to each
Pre-Targeting Product shall be sublicensable by Janssen to a Third Party in any
country; provided, however, that Janssen shall not have the right to sublicense
the Development of the entire Pre-Targeting Product to any one Third Party, but
nevertheless shall have the right to sublicense for development individual
components of the Pre-Targeting Product to Third Parties with no one Third Party
having a license to develop all of the components.
3.3 Distribution
Janssen may sell or distribute Pre-Targeting Products through its
Affiliates or distributors in any country.
3.4 Nonexclusive Know-How License to NeoRx
Janssen hereby grants to NeoRx a paid-up, nonexclusive, worldwide
license to use Janssen Know-How (except compounds, assays and biological
materials), with the right to sublicense, and to disclose such Janssen Know-How
subject to a binder of confidentiality so long as the provisions of Article XI
remain in effect.
3.5 Nonexclusive Know-How License to Janssen
NeoRx hereby grants to Janssen a paid-up, nonexclusive, worldwide
license to use NeoRx Know-How (except compounds, assays, Clearing Agents,
Ligand/Anti-Ligand Pairs and biological materials, including NR-LU-10), with the
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right to sublicense, and to disclose such NeoRx Know-How subject to the binder
of confidentiality so long as the provisions of Article XI remain in effect.
3.6 Third-Party Agreements
Janssen shall comply with and perform in accordance with all agreements
under which NeoRx has Control of NeoRx Pre-Targeting Technology. If Janssen
intends to have another party manufacture any Pre-Targeting Product, Janssen
shall first negotiate in good faith with [ * ]. In the event that Janssen or
NeoRx takes a direct license to any Third Party Patents, it shall use its
reasonable and diligent efforts to provide in such license that (a) the other
Party shall be granted a sublicense with the same scope and (b) upon early
termination of such license, the other Party shall have a right to take over the
license as a direct license upon the same terms, provided the other Party agrees
to comply with the terms and to pay the licensor any past due milestone or
royalty payments that the licensor has identified as unpaid.
3.7 No Other Rights
All rights and licenses not specifically granted to Janssen under this
Agreement by NeoRx are hereby reserved and retained by NeoRx.
3.8 Prohibition
Except as licensed hereunder, Janssen shall not use, and shall not
allow its Affiliates and sublicensees to use, the NeoRx Patents and NeoRx
Know-How for any other purpose.
IV. PAYMENTS
4.1 Upfront Payments
Janssen shall pay or cause to be paid to NeoRx Ten Million Dollars
($10,000,000) as follows:
(a)......Five Million Dollars ($5,000,000) within ten (10) days of
receiving an invoice (which invoice may be dated and delivered as of the
Effective Date) and
(b)......Five Million Dollars ($5,000,000) as an equity investment in
[Convertible Preferred Stock or Common Stock] of NeoRx pursuant to the terms and
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conditions of a Stock Purchase Agreement between Johnson & Johnson Development
Corporation and NeoRx dated as of the Effective Date.
4.2 Milestone Payments for the First Pre-Targeting Product
Janssen shall pay NeoRx the following amounts for the first achievement
of each of the following milestones by any Pre-Targeting Product:
[ * ]
All milestone payments recited in this Paragraph 4.2 shall be payable
only once. Once a particular milestone has been paid it will not be due again
for a replacement or follow-up product, so that the total milestones payable
under this Paragraph 4.2 shall not exceed [ * ].
No credits from or against any royalties hereunder shall be available
on any of the milestones recited in this Paragraph 4.2.
Janssen shall promptly notify NeoRx of the occurrence of each milestone
event. Each milestone payment shall be due and payable after such notification
and shall be paid no later than thirty (30) days after receipt of an invoice
from NeoRx.
4.3 Milestones for a Second Type of Pre-Targeting Product
In addition to the milestone payments recited in Paragraph 4.2, Janssen
shall pay NeoRx the following amounts for the second Pre-Targeting Product that
achieves the following milestones and that is of a different type than that
Pre-Targeting Product that achieved the same milestone in Paragraph 4.2 (a
"type" of Pre-Targeting Product being either a Primary Pre-Targeting Product or
an Additional Product):
[ * ]
For example, if the milestones set forth in Paragraphs 4.2(a) and (b)
were first achieved by a Primary Pre-Targeting Product and the milestone set
forth in Paragraph 4.2(c) was first achieved by an Additional Product, the
milestones set forth in Paragraphs 4.3(a) and (b) would not be triggered unless
achieved by an Additional Product and a Primary Pre-Targeting Product,
respectively.
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All milestone payments recited in this Paragraph 4.3 shall be payable
only once. Once a particular milestone has been paid it will not be due again
for a replacement or follow-up product, so that the total milestones payable
under this Paragraph 4.3 shall not exceed [ * ].
No credits from or against any royalties hereunder shall be available
on any milestones recited in this Paragraph 4.3.
Janssen shall promptly notify NeoRx of the occurrence of each
milestone. Each milestone payment shall be due and payable after such
notification and shall be paid no later than thirty (30) days after receipt of
an invoice from NeoRx.
4.4 Earned Royalties for Primary Pre-Targeting Products
Janssen shall pay NeoRx a royalty based on Net Sales in connection with
the annual Net Sales of each Primary Pre-Targeting Product by Janssen, its
Affiliates and sublicensees as follows:
Royalty Rate Worldwide Net Sales (annual)
[ * ] [ * ]
[ * ] [ * ]
For example, if during a year of sales, Janssen has Net Sales of [ * ]
of a Primary Pre-Targeting Product, Janssen is obligated to pay royalties as
follows: [ * ] and [ * ].
4.5 Royalty Adjustment in U.S. for Primary Pre-Targeting Products
In the United States only, NeoRx will share in the gross profit
increase/decrease resulting from changes in the Cost of Goods Sold structure of
the Targeting Agent and Clearing Agent components of the Primary Pre-Targeting
Product being sold as recited hereinafter. An annual adjustment only to the [ *
] royalty rate shall be made by calculating the percentage change to the [ * ]
royalty rate (the [ * ] royalty rate shall not likewise be so adjusted) based on
Actual Cost of Goods Percentage changes (excluding Third Party Royalties) and
Third Party Royalty Rate changes according to the following formula:
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[ * ]
wherein AR is the adjusted royalty rate; provided, however, that AR can never be
greater than [ * ] or less than [ * ] and AR1 and AR2 are calculated as set
forth in clauses (a) and (b) below.
(a)......Royalty Rate Adjustment for Actual Cost of Goods Percentage
Changes (Excluding Third Party Royalty Rates).
If the Actual Cost of Goods Percentage ("A1") for any calendar year is
greater than or less than the Standard Cost of Goods Reference Percentage
("S1"), then AR1 shall be calculated according to the following formula:
[ * ]
wherein A1 is calculated by dividing the average Cost of Goods Sold (excluding
Third Party Royalty Rates) per dose by an amount (the "Per Dose Price") that is
the greater of (i) [ * ] and (ii) the average Net Sales per dose in the United
States for the calendar year, and S1 is calculated by dividing [ * ] by the Per
Dose Price; provided, however, that in the event the average dose does not
contain [ * ] of chemical conjugate, fusion protein or other Targeting Agent
bound to Avidin, the [ * ] shall be adjusted using the calculational approach
set forth in the December 4, 1996 letter from Patrick Verheyen to Paul Abrams
attached hereto as Exhibit D.
(b)......Royalty Rate Adjustment Based on Changes to Third Party
Royalty Rates.
If the actual cumulative Third Party Royalty Rate ("A2") is greater
than or less than the Standard Cumulative Third Party Royalty Rate ("S2"), which
equals [ * ], then AR2 shall be calculated according to the following formula:
[ * ]
wherein A2 is the actual cumulative Third Party Royalty Rate paid to such Third
Parties during the calendar year with respect to the sale of Primary
Pre-Targeting Products in the United States and S2 equals [ * ].
For example, if the average Cost of Goods Sold for a calendar year is
[ * ] per dose [ * ] and the average Net Sales per dose for the same calendar
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year are [ * ] per dose, A1 equals [ * ]. If the Actual Cumulative Third Party
Royalty Rate is [ * ], then using the formulas shown above:
[ * ]
Should the adjusted royalty rate calculation result in monies being
owed to NeoRx as in the above example, Janssen shall report to NeoRx the amount
of monies owed and, upon receipt of an invoice from NeoRx, shall pay NeoRx
within thirty (30) days after receipt of invoice. Should the adjusted royalty
rate calculation result in monies being owed to Janssen, Janssen shall take
those monies as a credit on the next scheduled royalty payment to NeoRx.
4.6 Earned Royalties for Additional Products
Janssen shall pay NeoRx a royalty based on Net Sales in connection with
the annual Net Sales of each Additional Product by Janssen, its Affiliates and
sublicensees as follows:
Royalty Rate Worldwide Net Sales (annual)
[ * ] [ * ]
[ * ] [ * ]
4.7 Royalty Adjustment in U.S. for Additional Products
The royalty rates recited in Paragraph 4.6 are based on an Actual Cost
of Goods Percentate plus the Third Party Royalty Rate being [ * ] or less for
the United States. If on an annual basis the Actual Cost of Goods Percentage
plus the Third Party Royalty is greater than [ * ] for the United States, the
royalty rates for the United States shall be as follows:
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Royalty Rate Worldwide Net Sales (annual)
[ * ] [ * ]
[ * ] [ * ]
4.8 Duration of Royalty Payments
The royalties recited in Paragraphs 4.4 and 4.6 shall accrue and be
payable on a country-by-country and product-by-product basis with respect to Net
Sales occurring prior to the later of (a) the last to expire of any NeoRx Patent
with a Valid Claim covering the Pre-Targeting Product or its use or (b) ten (10)
years from the Date of First Sale of the Pre-Targeting Product in the country,
except that the Date of First Sale for any country in the European Union shall
be deemed to be, if earlier, the first Date of First Sale of the Pre-Targeting
Product in a Major European Market Country. Thereafter, no further royalties
shall accrue and the license under Paragraph 3.1 shall become fully paid-up
(except for payments to Third Parties) and non-exclusive with respect to the
Pre-Targeting Product and country.
4.9 Reduction in Royalty Rate in Response to Generic Competition
Except as provided in Paragraph 4.21, the royalty rates recited in
Paragraphs 4.4 and 4.6 shall be reduced (on a country-by-country and
product-by-product basis) by [ * ] in connection with the sale of a
Pre-Targeting Product by Janssen, its Affiliates or sublicensees in those
countries where (a) the royalty period described in Paragraph 4.8(b) has not
expired and the royalty period described in Paragraph 4.8(a) has either (i)
expired or (ii) is still running only as a result of a Valid Claim in a NeoRx
Patent covering only a method of manufacturing the Pre-Targeting Product, (b) a
Generic Product to the Pre-Targeting Product is being manufactured and sold in
the country without infringing such Valid Claim, and (c) the total sales of the
Generic Product in the country are cumulatively [ * ] of the total sales of the
Pre-Targeting Product being sold hereunder expressed in equivalent units in said
country for a [ * ]. Once it has been determined that competition exists in a
particular country pursuant to clause (c) of this paragraph and clauses (a) and
(b) of this paragraph apply, the royalty rates shall be reduced pursuant to this
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Paragraph 4.9 for the next succeeding [ * ], and the determination of whether
competition continues to exist shall be reviewed [ * ] thereafter. If for such [
* ] competition exists, then the royalty rates for the next succeeding [ * ]
shall continue to be as set forth in this Paragraph 4.9. If it is determined
that competition exists for [ * ], the royalty for such country and
Pre-Targeting Product shall be as set forth in this Paragraph 4.9, unless it can
be demonstrated that no competition pursuant to clause (c) of this paragraph
exists for [ * ].
4.10 Reduction in Royalty Rate in Response to Substitute Product Competition
Except as provided in Paragraph 4.21, the royalty rates recited in
Paragraphs 4.4 and 4.6 shall be reduced (on a country-by-country and
product-by-product basis) by [ * ] in connection with the sale of a
Pre-Targeting Product by Janssen, its Affiliates or sublicensees in those
countries where (a) a Substitute Product to the Pre-Targeting Product is being
sold and (b) the total sales of the Substitute Product in the country is
cumulatively at least [ * ] of the total sales of the Pre-Targeting Product
being sold hereunder expressed in equivalent units in said country [ * ]. Once
it has been determined that competition exists in a particular country pursuant
to clause (b) of this paragraph and clause (a) of this paragraph applies, the
royalty rates shall be reduced pursuant to this Paragraph 4.10 for the next
succeeding [ * ], and the determination of whether competition continues to
exist shall be reviewed [ * ] thereafter. If for such [ * ] competition exists,
then the royalty rates for the next succeeding [ * ] shall continue to be as set
forth in this Paragraph 4.10. If it is determined that competition exists for [
* ], the royalty for such country and Pre-Targeting Product shall be as set
forth in this Paragraph 4.10, unless it can be demonstrated that no competition
pursuant to clause (b) of this paragraph exists for [ * ].
4.11 Reduction in Royalty Rate for Jointly Owned Patents
After the expiration of the royalty period described in Paragraph
4.8(b) and except as provided in Paragraph 4.21, the royalty rates recited in
Paragraphs 4.4 and 4.6 shall be reduced (on a country-by-country and
product-by-product basis) [ * ] in connection with the sale of a Pre-Targeting
Product by Janssen, its Affiliates or sublicensees in those countries where the
only Valid Claim(s) covering the Pre-Targeting Product are in jointly owned
patents described in Paragraph 8.3 that were filed in good faith more than [ * ]
after the Effective Date.
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4.12 Foreign Exchange
The remittance of royalties payable on Net Sales will be payable in
U.S. dollars to NeoRx at a bank and to an account designated by NeoRx using a
rate of exchange of the currency of the country from which the royalties are
payable in accordance with the rate of exchange published in The Wall Street
Journal as of the last business day of the month immediately preceding the month
during which payment of such royalties is required to be made to NeoRx
hereunder. All references to "Dollars" hereunder are references to U.S.
Dollars.
4.13 [Intentionally Left Blank]
4.14 Taxes
All payments under this Agreement will be made without any deduction or
withholding for or on account of any tax unless such deduction or withholding is
required by any applicable law. If Janssen is so required to deduct or withhold,
Janssen will:
(a)......promptly notify NeoRx of such requirement;
(b)......pay to the relevant authorities the full amount required to be
deducted or withheld promptly upon the earlier of determining that such
deduction or withholding is required or receiving notice that such amount has
been assessed against NeoRx; and
(c)......promptly forward to NeoRx an official receipt (or certified
copy), or other documentation reasonably acceptable to NeoRx, evidencing such
payment to such authorities.
In case such deduction or withholding is required, the Parties may
propose changes to the then current arrangement with respect to the flow of
monies under this Agreement in order to reduce or eliminate the extra cost for
NeoRx.
All payments pursuant to Paragraphs 4.1, 4.2, 4.3, 4.4, 4.6 and 4.19 to
NeoRx shall be made by Janssen from either Belgium or the United States so that,
under current law, there should be no tax withholding.
4.15 Records, Reports and Payment
Janssen shall keep complete and accurate records of the sale of
Pre-Targeting Products, with respect to which a royalty is payable according to
this Agreement. Within thirty (30) days following each quarterly period of a
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calendar year, Janssen shall render to NeoRx a written report setting forth the
Net Sales (in local currency and U.S. Dollars, with applicable exchange rates
pursuant to Paragraph 4.12 noted) and quantity of such products sold and the
royalty due and payable on a product-by-product and country-by-country basis
(including all deductions taken from the gross sales price in determining Net
Sales and any royalty reduction or credit). NeoRx shall then remit to Janssen an
invoice for the royalty payment due and Janssen shall, within ten (10) days of
receipt of such invoice, remit to NeoRx the amount of royalty shown thereby to
be due.
4.16 Accounting
Each Party shall have the right, at its own expense, to appoint an
independent certified public accountant reasonably acceptable to and approved by
the other Party, said approval not to be unreasonably withheld or delayed, who
shall have access to the other Party's records during reasonable business hours
for the purpose of verifying Net Sales, the Cost of Goods Sold, the Actual Cost
of Goods Percentage, Third-Party Royalty Rates, manufacturing costs and
supplier's charges (Paragraphs 5.6 and 7.2) and the calculation of royalties
payable for any period within the preceding three (3) years or, in the case of
Janssen, for verifying whether NeoRx dedicated the number of FTEs for which it
received funding at the rate agreed to pursuant to Article II. This right may
not be exercised more than once in any calendar year, and said accountant shall
disclose to the Party requesting the audit only information relating solely to
the accuracy of the royalty report, the royalty payments or research
expenditures according to this Agreement. If any audit or examination shall
reveal a deficiency of any royalty payment due, the Party owing the royalty
shall make payment to the other Party of such deficiency plus interest for the
period of such deficiency. If any audit or examination shall reveal that NeoRx
has not properly spent the research funding pursuant to the terms of this
Agreement and therefore misused such funding, NeoRx shall refund any monies not
so properly spent to Janssen. Payment of such deficiencies or misused research
funding shall be made within five (5) days following written notification of the
auditing Party to the Party being audited of the monies owed. In the event that
such an audit or examination shall reveal a deficiency of any royalty payment
due in an amount equaling or exceeding five percent (5%) of the royalties or
expenditures, the Party shall reimburse the other Party for the reasonable costs
of such audit within ten (10) business days after written demand therefor.
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4.17 Third Party Patents
If a patent or patents of a Third Party, other than Third Party Patents
or patents [ * ], should exist in any country during the term of this Agreement
covering the use or sale of any Primary Pre-Targeting Product comprised of a [ *
], and if it should prove in Janssen's reasonable judgment impractical or
impossible for Janssen or any Affiliate or sublicensee to continue the activity
or activities licensed hereunder without obtaining a royalty-bearing license
from such Third Party under such patent or patents in said country, then, except
as provided in Paragraph 4.21, Janssen shall be entitled to a credit for the
royalty paid to such Third Party under such license for the use or sale of the
Primary Pre-Targeting Product in said country ("Royalty"), such credit being
applied against only the royalty payments due under this Agreement with respect
to the Primary Pre-Targeting Product for said country and in an amount equal to
[ * ] of the Royalty paid to such Third Party; provided, however, that the
earned royalties payable to NeoRx under this Agreement shall not be reduced to
less than [ * ] of Net Sales of such Primary Pre-Targeting Product in said
country by reason of the credit described in this Paragraph 4.17 and the
reduction provided by this Paragraph 4.17 with respect to the United States
shall not exceed [ * ] of the amount by which [ * ] the Royalty exceeds [ * ]
for the United States. For example, with respect to such a Primary Pre-Targeting
Product in the United States, if A1 equals [ * ], A2 equals [ * ] and the
Royalty equals [ * ], then the maximum amount of the Royalty that may be
deducted pursuant to this Paragraph 4.17 from the earned royalties otherwise
payable on Net Sales in the United States for such Primary Pre-Targeting Product
shall not exceed [ * ] and shall not be applied to reduce the earned royalties
payable to NeoRx to less than [ * ] of Net Sales in the United States for such
Primary Pre-Targeting Product. (Note that by operation of Paragraph 4.5, without
the application of this Paragraph 4.17, the earned royalty rate may be reduced
to [ * ].)
4.18 Compulsory License
If at any time and from time to time a Third Party in any country
shall, under the right of a compulsory license granted or ordered to be granted
by a competent governmental authority, sell any Pre-Targeting Product, with
respect to which royalties would be payable pursuant to Paragraphs 4.4 and 4.6,
then except as provided in Paragraph 4.21, Janssen may reduce the royalty on
sales in such country of such Pre-Targeting Product, to an amount no greater
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than the amount payable by said Third Party as consideration for the compulsory
license; provided, however, that the royalty rate payable by Janssen after any
reduction thereof pursuant to this Paragraph 4.18 shall not be less than [ * ]
of Net Sales of such Pre-Targeting Product in such country.
4.19 No Multiple Royalties; Third Party Royalties
If a Pre-Targeting Product is covered by more than one license granted
hereunder, Janssen shall be responsible for payment of only one royalty based on
the Net Sales thereof, such royalty to be equal to the highest applicable
royalty rate on a product-by-product and country-by-country basis; provided,
however, that Janssen shall remain responsible for paying all Third Party
Royalties and any other royalties or amounts that NeoRx owes or has paid a Third
Party for NeoRx Pre-Targeting Technology that it hereafter acquires Control of
and that Janssen elects to have included in the license granted in Paragraph 3.1
and added to the definition(s) of NeoRx Patents and/or NeoRx Know-How. Janssen
shall pay such Third Party Royalties and other royalties or amounts to NeoRx or,
at NeoRx's request, directly to the appropriate Third Party.
4.20 Value of Collaboration in NeoRx Know-How
Janssen acknowledges that NeoRx's participation and work in Development
may be of substantial value and that the NeoRx Know-How and/or NeoRx's rights to
NR-LU-10 may constitute valuable and substantial trade secrets of NeoRx. The
parties acknowledge and agree that, for their mutual convenience and after
considering other alternatives, including reimbursement of NeoRx's costs under
Paragraph 2.2 and larger or other upfront and milestone payments, the payments
to NeoRx set forth in this Agreement, including the structure and term of
royalty payments, are an appropriate and mutually convenient way of compensating
NeoRx.
4.21 No Multiple Reductions
Notwithstanding the provisions of Paragraphs 4.9, 4.10, 4.11, 4.17 and
4.18 (each a "Royalty Reduction Paragraph"), only one Royalty Reduction
Paragraph may be applied to reduce the royalty obligations payable under
Paragraphs 4.4 (as adjusted by Paragraph 4.5) and 4.6 (as adjusted by Paragraph
4.7) and the reductions provided by the other Royalty Reduction Paragraphs shall
not be accumulated and shall be lost. With each quarterly report due under
Paragraph 4.15, Janssen shall identify which, if any, Royalty Reduction
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Paragraph it elects to apply to the royalties due on the Net Sales for the
quarter.
4.22 Allocation of Annual Net Sales [ * ]
In the event annual worldwide Net Sales [ * ] (the "Breakpoint") and it
is necessary to treat Net Sales for certain Pre-Targeting Products and/or
countries differently (e.g., under Paragraphs 4.5, 4.7, 4.9, 4.10, 4.11, 4.17 or
4.18), then the amount of Net Sales for such Pre-Targeting Product and/or
country that are deemed to be above the Breakpoint (i.e., to which a higher
royalty rate is applied under this Agreement) shall be equal to the worldwide
annual Net Sales in [ * ] multiplied by the ratio of the Net Sales for such
Pre-Targeting Product and/or country to the worldwide annual Net Sales; the
balance of such Net Sales being deemed to be below the Breakpoint (i.e., to
which a lower royalty rate is applied). Any credits to royalties provided under
Paragraph 4.17 for a particular Pre-Targeting Product and/or country shall be
attributed prorata to the royalties for Net Sales deemed to be above and below
the Breakpoint, i.e., if one-third of the Net Sales for a particular
Pre-Targeting Product and/or country is deemed to be above the Breakpoint, then
one-third of the credit for such Pre-Targeting Product and/or country shall be
deemed attributable to the higher royalty rate and two-thirds of the credit
shall be deemed attributable to the lower royalty rate.
For example, if worldwide Net Sales of a Primary Pre-Targeting Product
are [ * ] in one year, of which [ * ] are in the United States and [ * ] are in
the rest of the world, and if the adjusted royalty rate on the first [ * ] Net
Sales in the United States is [ * ] pursuant to Paragraph 4.5, then the
aggregate royalties payable to NeoRx pursuant to Paragraphs 4.4 and 4.5 for the
year on such Net Sales would be [ * ], calculated as follows: with respect to
the United States, [ * ]; and, with respect to the rest of the world, [ * ].
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V. JANSSEN'S OPTION TO EXPAND FIELD AND INDEPENDENT DEVELOPMENT
5.1 Janssen's Option to Expand the Field
Until [ * ] after the Effective Date, Janssen shall have the exclusive
right and option to expand the Field to [ * ]; provided, however, that the
Parties agree on financial terms and conditions during such [ * ]. If either (a)
the Parties fail to reach agreement by the end of such [ * ] or (b) Janssen
notifies NeoRx during such [ * ] that it elects not to exercise its right and
option, the right and option shall be terminated.
5.2 Exercise of Janssen's Option
Janssen shall be deemed to have exercised its right and option to
expand the Field pursuant to Paragraph 5.1 upon written agreement by the Parties
to the financial terms and conditions.
5.3 Limitation on NeoRx Right to Assign or License Prior to Exercise by
Janssen of Its Option
NeoRx agrees not to assign or license any rights in the expanded Field
as defined in Paragraph 5.1 (or begin discussions with any Third Party to do
such) until the first to occur of:
(a)......Janssen exercises its option to expand the Field pursuant to
Paragraph 5.2;
(b)......Janssen elects not to exercise its option; or
(c)......The option period expires without Janssen exercising its
option.
5.4 NeoRx Right to Independently Develop Pre-Targeting Products Within the
Field
At any time following [ * ], but not more than once every [ * ] and
with not more than [ * ] such recommendations in the aggregate, NeoRx may
propose a Pre-Targeting Product, other than Avicidin or other Pre-Targeting
Product in Development or on sale hereunder, as a Pre-Targeting Product to enter
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into development by written notice to Janssen after NeoRx has completed [ * ].
Together with its notice, NeoRx will submit a detailed proposed development plan
and a proposed development budget for the proposed Pre-Targeting Product.
Janssen shall have one hundred twenty (120) days from the date of receipt of the
notice, together with the proposed development plan and budget, to accept or
reject NeoRx's recommendation to commence development. If Janssen accepts
NeoRx's recommendation to develop the proposed Pre-Targeting Product, it shall
so notify NeoRx within the one hundred twenty (120) day period and shall assume
responsibility for development pursuant to Article II. If Janssen either fails
to notify NeoRx of its decision to either accept or reject NeoRx's
recommendation within the one hundred twenty (120) day period or rejects NeoRx's
recommendation within the one hundred twenty (120) day period, NeoRx may
independently develop the proposed Pre-Targeting Product, subject to the right
to re-offer it to Janssen under Paragraph 5.5; provided, however, that the
proposed Pre-Targeting Product is not being developed for the same indication
for which a Pre-Targeting Product is being developed or marketed hereunder. The
proposed Pre-Targeting Product shall be an Independent Product until and unless
Janssen elects, pursuant to Paragraph 5.4 or 5.5, to have it developed pursuant
to Article II, in which event it shall become a Pre-Targeting Product for which
milestone payments may be payable pursuant to Paragraph 4.2 or 4.3.
5.5 NeoRx Obligation to Re-Offer
In the event that NeoRx continues to independently develop the
Independent Product, NeoRx agrees that it will disclose a summary of all
development plans, results and data every six (6) months during independent
development to Janssen through the Development Committee and re-offer in writing
the Independent Product to Janssen at least [ * ] prior to the estimated date of
[ * ]. The Development Committee shall be involved in the development of such
Independent Product to the extent necessary to assure that its development does
not interfere with or disrupt the Development of any Pre-Targeting Product in
Development. The re-offer of the Independent Product to Janssen shall include at
the time of re-offer a complete information package on development results,
plans and data, details of monies expended, and a comprehensive development plan
and budget, all of which shall be kept updated during the re-offer period.
Upon a re-offer, Janssen may elect that such Independent Product be
returned to it for development under this Agreement by notifying NeoRx (a) at
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any time prior to the [ * ] or (b) [ * ] following the re-offer, whichever is
the later. At the time such Independent Product is returned to Janssen for
Development, Janssen shall pay NeoRx [ * ] of the Development Costs that were
incurred independently by NeoRx for the Independent Product up to that point,
plus accrued simple interest at the prime rate plus [ * ] adjusted quarterly
during the period of independent development.
If Janssen elects to cause an Independent Product to be returned to it
for Development, it shall cease being an Independent Product and become a
Pre-Targeting Product for which milestone payments may be payable pursuant to
Paragraph 4.2 or 4.3.
If Janssen does not elect to cause such Independent Product to be
returned to it within the time period specified in this Paragraph 5.5, it shall
continue being an Independent Product and Janssen shall have no rights therein.
5.6 Limitations on NeoRx Rights During Re-Offer Period
NeoRx shall not license or sublicense its rights under any NeoRx
Patents or NeoRx Know-How with respect to any Independent Product that is
subject to a re-offer right under Paragraph 5.5; provided, however, that NeoRx
shall have the right to license or sublicense rights to manufacture such
Independent Product. In this regard, NeoRx shall be obligated to first offer to
Janssen the right to manufacture. Janssen shall have the absolute right to
manufacture any components of such Independent Product that are the same or
substantially the same as the components of a Pre-Targeting Product that is
being developed by Janssen hereunder. With respect to components that are not
the same or substantially the same, Janssen shall have the right to manufacture
such components if it can manufacture and supply to NeoRx the components at an
acceptable quality and at a price equal to or less than the price of a
qualified, quality manufacturer, i.e., a manufacturer that manufactures with
comparable quality as Janssen and is in compliance with cGMPs and other
applicable regulatory regulations and requirements. Janssen shall exercise its
right to manufacture by giving its commitment in writing to NeoRx within [ * ]
of notice. If Janssen manufactures components for NeoRx and does not decide to
return the Independent Product to Development (i.e., decides not to exercise its
right of re-offer), Janssen shall continue to manufacture NeoRx's requirements
for such components for [ * ]. The price for components that are the same or
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substantially the same as components that Janssen is developing for
Pre-Targeting Products shall be Janssen's Cost of Goods Sold F.O.B. Janssen's
facility during the re-offer period and for [ * ] thereafter. Thereafter, the
price of such components shall be Janssen's Cost of Goods Sold plus [ * ] for
the [ * ], and each year thereafter Janssen may increase the [ * ] number in
increments of [ * ], so that in [ * ] the profit margin may be [ * ] and in
[ * ], etc., subject to NeoRx's right to terminate such supply arrangements.
5.7 Janssen's Right of First Negotiation to Expand the Field Further
In the event the Field has not been expanded pursuant to Paragraph 5.1,
in whole or in part, Janssen shall have the first right of negotiation with
respect to the use of specific antibodies in the Expansion Field prior to NeoRx
negotiating or entering into an agreement with a Third Party with respect to the
Expansion Field as follows: [ * ].
VI. CO-PROMOTION
6.1 Co-Promotion Option of NeoRx
In connection with Pre-Targeting Products marketed and sold by or under
authority of Janssen hereunder, NeoRx has the right to Co-Promote in the United
States during the term of this Agreement from the Date of First Sale of each
Pre-Targeting Product sold in the United States according to the terms and
conditions recited in Paragraphs 6.2 - 6.17. NeoRx's rights under this Article
VI shall only be transferable pursuant to Paragraph 6.17. NeoRx must indicate
its intention to Co-Promote by providing Janssen with notice within [ * ] of the
filing of a BLA for each Pre-Targeting Product; provided, however, that Janssen
(or the Joint Marketing and Sales Committee for Pre-Targeting Products (other
than the first one to be marketed)) provided to NeoRx, at least [ * ] prior to
the date by which NeoRx must indicate its intention, the proposed total Details
to be conducted for such Pre-Targeting Product in the United States, together
with a complete copy of the then-current U.S. Marketing Plan for such
Pre-Targeting Product (to the extent one then exists). Should NeoRx not have
been provided with such Information on or before the BLA filing, it shall have [
* ] from receipt of all such Information to indicate its intention. The
notification must include a declaration by NeoRx of what it commits to be its
effort for detailing to be used in refining the U.S. Marketing Plan. Failure of
Janssen (or the Joint Marketing and Sales Committee) to provide the proposed
total Details along with a U.S. Marketing Plan will toll the time in which NeoRx
must decide to Co-Promote the Pre-Targeting Product. Should NeoRx elect to
Co-Promote hereunder and should NeoRx not already have in place a sales force
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suitable for Co-Promoting, Janssen may instruct NeoRx to begin to hire sales
professionals to Co-Promote as early as [ * ] prior to the anticipated Date of
First Sale for the Pre-Targeting Product. NeoRx may only Co-Promote if within [
* ] after Janssen receives a letter from the FDA approving its Drug Approval
Application, it has in place in the United States an infrastructure, including,
but not limited to, reasonable insurance protection and a sales force of
sufficient size to carry out the Details to which NeoRx has committed. Promptly
following NeoRx's exercise of its right to Co-Promote each Pre-Targeting Product
hereunder, the Parties shall negotiate a more detailed Co-Promotion Agreement on
reasonable and customary terms and conditions, consistent with this Article VI.
6.2 Co-Promotion Limitation of Scope
The scope of Co-Promotion for NeoRx will be limited specifically to its
representation on the Joint Marketing and Sales Committee and to carry out
Details to a target audience, which shall be determined by the Joint Marketing
and Sales Committee. The U.S. Marketing Plan shall set the Details for the [ * ]
of sale of each Pre-Targeting Product, taking into account NeoRx's commitment of
its detailing support. If NeoRx elects to Co-Promote a Pre-Targeting Product
under this Article VI, NeoRx shall have the right to conduct that percentage of
Details as equal up to [ * ], but not less than [ * ], of the total Details to
be conducted for each Pre-Targeting Product during the period of Co-Promotion.
When making its commitment under Paragraph 6.1, NeoRx must commit to a specific
percentage of total Details [ * ] range, agreeing to carry out that percentage
of the total Details during each year of Co-Promotion, except to the extent
specified below. After making its commitment to a specific percentage of total
Details, should the total number of Details be changed by the Joint Marketing
and Sales Committee for any future period during the Co-Promotion, then the
actual number of Details assigned to NeoRx shall be changed as follows:
(a)......If the percentage change of total Details varies within a
range of [ * ] of the initial number of total Details established by the Joint
Marketing and Sales Committee, the total Details assigned to NeoRx shall not
change unless the Parties otherwise mutually agree; rather, the Janssen sales
force shall be responsible for either making more or less Details, whatever the
case may be.
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(b)......If the percentage increase in total Details is greater than [
* ] of the initial number of total Details established by the Joint Marketing
and Sales Committee, NeoRx, at its option, may increase its total Details by a
percentage equal to its initial commitment percentage times the percentage
increase over the initial number of total Details established by the Joint
Marketing and Sales Committee. For example, if NeoRx initially committed to [ *
] of the total Details and the total Details established by the Joint Marketing
and Sales Committee for [ * ] of the Co-Promotion amounted to a [ * ] increase
as compared to the initial number of total Details, then NeoRx may elect to
increase its total Details by the percentage equal to [ * ], which is [ * ].
NeoRx must exercise its option to increase its total Details by giving Janssen
notice within [ * ] of being notified of the percentage increase in total
Details or the option will terminate.
(c)......If the percentage decrease of total Details is greater than [
* ] of the initial number of total Details established by the Joint Marketing
and Sales Committee, then NeoRx's total Details shall be decreased so that its
percentage of total Details remains at its initial commitment percentage.
After NeoRx makes its commitment to a specific number of Details, the
Joint Marketing and Sales Committee shall establish a target audience for NeoRx
to call on and a different target audience for Janssen to call on. Depending on
marketing strategy, one or more target audiences to be called on by both Janssen
and NeoRx may also be established.
6.3 NeoRx Is Not a Distributor
It is recognized by the Parties that NeoRx, under its option to
Co-Promote, may receive orders from Third Parties. NeoRx shall promptly transmit
said orders to Janssen and Janssen shall book all sales resulting from such
orders.
6.4 Joint Marketing and Sales Committee
The Joint Marketing and Sales Committee shall meet in the United States
at least four (4) times a year, generally on a quarterly basis, at Janssen's
facility or a Janssen-designated site, at mutually agreeable times, to discuss
and coordinate the Co-Promotion of Pre-Targeting Products that are being
Co-Promoted by Janssen and NeoRx in accordance with this Agreement and the
strategies and programs that should be developed to optimally grow each such
Pre-Targeting Product, including, but not limited to, the assignment of Details,
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designating the target audience and developing a U.S. Marketing Plan. Subject to
NeoRx's prior review and opportunity to comment, Janssen will have the sole
responsibility, with the cooperation and assistance of NeoRx, for marketing,
pricing and promotion strategies and all other elements of the U.S. Marketing
Plan with respect to each Pre-Targeting Product and budgets therefor. Allocation
of target audiences and detailing efforts between the Parties by the Joint
Marketing and Sales Committee will be done in a fair and reasonable manner. All
disputes relating to designating the target audiences shall be resolved in
accordance with the procedures set forth in Paragraph 6.16.
6.5 Co-Promotion Obligations
NeoRx and Janssen shall use all reasonable efforts consistent with
Janssen's and NeoRx's normal business practices and legal requirements to deploy
a professional and trained sales force to Co-Promote those Pre-Targeting
Products selected by NeoRx for Co-Promotion in the United States. NeoRx and
Janssen agree that their sales force employed in Co-Promoting each Pre-Targeting
Product, shall be comprised of individuals at least [ * ] of whom have at least
[ * ] prior pharmaceutical sales experience (or is otherwise acceptable to the
other Party), and such sales forces shall meet standards of competence and
professionalism as is common in the pharmaceutical industry. NeoRx and Janssen
shall compensate their sales force consistent with industry standards,
including, but not limited to, incentivizing their sales representatives. In all
events, the joint promotion and detailing shall be conducted in accordance with
the then current U.S. Marketing Plan. Janssen shall provide to NeoRx's sales
personnel, at Janssen's expense, such product training and promotional materials
(including samples) that are reasonably necessary to effectively promote the
particular product consistent with the U.S. Marketing Plan and that are provided
to the Janssen sales force.
6.6 Costs Associated With Co-Promotion
Except to the extent specifically described in this Paragraph 6.6, each
Party shall be solely responsible for all expenses (direct and indirect)
associated with its Co-Promotion activities, including, but not limited to,
compensation for its sales force. Notwithstanding the foregoing, NeoRx's sales
representatives shall receive sufficient advanced notice of and may attend
Janssen-organized and-supported scientific and educational symposiums or
meetings, including, but not limited to, sales meetings, sales training
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sessions, symposiums, conventions, displays, clinical presentations and
seminars, and speaker presentations to the extent such involve a Pre-Targeting
Product. While NeoRx shall remain responsible for the compensation of its sales
representatives attending any such educational or scientific symposium or
meeting; Janssen shall compensate NeoRx for all reasonable and necessary
out-of-pocket expenses incurred by such sale representatives attending such
symposium or meeting, provided, however, that the travel and room and board
expenses of NeoRx sales representatives are pre-approved by Janssen.
6.7 Co-Promotion Compliance
Within thirty (30) days after the end of each calendar quarter during
the term of Co-Promotion, the Parties shall submit to each other a reasonably
detailed description of their promotional, detailing and marketing efforts
pursuant to this Agreement. Such description shall be based on its then current
call reporting system and shall contain a full disclosure of any changes to such
system from that previously disclosed to the other and of any noncompliance with
its promotional, detailing and marketing obligations under this Agreement.
6.8 Co-Promotion Audit of Performance
Each Party shall have the right to review and audit the other Party's
call reporting records during regular business hours to confirm satisfaction of
the obligations set out in this Article VI where for any two (2) consecutive
quarters there is a substantial difference between the Party's call reporting
records and the records of the IMS auditing service or other pharmaceutical
industry call reporting service utilized by the Party hereunder. For this
purpose, each Party shall, at its expense, subscribe to the IMS auditing service
or other pharmaceutical industry-recognized auditing service recommended by
Janssen. Further, each Party shall provide to the other Party its reporting
records on a quarterly basis. If, after such review, the Parties are unable to
agree as to the results of the audit, a Party may demand a verification of any
certification by audit of the other Party's call reporting system to be
conducted by a mutually agreed upon auditor.
6.9 Co-Promotion Termination for Cause
In order to monitor the performance of NeoRx's sale representatives,
the Parties shall compare the number of prescriptions for each Pre-Targeting
Product per doctor for those doctors in the target audience called on by NeoRx's
sales representatives ("NeoRx Prescriptions") against the number of
prescriptions for each Pre-Targeting Product per doctor for the aggregate of the
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doctors called on by both NeoRx and Janssen sales representatives ("Total
Prescriptions"). Such comparison shall be done on a monthly basis using data
obtained from the IMS Exponent Database based on prescriptions written per zip
code and the number of target physicians in that zip code. The IMS data will be
obtained by Janssen on a monthly basis and shared with NeoRx so that Janssen and
NeoRx can monitor the performance of NeoRx's sales force against the Total
Prescriptions. On an annual basis (calendar year) NeoRx's performance will be
evaluated and actions taken as follows:
NeoRx Rxs Per Doctor/
Total Rxs Per Doctor % Consequence
[ * ] Acceptable performance.
[ * ] Performance sub par--NeoRx
......... has [ * ] to improve
......... performance to acceptable level. If
......... NeoRx fails, Janssen has the right to
......... terminate upon [ * ]
......... notice.
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NeoRx Rxs Per Doctor/
Total Rxs Per Doctor % Consequence
[ * ] Janssen has the right to terminate
......... upon [ * ] notice given
......... within [ * ] after the end
......... of the calendar year.
More specifically, if NeoRx falls within the [ * ] range during any
calendar year it shall have the next year to improve its performance to [ * ].
If during that next calendar year NeoRx fails to so improve, Janssen shall have
the right to terminate NeoRx's right to Co-Promote that Pre-Targeting Product.
In order to avoid the possibility of NeoRx falling into an unacceptable
performance category of [ * ], Janssen shall report the comparative numbers to
NeoRx on a monthly basis to the extent the numbers are available from IMS. In
addition, upon written request from NeoRx, Janssen will make suggestions to
NeoRx on how to improve its performance.
Except for the remedies provided by Paragraph 6.14, Janssen's sole
remedy for any material nonperformance of NeoRx under this Article VI shall be
termination of NeoRx's right to Co-Promote the Pre-Targeting Product.
6.10 Co-Promotion Is Through Independent Organizations
In implementing the obligations of Co-Promotion hereunder, each Party
shall have sole discretion as to the manner (which shall not be inconsistent
with the U.S. Marketing Plan) in which it promotes and Details (including any
expenditure of funds in connection therewith) the Pre-Targeting Product. Except
as otherwise expressly provided in this Article VI, each Party shall contribute
facilities, supplies, personnel (including management and sales representatives)
and other resources to the other as each Party, in its absolute discretion not
inconsistent with the express terms of this Agreement, believes necessary for
the proper performance of the terms of this Agreement, and each Party shall bear
its own costs, except as payment is provided to NeoRx in Paragraph 6.6, incurred
in the performance of any obligations hereunder.
6.11 Co-Promotion Does Not Affect Certain Responsibilities
Except as expressly otherwise provided in this Agreement, Janssen shall
have the sole right and responsibility, and shall bear all costs related
[ * ] Confidential Treatment Requested
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thereto, to take such actions with respect to each Pre-Targeting Product that is
Co-Promoted hereunder as would normally be taken in accordance with accepted
business practices and legal requirements to manufacture or arrange for the
manufacture of each Pre-Targeting Product and obtain and maintain the
authorization and/or ability to market and commercialize each Pre-Targeting
Product in the United States, including, without limitation, the following:
(a)......Any activity relating to the manufacture of each Pre-Targeting
Product, including, without limitation, determination of the content of labeling
and the style, design and type of packaging;
(b)......Responding to medical complaints and inquiries relating to
each Pre-Targeting Product;
(c)......Handling all returns of each Pre-Targeting Product; and
(d)......Communicating and dealing with any governmental agencies and
satisfying their requirements regarding the authorization and/or continued
authorization to market each Pre-Targeting Product in commercial quantities;
provided, however, that NeoRx shall be able to communicate with such agencies
regarding each Pre-Targeting Product if (i) in the reasonable opinion of NeoRx's
counsel, such communication is necessary to comply with the requirements of any
applicable law, order or governmental regulation and (ii) NeoRx, if practical,
made a request of such agency to communicate with Janssen instead, and such
agency refused such request; but in any such event, unless in the reasonable
opinion of NeoRx's counsel there is a legal prohibition against doing so,
Janssen shall be immediately notified of such agency's request and/or NeoRx's
intention to make such communication and Janssen shall be permitted to accompany
NeoRx to any meeting with such agency, take part in any such communication and
receive copies of all such communications.
6.12 NeoRx Right to Terminate
NeoRx shall have the right to terminate its Co-Promotion of each
Pre-Targeting Product hereunder, and its obligations under this Article VI with
respect to each such Pre-Targeting Product, upon six (6) months' prior notice to
Janssen.
6.13 Trademarks
The Joint Marketing and Sales Committee shall select new trademarks or
the "Avicidin(R)" mark under which the Parties will market each Pre-Targeting
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Product, and no right or license is granted to NeoRx hereunder with respect to
such trademarks. All such trademarks shall be solely owned by Janssen.
6.14 Indemnification for Products
With respect to Pre-Targeting Products covered by this Agreement:
(a)......Janssen shall save, defend and hold NeoRx and its agents,
directors and employees harmless from and against any and all suits, claims,
actions, demands, liabilities, expenses and/or losses, including reasonable
legal expense and attorneys' fees, related to Third Party claims ("Losses")
resulting directly from the manufacture, use, handling, storage, sale or other
disposition of chemical agents or Pre-Targeting Products by Janssen, its
Affiliates, agents or sublicensees, except to the extent such Losses result
directly from the negligence of NeoRx.
(b)......In the event that NeoRx is seeking indemnification under
Paragraph 6.14(a), it shall inform Janssen of a claim as soon as reasonably
practicable after it receives notice of the claim, shall permit Janssen to
assume direction and control of the defense of the claim (including the right to
settle the claim solely for monetary consideration) and shall cooperate as
requested (at the expense of Janssen) in the defense of the claim.
(c)......NeoRx shall save, defend and hold Janssen and its agents,
directors and employees harmless from and against any and all Losses resulting
directly from the manufacture, use, handling, storage, sale or other disposition
of chemical agents or Pre-Targeting Products by NeoRx, its Affiliates, agents or
sublicensees, except to the extent such Losses result directly from the
negligence of Janssen.
(d)......In the event that Janssen is seeking indemnification under
Paragraph 6.14(c), it shall inform NeoRx of a claim as soon as reasonably
practicable after it receives notice of the claim, shall permit NeoRx to assume
direction and control of the defense of the claim (including the right to settle
the claim solely for monetary consideration), and shall cooperate as requested
(at the expense of NeoRx) in the defense of the claim.
6.15 Marketing Liaison
NeoRx shall appoint a "Marketing Liaison" who will take part in all
Pre-Targeting Product marketing discussions and receive all relevant
correspondence, memos and reports. The Marketing Liaison will be responsible for
coordinating NeoRx marketing and sales efforts with those of Janssen for the
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Pre-Targeting Products. The Marketing Liaison will have the right to review all
details of the U.S. Marketing Plans for Pre-Targeting Products and shall have
the opportunity to submit to Janssen written and oral comments on such plans. In
order to perform his/her work effectively, the Marketing Liaison is expected to
spend a reasonable amount of his/her working time at the premises of Janssen.
Janssen will make available to the Marketing Liaison an office and secretarial
services at the relevant site and will provide reasonable access to Janssen's
marketing personnel assigned to work on the Pre-Targeting Product.
6.16 Dispute Resolution
Should the Joint Marketing and Sales Committee disagree on any
substantive issue relating to designating the target audiences for a
Pre-Targeting Product (a "Dispute"), the following procedures shall be employed
to resolve such Dispute:
(a)......Within three (3) business days of determining the existence of
a Dispute, each Party shall prepare a written memo summarizing the Dispute and
stating the Party's position and reasons therefor.
(b)......Copies of each party's memos shall be forwarded to the respec-
tive heads of Janssen U.S. and NeoRx.
(c)......A meeting shall be convened within five (5) business' days of
the receipt of the memos or as soon thereafter as mutually agreed.
(d)......The heads of Janssen and NeoRx shall meet and discuss the
issues relating to the Dispute and use reasonable efforts to resolve the
Dispute. The standard of negotiation shall be one of good faith and fair
dealing.
(e)......If the heads of Janssen and NeoRx cannot resolve the dispute,
Janssen's head shall have the right to make the final determination of the
Dispute.
6.17 Transferability of Co-Promotion Right
Upon a Change in Control (hereinafter defined) involving NeoRx, the
rights and duties set forth in this Article VI are transferable and/or
assignable under the following conditions:
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(a)......NeoRx shall not require the consent of Janssen where the
acquiring party has annual U.S. prescription sales of [ * ]; or
(b)......If the acquiring party has annual U.S. prescription sales [ *
], then Janssen shall have the right to consent to the transfer and/or
assignment of the subject rights. Once Janssen grants such consent in writing,
it cannot be revoked. If Janssen does not consent, the transfer of such rights
to the acquiring party shall not take place upon a Change in Control, but rather
the acquiring party shall not have any Co-Promotion rights.
As used herein, a "Change in Control" means any transaction or series
of related transactions in which a Third Party acquires or becomes the
beneficial owner of (i) [ * ] of the outstanding voting securities of NeoRx or
the surviving entity, whether by merger, consolidation, reorganization, tender
offer or other similar means, or (ii) all or substantially all of the assets of
NeoRx.
VII. MANUFACTURE
7.1 Janssen's Responsibility
Janssen shall be solely responsible for making or having made
Pre-Targeting Products to be sold by Janssen or Co-Promoted by Janssen and NeoRx
under this Agreement.
7.2 Janssen's Obligation
If Janssen terminates this Agreement pursuant to Paragraph 13.4 [ * ],
Janssen shall provide, or make arrangements for its supplier to provide, to
NeoRx its requirements for the next [ * ] of Avicidin. The price for such
material shall be Janssen's Cost of Goods Sold [ * ] for the [ * ], [ * ] for
the [ * ] and [ * ] for the [ * ] or the supplier's charges under its contract
with Janssen, without markup by Janssen.
[ * ] Confidential Treatment Requested
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VIII. PATENTS
8.1 Maintenance of NeoRx Patents
Except as provided in Paragraph 8.5 for patents jointly owned by the
Parties, NeoRx shall continue, at its sole expense, to prosecute all patent
applications for NeoRx Patents listed in Exhibit B and to file and prosecute
NeoRx Patents covering commercially relevant, patentable inventions relating to
NeoRx Pre-Targeting Technology in at least the countries of Canada, Japan, the
EPO and the United States and, with reimbursement from Janssen for all
reasonable costs, to file, prosecute and maintain NeoRx Patents in all other
countries requested by Janssen. Notwithstanding the foregoing, Janssen shall pay
all taxes, maintenance fees and annuities on all NeoRx Patents. If so requested
by Janssen, NeoRx shall promptly provide Janssen with copies of all patent
applications listed in Exhibit B, all future filed NeoRx Patents and all
correspondence with the patent offices in any countries relating thereto on an
on-going basis.
8.2 Failure by NeoRx to Prosecute and/or Maintain
If NeoRx chooses not to prosecute and/or maintain any NeoRx Patents
under Paragraph 8.1, NeoRx shall promptly and timely so notify Janssen, and
Janssen shall, in its sole discretion, decide whether to assume the
responsibility and expenses therefor on a country-by-country basis for each such
NeoRx Patent. In the event Janssen decides to assume such responsibility: (a)
the NeoRx Patent shall be assigned to Janssen (subject to the rights previously
granted therein to Third Parties for other than Pre-Targeting Products); (b) all
royalty obligations with respect to the NeoRx Patent under this Agreement shall
cease; and (c) NeoRx shall have a fully paid-up, royalty-free, worldwide
nonexclusive license to the NeoRx Patent, with the right to sublicense, for
other than Pre-Targeting Products.
8.3 Ownership of Patents
Title to all patents claiming inventions made solely by an employee of
a Party in the course of performing Development shall be owned by such Party.
Title to all other patents claiming inventions made jointly by employees of
Janssen and NeoRx shall be jointly owned by Janssen and NeoRx. The laws of the
United States with respect to joint ownership of inventions shall apply in all
jurisdictions; accordingly, except as expressly provided in this Agreement,
neither Party shall have any obligation to account to the other for profits, or
to obtain any approval of the other party to license or exploit a jointly owned
patent, by reason of joint ownership thereof.
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8.4 Disclosure of Patentable Inventions
Each Party shall provide to the other any invention disclosure
submitted to it in the normal course and disclosing a patentable invention,
which is at a stage reasonably suitable to begin the preparation of a patent
application thereto, arising in the course of the Development. Such invention
disclosures shall be provided to the other Party promptly after submission, or,
in the case where no invention disclosure is made, any patent application shall
be provided promptly after it is initially drafted.
8.5 Jointly Owned Patent Filings
The filing and prosecution of jointly owned patents shall be only as
mutually agreed by Janssen and NeoRx. In such connection, the Parties agree to
cooperate in good faith to obtain broad patent protection.
Janssen shall be responsible at the expense of Janssen for drafting,
filing, prosecuting, maintaining and defending any jointly owned patents
relating primarily to the Pre-Targeting Product. Janssen shall keep NeoRx
apprised of the status of each such jointly owned patent. If, during the term of
this Agreement, Janssen intends to allow any jointly owned patent to lapse or
become abandoned without having first filed a substitute, Janssen shall promptly
notify NeoRx of such intention, and, if practical, at least sixty (60) days
prior to the date upon which such patent shall lapse or become abandoned, and
NeoRx shall thereupon have the right, but not the obligation, to assume
responsibility for the prosecution, maintenance and defense thereof in its sole
name and at its own expense. In the event NeoRx assumes such responsibility, the
patent or patent application shall be assigned to NeoRx and excluded from the
definition of NeoRx Patents.
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8.6 Parties' Cooperation in Obtaining Patent Extensions
The Parties shall cooperate in order to avoid loss of any rights that
may otherwise be available to the Parties under the U.S. Drug Price Competition
and Patent Term Restoration Act of 1984, the Supplementary Certificate of
Protection of the Member States of the European Union and other similar measures
in any other country. Without limiting the foregoing, Janssen shall notify NeoRx
promptly upon receipt of a BLA approval to market licensed Pre-Targeting
Products in the United States and timely supply NeoRx with all information
necessary to file an application for patent term extension in connection with
any relevant NeoRx Patent within the sixty (60) day period following BLA
approval. The same cooperation and obligations shall apply with respect to
patent term extensions in any other country.
IX. INFRINGEMENT
9.1 Infringement of Third Party Patents
If, as a result of the manufacture, use or sale of a Pre-Targeting
Product in any country, Janssen and/or its Affiliate is sued for patent
infringement or threatened with such a lawsuit or other action by a Third Party
(other than with respect to Third Party Patents), Janssen shall be solely
responsible for defending against any such assertions at its cost and expense.
9.2 Infringement by Third Parties of NeoRx Patents
Except as provided in Paragraph 9.3 for patents jointly owned by the
Parties, in the event that there is an infringement of a NeoRx Patent on a
commercial scale by a Third Party involving a Pre-Targeting Product, Janssen or
its Affiliates shall notify NeoRx in writing to that effect, including with said
written notice evidence establishing a case of infringement by such Third Party.
NeoRx shall have the first right to bring an infringement suit against the Third
Party and shall bear all the expenses of any suit brought by it. Janssen and/or
its Affiliates will cooperate with NeoRx in any such suit and shall have the
right to consult with NeoRx and be represented by its own counsel at its own
expense. If, after the expiration of one hundred twenty (120) days from the date
of receipt of notice of infringement from Janssen or its Affiliate, NeoRx has
not overcome the case of infringement, obtained a discontinuance of such
infringement or brought suit against the Third Party infringer, then Janssen
shall have the right, in its sole discretion, but not the obligation, to bring
such suit at its own expense and in its own name, if possible, for such
infringement. If necessary, NeoRx will permit the suit to be brought in its
name. Janssen shall bear all the expenses of any suit brought by it. NeoRx will
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cooperate with Janssen in any such suit and shall have the right to consult with
Janssen and be represented by its own counsel at its own expense. All monies
recovered by either Party from a final judgment or settlement of any
infringement suit shall, after reimbursement of the expenses of the Party
bringing such suit, be shared as follows: [ * ] to Janssen and [ * ] to NeoRx.
9.3 Infringement by Third Parties of Jointly Owned Patents
In the event there is infringement of a jointly owned patent on a
commercial scale by a Third Party in the Field, Janssen or its Affiliates shall
notify NeoRx of such infringement and shall have the first right, but not the
obligation, to bring an infringement suit against such Third Party. If an
infringement suit is not brought within one hundred twenty (120) days, NeoRx
shall have the right, but not the obligation, to bring such an infringement
suit. The Parties will cooperate in any such suit and shall have the right to
consult with the other party and be represented by its own counsel at its own
expense. If necessary, the other party will permit the suit to be brought in its
name. All monies recovered by a Party in a final judgment or settlement of such
infringement suit shall, after reimbursement of the expenses of Janssen in
bringing such suit, be shared as follows: [ * ] to the Party bringing the suit
and [ * ] to the other Party.
X. TRADEMARKS AND CORPORATE NAME
All trademarks (except the "NeoRx" mark) to be utilized by Janssen
and/or its Affiliates on Pre-Targeting Products under this Agreement shall be
owned by Janssen and/or its Affiliates. Except to the extent prohibited by
applicable law, Pre-Targeting Products covered by this Agreement shall bear
NeoRx's corporate name in a reasonable location on outer packaging labels and on
any package inserts. Janssen shall mention, in certain appropriate forms of its
advertising and promotional literature, NeoRx's contribution to the development
of each Pre-Targeting Product to the extent permitted by applicable law. The
first use of any such reference shall require NeoRx's approval, which shall not
be unreasonably withheld.
[ * ] Confidential Treatment Requested
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XI. CONFIDENTIALITY
11.1 Confidentiality; Exceptions
Except to the extent expressly authorized by this Agreement or
otherwise agreed in writing, the Parties agree that, for the term of this
Agreement and for five (5) years thereafter, the receiving Party shall keep
confidential and shall not publish or otherwise disclose or use for any purpose
other than as provided for in this Agreement any Information, and other
confidential and proprietary information and materials, disclosed or otherwise
furnished to it by the other Party pursuant to this Agreement (collectively,
"Confidential Information"), except to the extent that it can be established by
the receiving Party that such Confidential Information:
(a)......was in the lawful knowledge and possession of, or was
independently developed by, the receiving Party prior to the time it was
disclosed to, or learned by, the receiving Party as evidenced by written records
kept in the ordinary course of business or other documentary proof of actual use
by the receiving Party;
(b)......was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving Party;
(c)......became generally available to the public or otherwise part of
the public domain after its disclosure and other than through any act or
omission of the receiving Party in breach of this Agreement; or
(d)......was disclosed to the receiving Party, other than under an
obligation of confidentiality, by a Third Party who had no obligation not to
disclose such Confidential Information to others.
11.2 Authorized Disclosure
Each Party may disclose Confidential Information of the other Party as
follows: (a) to Third Parties under appropriate terms and conditions including
confidentiality provisions substantially equivalent to those in this Agreement
for consulting, manufacturing, development, external testing and marketing
trials with respect to the products covered by this Agreement or (b) to the
extent such disclosure is reasonably necessary in filing or prosecuting patent,
copyright and trademark applications, prosecuting or defending litigation,
complying with applicable governmental regulations, obtaining Regulatory
Approvals, conducting preclinical or clinical trials, or marketing products;
provided, however, that if a Party is required by law or regulation to make any
such disclosure of the other Party's Confidential Information it will, except
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where impracticable for necessary disclosures (for example, in the event of
medical emergency), give reasonable advance notice to the other Party of such
disclosure requirement and will, except to the extent inappropriate in the case
of patent applications, use its reasonable efforts to secure confidential
treatment of such Confidential Information required to be disclosed. Nothing in
this Article XI shall restrict any Party from using for any purpose any
Information developed by it during the course of this Agreement.
11.3 Survival
This Article XI shall survive the termination or expiration of this
Agreement for a period of five (5) years.
XII. REPRESENTATIONS AND WARRANTIES; PERFORMANCE
12.1 Representations and Warranties
Each Party hereby represents and warrants and covenants as follows:
(a)......This Agreement is a legal and valid obligation binding upon
such Party and enforceable in accordance with its terms. The execution, delivery
and performance of this Agreement by such Party do not conflict with any
agreement, instrument or understanding, oral or written, to which it is a Party
or by which it is bound, or violate any law or regulation of any court,
governmental body or administrative or other agency having jurisdiction over it.
(b)......Each party has not granted, and during the term of this
Agreement will not grant, any right to any Third Party relating to its
respective technology in the Field (excluding the Crossover Field with respect
to NeoRx) that would conflict with the rights granted to the other Party
hereunder, except, in the case of NeoRx, the rights granted under the contract
described in Paragraph 1.27(b).
(c)......Each Party owns or Controls its respective know-how.
12.2 Disclaimer
EXCEPT AS SET FORTH IN THIS AGREEMENT, NEORX MAKES NO OTHER
REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE NEORX PRE-TARGETING
TECHNOLOGY, NEORX PATENTS AND NEORX KNOW-HOW, EXPRESS OR IMPLIED, INCLUDING
WARRANTIES, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, PATENTABILITY AND
NONINFRINGEMENT.
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12.3 Performance by Affiliates
The Parties recognize that each may perform some or all of its
obligations under this Agreement through Affiliates; provided, however, that
each Party shall remain responsible and be guarantor of the performance by its
Affiliates and shall cause its Affiliates to comply with the provisions of this
Agreement in connection with such performance.
XIII. TERM AND TERMINATION
13.1 Term
This Agreement shall commence as of the Effective Date and, unless
sooner terminated as provided herein, shall continue in effect until the date on
which NeoRx is no longer entitled to receive a royalty on any Pre-Targeting
Product under this Agreement. After expiration (but not termination), Janssen
and its Affiliates shall have a fully paid-up (except for payments to Third
Parties), irrevocable, nonexclusive license to sell, have sold, distribute, use,
make and have made Pre-Targeting Products licensed hereunder.
13.2 Termination for Breach
In the event that (a) either Party shall commit a material breach at
any time and (b) such defaulting Party shall fail to remedy such material breach
within sixty (60) days after the date of notice thereof by the nondefaulting
Party to the defaulting Party (or, if such material breach cannot be remedied
within sixty (60) days, such longer period of time as may be reasonably
necessary; provided, however, that the defaulting Party commences to remedy such
material breach within such sixty (60) day period and thereafter proceeds
promptly and diligently to complete such remedy), then the nondefaulting Party
may at any time thereafter terminate this Agreement.
13.3 Termination for Bankruptcy
Either Party hereto shall have the right to terminate this Agreement
forthwith by written notice to the other Party (a) if the other Party is
declared insolvent or bankrupt by a court of competent jurisdiction, (b) if a
voluntary or involuntary petition in bankruptcy is filed in any court of
competent jurisdiction against the other Party and such petition remains
undismissed, undischarged or unbonded for a period of ninety (90) days after the
filing thereof, or (c) if the other Party shall make or execute an assignment
for the benefit of creditors generally.
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13.4 Janssen's Termination Without Cause
Janssen may not terminate this Agreement, other than pursuant to
Paragraph 13.2 or 13.3, during the period beginning on the Effective Date and
ending twelve (12) months thereafter, except in the following situations:
(a)......There is a Change in Control as described in Paragraph 6.17 or
(b)......A patent of a Third Party (other than a Third Party Patent) is
uncovered containing a Valid Claim that would be infringed if the Pre-Targeting
Product in Development is sold.
Notice of termination under either clause (a) or (b) shall be given at
least one (1) month in advance. At any time after the twelve (12) month period,
however, Janssen may terminate this Agreement upon ninety (90) days' prior
notice for any reason.
13.5 Rights and Obligations Upon Termination Under Paragraph 13.2 or 13.3 by
NeoRx or Under Paragraph 13.4 by Janssen
In the event this Agreement is terminated by Janssen pursuant to
Paragraph 13.4 or by NeoRx pursuant to Paragraph 13.2 or 13.3, Janssen agrees:
(a)......To return to NeoRx any NeoRx Know-How in its possession;
(b)......Not to use the NeoRx Know-How as long as it has to be kept
confidential pursuant to Article XI;
(c)......That its licenses and rights under the NeoRx Patents are
terminated;
(d)......To transfer, at NeoRx's written request, all Janssen
Information useful for or related to Pre-Targeting Products that were being
Developed hereunder and all Drug Approval Applications and Regulatory Approvals
for use by NeoRx or its designee; and
(e)......To the extent requested by NeoRx, transfer to NeoRx
responsibility for ongoing Development, including contracts with Third Parties
for such work with costs for such on-going (but not past) Development assumed by
NeoRx as of the effective date of termination.
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13.6 Survival
Any accrued obligations and the provisions of Articles XIV, XV and XVII
and Paragraphs 3.6 (with respect to NeoRx's sublicense and right to take over as
a direct license in the last sentence), 4.15, 4.16, 6.14, 7.2, 8.2(c), 13.5 and
21.9 shall survive expiration or termination of this Agreement.
13.7 Accrued Rights, Surviving Obligations
Termination, relinquishment or expiration of this Agreement for any
reason shall be without prejudice to any rights that shall have accrued to the
benefit of either Party prior to such termination, relinquishment or expiration,
including, but not limited to, the payment obligations under Paragraphs 4.1-4.4
and 4.6 and any and all damages arising from any breach hereunder.
13.8 Termination Not Sole Remedy
Termination is not the sole remedy under this Agreement and, whether or
not termination is effected, all other remedies will remain available except as
agreed to otherwise herein.
XIV. INDEMNIFICATION
14.1 Research and Development Indemnification
Each Party (the "Indemnifying Party") shall indemnify, defend and hold
the other Party (the "Indemnified Party") harmless from and against any and all
liabilities, claims, damages, costs, expenses or money judgments incurred by or
rendered against the Indemnified Party and its Affiliates and sublicensees
incurred in the defense or settlement of a Third Party lawsuit or in a
satisfaction of a Third Party judgment arising out of any injuries to persons
and/or damage to property resulting from negligent acts of the Indemnifying
Party performed in carrying out the development program hereunder, including
failure by the Indemnifying Party to provide the Indemnified Party with any
Information of the Indemnifying Party that, if timely received, would have
avoided injury, death or damage; provided, however, that such failure to provide
such Information is due to negligence on the part of the Indemnifying Party.
14.2 Janssen Indemnification
In addition to its obligations in Paragraph 14.1, Janssen shall
indemnify and hold NeoRx harmless from and against any and all liabilities,
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claims, damages, costs, expenses or money judgments that result from the
Development, manufacture, promotion, sale or use of any and all Pre-Targeting
Products under this Agreement.
14.3 Notification
The Indemnified Party shall promptly notify the Indemnifying Party in
writing of any such liability, claim, damage, costs, expenses or money
judgments, and the Indemnifying Party, upon written request by the Indemnified
Party, shall promptly defend or settle such at the Indemnifying Party's expense.
XV. DISPUTE RESOLUTION
15.1 Alternative Dispute Resolution
Any dispute, controversy or claim arising out of or relating to the
validity, construction, enforceability or performance of this Agreement,
including disputes relating to the alleged breach or to termination of this
Agreement, shall be settled by binding Alternative Dispute Resolution ("ADR") in
the manner described below:
(a)......If a Party intends to begin an ADR to resolve a dispute, such
Party shall provide written notice (the "ADR Request") to the other Party
informing such other Party of such intention and the issues to be resolved.
(b)......Within fourteen (14) days after the receipt of the ADR
Request, the other Party may, by written notice to the Party initiating ADR, add
additional issues to be resolved.
15.2 Arbitration Procedure
The ADR shall be conducted pursuant to the International Arbitration
Rules of the American Arbitration Association then in effect. Notwithstanding
those rules, the following provisions shall apply to the ADR hereunder.
(a) Arbitrator
The ADR shall be conducted by a panel of three (3) arbitrators (the
"Panel"). Each Party shall have the right to appoint one member of the Panel,
with the third member to be mutually agreed upon by the two (2) Panel members
appointed by the Parties or appointed in accordance with the rules of the
American Arbitration Association. All Panel members shall be selected from the
CPR Panel of Distinguished Neutrals of the CPR Institute of Distinguished
Neutrals. Each Party shall make its appointment within twenty (20) days of
receipt of the ADR Request and the Third Panel member shall be selected by the
two (2) Panel members within ten (10) days of the selection of the first two (2)
Panel members.
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(b) Proceedings
The Parties will cooperate in good faith in the voluntary, prompt and
informal exchange of documents and other information relevant to the ADR. The
Parties and the Panel will make every effort to conclude the information
exchange process within ninety (90) days after the Panel is selected. Within
seven (7) days after selection of the Panel, each Party may serve on any other
Party up to ten (10) interrogatories, without subparts, for the purpose of
identifying documents and witnesses. These interrogatories will be answered
within seven (7) days.
At any time after the selection of the Panel, but no later than thirty
(30) days before the ADR hearing, each Party may take up to three (3)
depositions of an opposing Party as a matter of right. The Parties will attempt
to agree to time, location and duration of the deposition, and, if the Parties
do not agree, these will be determined by the Panel.
Any Party may conduct depositions of its own witnesses that may be
introduced as evidence at the ADR hearing if the other Party was given fair
opportunity to attend the deposition and cross-examine. Upon the request of any
Party, the Panel will conduct a conference for the purpose of determining
additional information to be exchanged. Parties may request additional
depositions, interrogatories or document production. If the Panel determines
that the requesting Party has a reasonable need for the requested information
and that the request is not overly burdensome on the opposing Party, the Panel
may order the additional information exchange.
As they become aware of new documents or information, including experts
who may be called upon to testify, all Parties remain under a continuing
obligation to provide documents upon which they rely, to supplement their
responses and to honor any informal agreements or understandings between the
Parties regarding documents or information to be exchanged. Documents that have
not been previously exchanged will not be considered by the Panel at the
hearing, unless agreed by the Parties.
The Parties will promptly notify the Panel when an unresolved dispute
exists regarding discovery issues. The Panel will discuss the matter with the
Parties to determine the nature of the dispute and will attempt to resolve that
dispute. If the Panel does not resolve the dispute, the Panel will arrange a
conference concerning the dispute before the Panel by telephone, or in person,
and the Panel will decide the dispute.
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The Panel will determine the location, date and time of the ADR hearing
and other proceedings after consultation with the Parties and will provide
reasonable notice of the hearing date and time. The Panel will make every effort
to schedule the ADR hearing within one hundred twenty (120) days of the
commencement of ADR, absent unusual circumstances.
The Parties may agree on or the Panel for good cause may order a
rescheduling of the hearing date.
The Panel will ordinarily conduct the ADR hearing in the manner set
forth herein. The Panel may vary these procedures if the Panel determines it is
reasonable and appropriate to do so. The Panel may impose reasonable time limits
on each phase of the proceeding and may limit testimony to exclude evidence that
would be immaterial or unduly repetitive; provided, however, that all Parties
are afforded the opportunity to present material and relevant evidence.
The Panel will require witnesses to testify under oath if requested by
any Party.
The Panel will determine the order of proof, which will generally be
similar to that of a court trial, including opening and closing statements.
When the Panel determines that all relevant and material evidence and
arguments have been presented, the Panel will declare the hearing closed. The
Panel may defer the closing of the hearing for up to twenty (20) days to permit
the Parties to submit post-hearing briefs and/or to make closing arguments, as
the Panel deems appropriate, before rendering an award.
The Panel will render the award within ten (10) days after the date of
the closing of the hearing or, if an ADR hearing has been waived, within ten
(10) days after the date of the Panel's receiving all materials specified by the
parties. The decision and award of a majority of the Panel will constitute the
ADR award and will be binding on the Parties.
The Panel shall, in rendering its decision, apply the substantive law
of the State of Illinois U.S.A., without regard to its conflict of laws
provisions, except that the interpretation and enforcement of this Article XV
shall be governed by the Federal Arbitration Act. The proceeding shall take
place in the City of Chicago, Illinois, U.S.A., or such other place as may be
mutually agreed upon by the Parties. The fees of the Panel shall be paid by the
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losing Party, which shall be designated by the Panel. If the Panel is unable to
designate a losing Party, it shall so state and the fees shall be split equally
between the Parties.
(c) Award
The Panel is empowered to award any remedy allowed by law, including
money damages, prejudgment interest and attorneys' fees and expenses, and to
grant final, complete, interim or interlocutory relief, including injunctive
relief. Notwithstanding the foregoing, punitive damages may not be awarded.
(d) Costs
Except as set forth in Paragraph 15.2(b), each Party shall bear its own
legal fees.
(e) Confidentiality
The ADR proceeding shall be confidential and the Panel shall issue
appropriate protective orders to safeguard each Party's Confidential
Information. Except as required by law, no Party shall make (or instruct the
Panel to make) any public announcement with respect to the ADR proceedings or
the decision of the Panel without the prior written consent of the other Party.
The existence of any dispute submitted to ADR, and the award, shall be kept in
confidence by the Parties and the Panel, except as required in connection with
the enforcement of such award or as otherwise required by applicable law.
15.3 Survivability
Any duty to arbitrate under this Agreement shall remain in effect and
enforceable after termination of this Agreement for any reason.
15.4 Jurisdiction
For the purposes of this Article XV, the Parties acknowledge their
diversity (NeoRx having its principal place of business in Seattle, Washington,
U.S.A., and Janssen Pharmaceutica, N.V. having its principal place of business
in Beerse, Belgium) and agree to accept the exclusive jurisdiction of the
Federal District Court in Chicago, Illinois, U.S.A., and any courts of appeal
therefrom for the purposes of enforcing awards entered pursuant to this Article
XV and for enforcing the agreements reflected in this Article XV.
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XVI. LICENSOR BANKRUPTCY
All rights and licenses granted under or pursuant to this Agreement by
NeoRx to Janssen are, and shall otherwise be deemed to be, for purposes of
Section 365(n) of Title 11, U.S. Code (the "Bankruptcy Code"), licenses of
rights to "intellectual property" as defined under Section 101(60) of the
Bankruptcy Code. The Parties agree that Janssen, as a licensee of such rights
under this Agreement, shall retain and may fully exercise all of its rights and
elections under the Bankruptcy Code. NeoRx agrees during the term of this
Agreement to create and maintain current copies or, if not amenable to copying,
detailed descriptions or other appropriate embodiments of all such intellectual
property licensed hereunder. The Parties further agree that, in the event of the
commencement of a bankruptcy proceeding by or against NeoRx under the Bankruptcy
Code, Janssen shall be entitled to a complete duplicate of (or complete access
to, as appropriate) any such intellectual property and all embodiments of such
intellectual property, and the same, if not already in its possession, shall be
promptly delivered to Janssen, upon written request therefor by Janssen, (a)
upon any such commencement of a bankruptcy proceeding, unless NeoRx elects to
continue to perform all of its obligations under this Agreement, or (b) if not
delivered under clause (a) above, upon the rejection of this Agreement by or on
behalf of NeoRx.
XVII. NOTICES
Any payment, notice or other communication required or permitted to be
made or given to either Party hereto pursuant to this Agreement shall be in
writing in case of a notice or communication and shall be deemed given if
delivered by hand or by facsimile transmission (receipt verified), telexed,
received by registered or certified mail (return receipt requested), postage
prepaid, or sent by overnight or express courier service, to the Parties at the
following addresses (or at such other address for a Party as shall be specified
by like notice; provided, however, that notices of a change of address shall be
effective only upon receipt thereof):
In the case of NeoRx:
NeoRx Corporation
410 West Harrison Street
Seattle, Washington 98119-4004, U.S.A.
Attention: President
Telephone: (206) 281-7001
Telecopy: (206) 284-7112
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With a copy to:
Perkins Coie
1201 Third Avenue, 40th Floor
Seattle, WA 98101-3099, U.S.A.
Attention: James R. Lisbakken
Telephone: (206) 583-8888
Telecopy: (206) 583-8500
In case of Janssen:
Janssen Pharmaceutica, N.V.
Turnhoutseweg 30
2340 Beerse, Belgium
Attention: President, Janssen Research Foundation
Telephone: 32 14 60 2613
Telecopy: 32 14 60 2111
With a copy to:
Office of General Counsel
Johnson and Johnson
One Johnson and Johnson Plaza
New Brunswick, New Jersey 08933, U.S.A.
Telephone: (908) 524-2485
Telecopy: (908) 524-2788
XVIII. PUBLICITY
18.1 Publicity
In the absence of specific agreement between the Parties, neither Party
shall, without the prior written consent of the other Party (which consent shall
not be unreasonably withheld or delayed), originate any publicity, news release
or public announcement, written or oral, whether to the public or press,
relating to this Agreement, including its existence, the subject matter to which
it relates, performance under it or any of its terms or to any amendment hereto,
except only such announcement as in the opinion of counsel for the Party making
such announcement is required by law to be made. Any such announcements shall be
factual. If a Party decides to make an announcement required by law, it will
give the other Party five (5) business days' advance written notice, where
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possible, of the text of the announcement so that the other Party will have an
opportunity to comment on the announcement. To the extent that the receiving
Party requests that any information in the materials proposed to be disclosed be
deleted, the disclosing Party shall request confidential treatment of such
information pursuant to any applicable rules or regulations (including those of
the Securities and Exchange Commission) relating to the confidential treatment
of such information so that there is omitted from the materials that are
proposed to be disclosed any information that the receiving Party reasonably
requests to be deleted. The Parties shall mutually agree upon a press release to
be made on or promptly after the Effective Date.
18.2 Scientific Publications
Except for materials submitted prior to the Effective Date by NeoRx for
publication or scientific meetings scheduled prior to the Effective Date, each
Party shall submit any other proposed publication containing Confidential
Information to the other Party at least thirty (30) days in advance to allow
that Party to review such planned public disclosure. The reviewing party will
promptly review such proposed publication and make any objections that it may
have to the publication of the Confidential Information contained therein.
Should the reviewing Party make an objection to the publication of the
Confidential Information, then the Parties shall discuss the advantages and
disadvantages of publishing such Confidential Information. If the Parties are
unable to agree on whether to publish the same, the Vice President, Drug
Discovery of Janssen Research Foundation, and NeoRx's Vice President of Research
shall discuss the advantages and disadvantages of publishing such, with the Vice
President, Drug Discovery of Janssen Research Foundation having the final say.
XIX. FORCE MAJEURE
Neither Party hereto shall be liable to the other Party for any losses
or damages attributable to a material breach or other default in or breach of
this Agreement that is the result of war (whether declared or undeclared), acts
of God, revolution, strike, fire, earthquake, flood, pestilence, riot, enactment
or change of laws and regulations, accident(s), labor trouble, or shortage of or
inability to obtain material, equipment or transport or any other cause beyond
the reasonable control of the Party, and the performance of obligations
hereunder shall be suspended during, but no longer than, the existence of such
cause.
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XX. INTEGRATION
It is the mutual desire and intent of the Parties to provide certainty
as to their future rights and remedies against each other by defining the extent
of their mutual undertakings as provided herein. The Parties have in this
Agreement incorporated all representations, warranties, covenants, commitments,
and understandings on which they have relied in entering into this Agreement,
and, except as provided for herein, neither Party has made any covenant,
agreement or other commitment to them concerning its future action. Accordingly,
this Agreement, all Exhibits attached hereto and all documents delivered
concurrently herewith or referenced herein (a) constitute the entire agreement
and understanding between the Parties with respect to the matters contained
herein, and there are no promises, representations, warranties, conditions,
provisions or terms related thereto other than those set forth in this
Agreement, and (b) supersede all previous understandings, agreements,
representations and warranties by or between the Parties, written or oral,
relating to the subject matter hereof.
XXI. MISCELLANEOUS
21.1 Amendments
This Agreement will not be binding upon the Parties until it has been
signed herein below by or on behalf of each Party, in which event it shall be
effective as of the Effective Date. No amendment or modification hereof shall be
valid or binding upon the Parties unless made in writing and duly executed by or
on behalf of all Parties hereto.
21.2 Laws
All matters affecting the interpretation, validity and performance of
this Agreement shall be governed by the internal laws of the State of Illinois,
U.S.A. without regard to its conflict of law principles, except as otherwise
expressly provided herein.
21.3 Severability
Any provision hereof that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
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21.4 Headings
The headings of the several sections are inserted for convenience of
reference only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
21.5 Waiver
No failure or delay by any Party to insist on the strict performance of
any term, condition, covenant or agreement of this Agreement, or to exercise any
right, power or remedy hereunder or consequent upon a breach hereof, shall
constitute a waiver of any such term, condition, covenant, agreement, right,
power or remedy of any such breach or preclude such Party from exercising any
such right, power or remedy at any later time or times.
21.6 Representations
Each of the Parties hereto acknowledges and agrees that (a) no
representation or promise not expressly contained in this Agreement has been
made by the other Party hereto or by any of its agents, employees,
representatives or attorneys, (b) this Agreement is not being entered into on
the basis of, or in reliance on, any promise or representation, express or
implied, covering the subject matter hereof, other than those that are set forth
expressly in this Agreement, and (c) each Party has had the opportunity to be
represented by counsel of its own choice in this matter, including the
negotiations that preceded the execution of this Agreement.
21.7 Compliance With Laws
The Parties shall comply with all applicable laws, rules, regulations
and orders of the United States and all jurisdictions and any agency or court
thereof in connection with this Agreement and the transactions contemplated
thereby.
21.8 Relationship of Parties
Nothing herein shall be construed to create any relationship of
employer and employee, agent and principal, partnership or joint venture between
the Parties. Each Party is an independent contractor. Neither Party shall
assume, either directly or indirectly, any liability of or for the other Party.
Neither Party shall have the authority to bind or obligate the other Party and
neither Party shall represent that it has such authority.
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21.9 Interest
Any past due payments under this Agreement shall accrue and be payable
with interest at the "prime rate" of interest quoted by The Wall Street Journal
(or if not published, another appropriate publication) for the last business day
of each month plus [ * ] or the maximum rate permitted by applicable law,
whichever is less.
21.10 Counterparts
This Agreement may be executed in counterparts, any one of which need
not contain the signatures of more than one Party, but all of which, taken
together, shall constitute one and the same agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement in
duplicate originals by their proper officers as of the date and year first above
written.
JANSSEN PHARMACEUTICA, N.V.
By /s/ Staf VanReet
-----------------------------------
Title: Managing Officer
Date: August 8, 1997
By
-----------------------------------
Title:
-----------------------------------
NEORX CORPORATION
By /s/ Paul G. Abrams
-----------------------------------
Title: President and CEO
[ * ] Confidential Treatment Requested
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EXHIBIT A
COST OF GOODS SOLD
[ * ]
A-1
[ * ] Confidential Treatment Requested
<PAGE>
EXHIBIT B
NEORX PATENTS
[ * ]
B-1
[ * ] Confidential Treatment Requested
<PAGE>
EXHIBIT C
NEORX COST CATEGORIES
[ * ]
[ * ] Confidential Treatment Requested
C-1
<PAGE>
EXHIBIT D
12/4/96 Letter from P. Verheyen
[ * ]
[ * ] Confidential Treatment Requested
D-1
EXHIBIT 10.2
TO
NeoRx Corporation's
Report on Form 8-K
Dated
October 7, 1997
<PAGE>
PREFERRED STOCK PURCHASE AGREEMENT
This PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of
August 8, 1997, is entered into by and between NEORX CORPORATION, a Washington
corporation (the "Company"), and JOHNSON & JOHNSON DEVELOPMENT CORPORATION, a
New Jersey corporation (the "Investor").
RECITAL
The Investor desires to purchase from the Company, and the Company
desires to sell to the Investor, shares of the Company's Series 4 Convertible
Preferred Stock, $.02 par value (the "Preferred Stock"), upon the terms and
conditions set forth herein and in connection with the execution of a separate
License and Development Agreement between Janssen Pharmaceutica N.V. ("Janssen")
and the Company, dated as of even date herewith (the "License Agreement").
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto agree as follows:
1. Purchase and Sale
Upon the terms and subject to the conditions of this Agreement, the
Investor hereby agrees to purchase from the Company for the aggregate purchase
price of Five Million U.S. Dollars (US $5,000,000) (the "Purchase Price"), and
the Company hereby agrees to issue, sell and deliver to the Investor in exchange
for the Purchase Price, one thousand (1,000) shares of Preferred Stock (the
"Shares"), which amount has been determined by dividing (a) the Purchase Price
by (b) $5,000 per share.
The Investor shall pay the Purchase Price to the Company by bank wire
transfer to the account designated by the Company, such payment to be received
by the date of this Agreement. On the date of this Agreement after receipt of
the Purchase Price, the Company shall (a) deliver to the Investor, or instruct
its transfer agent to deliver to the Investor, a certificate, registered in the
Investor's name, representing the Shares, and (b) cause its outside counsel to
deliver an opinion to the Investor, dated as of the date of this Agreement,
substantially to the effect of Exhibit A hereto.
<PAGE>
2. Representations and Warranties of the Investor Regarding the Shares
The Investor hereby represents and warrants to the Company as of the
date of this Agreement as follows:
2.1 High Degree of Risk
There can be no assurance that the Company will be able to obtain its
projected goals, and the Company will need significant additional capital to be
successful, which capital may not be readily available when and as needed.
2.2 Professional Advice
The Investor has obtained, to the extent it deems necessary, its own
professional advice with respect to the risks inherent in the investment in the
Shares, the condition of the Company and the suitability of the investment in
the Shares in light of the Investor's financial condition and investment needs.
2.3 Sophistication
The Investor, either alone or with the assistance of its professional
advisors, has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of the prospective
investment in the Shares.
2.4 Suitability
The Investor has adequate net worth and means for providing for its
current financial needs and contingencies and has no need for liquidity of
investment with respect to the Shares. The Investor's overall commitment to
investments that are illiquid or not readily marketable is not disproportionate
to its net worth, and investment in the Shares will not cause such overall
commitment to become excessive.
2.5 Access to Information
The Investor has been given access to all information requested by it
regarding the Company, including, in particular, the current financial condition
of the Company and the risks associated therewith, and has utilized such access
to its satisfaction for the purpose of obtaining information about the Company
and the Investor has either attended or been given a reasonable opportunity to
attend a meeting with representatives of the Company for the purpose of asking
questions of, and receiving answers from, such representatives concerning the
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terms and conditions of the offering of the Shares and to obtain any additional
information, to the extent reasonably available, necessary to verify the
accuracy of information provided about the Company.
2.6 Purchase Entirely for Own Account
The Shares will be acquired for investment for the Investor's own
account, not as a nominee or agent, and not with a view to the distribution of
any part thereof. The Investor has no present intention of selling, granting any
participation in or otherwise distributing the same in a manner contrary to the
Securities Act of 1933, as amended (the "Act"), or any applicable state or
foreign securities or Blue Sky laws, and has no agreement or arrangement with
any person to sell, transfer or grant participations to such person or to any
third person with respect to any of the Shares.
2.7 Due Diligence
The Investor has been solely responsible for its own due diligence
investigation of the Company and the Company's business, and its own analysis of
the merits and risks of the investment made pursuant to this Agreement, and is
not relying on anyone else's analysis or investigation of the Company, its
business or the merits and risks of the Shares other than professionals employed
specifically by the Investor to assist the Investor. In taking any action or
performing any role relative to the arranging of the investment being made
pursuant to this Agreement, the Investor has acted solely in its own interest
and not in the interest of any other person, and no other person has acted as an
agent or fiduciary for the Investor.
2.8 Restricted Securities
The Investor realizes that the sale of the Shares hereunder has not
been registered under the Act, that the Shares are characterized under the Act
as "restricted securities," and, therefore, that the Shares cannot be sold or
transferred unless they are subsequently registered under the Act or unless an
exemption from such registration is available. The Investor's financial
condition is such that it is not likely to need to dispose of any of the Shares
in the foreseeable future. In this connection, the Investor represents that it
is familiar with Rule 144 of the Securities and Exchange Commission (the "SEC"),
as presently in effect, and understands the resale limitations imposed thereby
and by the Act.
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2.9 Exemption Reliance
The Investor has been advised that the Shares are not being registered
under the Act or the applicable state securities laws, but are being offered and
sold pursuant to exemptions from such laws, and that the Company's reliance upon
such exemptions is predicated in part on the Investor's representations
contained herein. The Investor represents that it has not been organized for the
specific purpose of investing in the Shares.
2.10 Further Limitations on Disposition
(a)Without in any way limiting the representations set forth above, the Investor
further agrees not to make any disposition of all or any portion of the Shares,
the shares of the Company's common stock that would be issuable to the Investor
upon conversion of the Shares (the "Conversion Shares" and, together with the
Shares, the "Securities"), unless and until
(i) there is then in effect a registration statement under
the Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(ii) (A) if there is no registration statement under the Act
covering the proposed disposition, the Investor shall have notified the Company
of the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition at least 30
days prior to said disposition and (B) if reasonably requested by the Company,
the Investor shall have furnished the Company with an opinion of counsel (which
opinion may be delivered by the Investor's in-house counsel), reasonably
satisfactory to the Company, that such disposition will not require registration
of such Securities under the Act; or
(iii) the Company shall have been satisfied that such proposed
disposition complies in all respects with SEC Rule 144 or any successor rule
providing a safe harbor for such disposition without registration.
(b) In addition to the foregoing provisions of subsection (a) of this
Section 2.10, if there is then in effect a registration statement under the Act
covering a proposed disposition of any or all of the Securities by the Investor,
then in order to preserve an orderly market for the Company's common stock, (A)
at least five business days prior to any such proposed disposition, the Investor
shall provide to the Company notice of such disposition; (B) the Investor shall
provide the Company or its agent an opportunity to arrange the sale to one or
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more parties of the Securities proposed to be transferred and shall cooperate
fully with the Company or such agent in such process (including discussions of
the terms of such sale with no more than two brokers designated by the Company
and to sell such Securities to one or both of such brokers if an agreement is
reached); and (C) if, after three business days from the date the notice
referred to in this subsection is received by the Company, an agreement
regarding such a sale has not been reached, the Investor may dispose of such
Securities in any manner it so chooses so long as such disposition is not in
violation of this Agreement.
(c) Notwithstanding the provisions of this Section 2.10, no
registration statement or opinion of counsel shall be necessary for a transfer
by the Investor to any wholly owned subsidiary of the Investor or of Johnson &
Johnson which is an accredited investor, if the transferee agrees in writing to
be subject to the terms hereof, to the same extent as if such transferee were
the Investor hereunder. Whenever the restrictions imposed by this Section 2.10
shall terminate as herein provided, the holder of the securities as to which
such restrictions have terminated shall be entitled to receive from the Company,
without expense, one or more new certificates not bearing restrictive legends
and not containing any reference to the restrictions imposed by this Agreement.
2.11 Domicile; Principal Place of Business
The Investor represents that it is domiciled in, and has its principal
place of business in, the jurisdiction set forth in the first paragraph of this
Agreement.
2.12 Legends
It is understood that the certificate evidencing the Shares will bear a
legend as follows:
"The securities evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended, of
the United States of America (the "Act"), or the securities
laws of any state of the United States of America, and no
interest in such securities may be sold, offered, pledged or
hypothicated in the United States of America, its territories
or possessions, or to a citizen, national, resident or entity
organized or chartered under the laws of the United States of
America, its territories or possessions, unless (i) there is
an effective registration statement under the Act and
applicable state securities laws, (ii) this corporation
receives an opinion of legal counsel for the holders of these
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securities satisfactory to this corporation stating that such
transaction is exempt from registration under the Act and
applicable state securities laws, or (iii) this corporation
otherwise satisfies itself that such transaction is exempt
from registration."
2.13 Acknowledgment
The Investor, by executing below, acknowledges that it understands that
the Company is relying upon the accuracy and completeness of its representations
and warranties set forth in this Section 2 in deciding whether to sell the
Shares to the Investor and in complying with the Company's obligations under
applicable securities laws.
3. Further Representations and Warranties of the Investor
The Investor hereby represents and warrants to the Company as of the
date of this Agreement as follows:
3.1 Organization and Existence
The Investor is a corporation duly organized, validly existing and in
good standing under the laws of the State of New Jersey and has all requisite
power and authority to enter into and perform this Agreement.
3.2 Authorization
The execution, delivery and performance by the Investor of this
Agreement and the consummation of the transactions contemplated hereby are
within the corporate powers of the Investor and have been duly authorized by all
necessary corporate action on the part of the Investor. This Agreement has been
duly and validly executed and delivered by the Investor and constitutes a legal,
valid and binding agreement of the Investor, enforceable in accordance with its
terms except as (a) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (b) the
availability of equitable remedies may be limited by equitable principles of
general applicability.
3.3 Governmental Authorization
No consent, approval or authorization of or designation, declaration or
filing with any governmental authority on the part of the Investor is required
in connection with the valid execution and delivery of this Agreement or the
purchase of the Shares.
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3.4 Noncontravention
The execution, delivery and performance by the Investor of this
Agreement do not and will not, with or without the passage of time or the giving
of notice or both, (a) contravene or conflict with the articles of incorporation
or bylaws of the Investor; (b) assuming compliance with the matters referred to
in Section 3.3 hereof, contravene or conflict with or constitute a violation of
any provision of any law, regulation, judgment, injunction, order or decree
binding upon or applicable to the Investor; (c) conflict with or result in any
breach of any of the terms, conditions or provisions of, or constitute a default
(or give rise to any right of termination, cancellation or acceleration) under,
or result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Investor under any material note,
indenture, mortgage, lease, agreement, contract, purchase order or other
instrument, document or agreement to which the Investor is a party or by which
it or any of its properties or assets is bound or affected.
3.5 Finders' Fees
There is no investment banker, broker, finder or other intermediary who
has been retained by or is authorized to act on behalf of the Investor and who
might be entitled to any fee or commission from the Investor in connection with
the transactions contemplated by this Agreement.
3.6 Financing
The Investor has sufficient funds available to purchase the Shares.
4. Representations and Warranties of the Company
The Company hereby represents and warrants to the Investor as of the
date of this Agreement as follows:
4.1 Corporate Organization
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Washington and is qualified to do
business as a foreign corporation in each jurisdiction where the failure to so
qualify would have a Material Adverse Effect (as defined hereinafter). The
Company has all requisite power and authority to enter into and perform this
Agreement and to own its properties and to carry on its business as now being
conducted.
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4.2 Corporate Authorization
The execution, delivery and performance by the Company of this
Agreement and the consummation of the transactions contemplated hereby are
within the corporate powers of the Company and have been duly authorized by all
necessary corporate action on the part of the Company. This Agreement has been
duly and validly executed and delivered by the Company and constitutes a legal,
valid and binding agreement of the Company, enforceable in accordance with its
terms except as (a) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (b) the
availability of equitable remedies may be limited by equitable principles of
general applicability.
4.3 Governmental Authorization
No consent, approval or authorization of or designation, declaration or
filing with any governmental authority on the part of the Company is required
for or in connection with the valid execution and delivery of this Agreement, or
the valid and lawful authorization, issuance, offer, sale and delivery of the
Securities, or the consummation of the transactions contemplated hereunder,
except for the qualification or registration (or taking such action as may be
necessary to secure an exemption from qualification or registration, if
available) of the offer and sale of the Securities under all applicable state
securities laws.
4.4 Noncontravention
The execution, delivery and performance by the Company of this
Agreement do not and will not, with or without the passage of time or the giving
of notice or both, (a) contravene or conflict with the articles of
incorporation, as amended, or bylaws of the Company; (b) assuming compliance
with the matters referred to in Section 4.3 hereof, contravene or conflict with
or constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to the Company; (c)
conflict with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default (or give rise to any right of
termination, cancellation or acceleration) under, or result in the creation of
any lien, security interest, charge or encumbrance upon any of the properties or
assets of the Company under any material note, indenture, mortgage, lease,
agreement, contract, purchase order or other instrument, document or agreement
to which the Company is a party or by which it or any of its properties or
assets is bound or affected. The business of the Company is not being conducted,
and shall not be conducted through the date upon which all the Shares have been
converted into shares of the Company's common stock, in violation of any law,
ordinance or regulation of any governmental entity, except for possible
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violations which either singularly or in the aggregate do not have a Material
Adverse Effect.
4.5 Authorization and Validity of the Shares
The Shares have been duly authorized and, when issued and delivered to
and paid for by the Investor pursuant to this Agreement, will be validly issued,
fully paid and nonassessable, and such shares are free of preemptive or similar
rights. All outstanding securities of the Company were issued in compliance with
applicable federal and state securities laws. Upon consummation of the
transactions contemplated hereby, good and valid title to the Shares will pass
to the Investor, free and clear of any encumbrances, liens, claims, charges or
assessments of any nature whatsoever. Upon their issuance in accordance with the
Company's Articles of Incorporation, as amended, good and valid title to the
Conversion Shares will pass to the Investor, free and clear of any encumbrances,
liens, claims, charges or assessments of any nature whatsoever. The Preferred
Stock shall have the rights, privileges, and preferences as set forth in the
Amendment to the Company's Articles of Incorporation (the "Amendment") in the
form attached to this Agreement as Exhibit B.
4.6 Capitalization
As of the date hereof, the authorized capital stock of the Company
consists of (i) 60,000,000 shares of Common Stock of which 17,293,519 shares are
outstanding, and (ii) 3,000,000 shares of Preferred Stock, of which 600,000
shares have been designated Series A Junior Participating Preferred Stock, of
which none are outstanding; 1,120,000 shares have been designated as $2.4375
Convertible Exchangeable Preferred Stock, Series 1, of which 208,240 are
outstanding; 50,000 shares have been designated as Series 2 Convertible
Preferred Stock, of which 5,167 are outstanding; and 120,000 shares have been
designated as Series 3 Convertible Preferred Stock, of which 118,780 are
outstanding. All such outstanding shares have been validly issued and are fully
paid and nonassessable. The Company has reserved 1,000 shares of Preferred Stock
for issuance hereunder. The Company has, and at all times shall have, authorized
and reserved for issuance a sufficient number of shares of the Company's common
stock as necessary to provide for the conversion of the Shares and the Dividend
Shares. The Conversion Shares will, upon issuance in accordance with the terms
of the Company's Articles of Incorporation, as amended, be duly authorized,
validly issued and outstanding, fully paid and nonassessable, and the
certificates representing the same will be duly and validly authorized, executed
and delivered by the Company.
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4.7 Nasdaq National Market; Listing
The Company's common stock is quoted on the Nasdaq National Market and
the Company is in compliance with the applicable provisions of Schedule D to the
By-laws of the National Association of Securities Dealers, Inc.
4.8 Finders' Fees
There is no investment banker, broker, finder or other intermediary who
has been retained by or is authorized to act on behalf of the Company and who
might be entitled to any fee or commission from the Company in connection with
the transactions contemplated by this Agreement.
4.9 Financial Statements
Each of the audited consolidated balance sheets and statements of
operations and cash flow for the Company contained in the Public Reports (as
defined below) (collectively, the "Financial Statements") are in accordance with
the books and records of the Company, have been prepared in accordance with
generally accepted accounting principles, consistently applied, and fairly
present, in all material respects, the financial position, results of operations
and cash flows of the Company as of each such date and for each of the periods
covered thereby, except that such summary statements are subject to normal
year-end adjustments.
4.10 Absence of Undisclosed Liabilities
Except as and to the extent reflected or stated in the Financial
Statements, the Company has no debts, liabilities or obligations of any nature,
whether accrued, absolute, assigned or otherwise, whether due or to become due,
other than incurred in the ordinary course of business.
4.11 Absence of Certain Developments
Since June 30, 1997, except as disclosed in the Financial Statements
and except for continuing operating losses, there has been no (i) change which
may result in a material adverse effect on the condition, financial or
otherwise, of the Company or its assets, liabilities, properties, business,
operations, condition or prospects generally (a "Material Adverse Effect"), (ii)
declaration, setting aside or payment of any dividend or other distribution with
respect to the capital stock of the Company except dividends set aside or paid
by the Company with respect to Convertible Exchangeable Preferred Stock, Series
1, Series 2 Convertible Preferred Stock or Series 3 Convertible Preferred Stock,
or (iii) loss, destruction or damage to any property of the Company, whether or
not insured, which has or may have a Material Adverse Effect.
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4.12 Litigation
Except as disclosed in the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1997, there is no claim, arbitration, action, suit,
proceeding or investigation pending, or to the best knowledge of the Company,
threatened against the Company, which questions the validity of this Agreement
or any other agreement entered into by the Company in connection with this
Agreement or the right of the Company to enter into any such agreements or to
consummate the transactions contemplated hereby or thereby, or which might
result, in a Material Adverse Effect, or any change in the current equity
ownership of the Company. The Company is not a party to, or subject to the
provisions of, any order, writ, injunction, judgment or decree of any court or
governmental agency or instrumentality which would have a Material Adverse
Effect.
4.13 Insurance
The Company maintains in full force such types and amounts of insurance
issued by issuers of recognized responsibility insuring the Company, with
respect to its liability, workers' compensation, business and properties, in
such amounts and against such losses and risks as are customary in the case of
corporations engaged in businesses and having circumstances similar to that of
the Company.
4.14 Environmental and Safety Laws
To the best of its knowledge, the Company is in compliance with every
applicable statute, law or regulation relating to the environment or
occupational health and safety, except where the failure to so comply would not
individually or in the aggregate have a Material Adverse Effect, and, to the
best of the Company's knowledge, no material expenditures are required in order
to comply with any such existing statute, law or regulation.
4.15 Securities Laws
Assuming that the Investor's representations and warranties contained
in Section 2 of this Agreement are and continue to be true and correct, the
offer, issuance and sale to the Investor of the Shares and the Conversion Shares
are and will be exempt from the registration and prospectus delivery
requirements of the Act, and have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws.
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5. Public Reports
The Company has provided to the Investor true and complete copies of
all reports, schedules, forms, statements and other documents (the "Public
Reports") filed by the Company with the SEC under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), since December 31, 1993. The Public
Reports include all the reports the Company has been required to file under the
Exchange Act since that date. As of their respective dates, (i) the Public
Reports complied in all material respects with the requirements of the Exchange
Act and the rules and regulations promulgated thereunder, and (ii) none of the
Public Reports contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein not misleading.
6. [Intentionally deleted.]
7. Registration Rights
7.1 Certain Definitions
As used in this Section 7, the following terms shall have the following
respective meanings:
(a) "Form S-3" shall mean Form S-3 issued by the SEC or any sub-
stantially similar form then in effect.
(b) "Holder" shall mean the Investor.
(c) "Milestone Date" shall mean the date upon which Janssen shall have
made payment to the Company of the amount specified in Section 4.2(b) of the
License Agreement.
(d) "Register," "Registered" and "Registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Act (the "Registration Statement") and pursuant to Rule 415
under the Act or any successor rule providing for offering securities on a
continual basis, and the declaration or ordering of the effectiveness of such
Registration Statement.
(e) "Registrable Securities" shall mean the Conversion Shares.
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(f) "Registration Expenses" shall mean all expenses incurred by the
Company in complying with this Section 7, including, without limitation, all
federal and state registration, qualification and filing fees, printing
expenses, fees and disbursements of counsel for the Company, Blue Sky fees and
expenses, and the expense of any special audits incident to or required by any
such registration.
(g) "Restriction Termination Date" shall mean, with respect to any
Registrable Securities, the earliest of (i) the date that such Registrable
Securities shall have been Registered and sold or otherwise disposed of in
accordance with the intended method of distribution by the seller or sellers
thereof set forth in the Registration Statement covering such Registrable
Securities or transferred in compliance with SEC Rule 144, (ii) the date that an
opinion of counsel to the Company which counsel shall be reasonably acceptable
to the Holder containing reasonable assumptions shall have been rendered and,
based upon such opinion, the legend referred to in Section 2.12 hereof shall
have been removed, and (iii) the second anniversary of the date of this
Agreement.
(h) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities pursuant to
this Agreement and all fees and disbursements of counsel for the Holder.
7.2 Request for Registration
(a) Upon the terms and subject to the conditions of this Section 7, at
any time within the period commencing on the earlier of (i) the Milestone Date
and (ii) 12 months from the date of this Agreement and ending on the Restriction
Termination Date, the Holder may, from time to time during such registration
period, request the Company in writing to effect a Registration on any form for
which the Company then qualifies and which counsel for the Company shall deem
appropriate and available for an offering of Registrable Securities. The Company
will promptly give notice of the proposed Registration to the Holder and, as
soon as practicable after receipt of such notice, the Company shall proceed to
file a Registration Statement covering all of the Registrable Securities to be
registered thereunder in accordance with the intended method of distribution
which the Holder requests to be registered within 15 days after mailing of
notice by the Company. The Company shall exercise its best efforts to cause such
Registration Statement to be declared effective by the SEC as soon as possible
after such filing and in any event within 90 days of the date of filing such
Registration Statement, although the Company cannot assure that such
Registration Statement will in fact be declared effective by the SEC within such
90 day period. The Registration Statement (and each amendment or supplement
thereto) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they were made, not
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misleading. The Company hereby agrees to file in a timely manner all reports
required under the Exchange Act during the registration period. The Company
shall be obligated to effect only one Registration pursuant to this Agreement.
(b) Notwithstanding the foregoing,
(i) the Company shall not be obligated to effect a
Registration pursuant to this Section 7.2 during the period starting with the
date 30 days prior to the Company's good faith estimated date of filing of, and
ending on the earlier of (A) the date which is 90 days after the effective date
of, and (B) the date which is 150 days after the filing of, a Registration
Statement pertaining to an underwritten public offering of securities for the
account of the Company, provided that the Company diligently pursues such
Registration; and
(ii) the Company shall not be obligated to register any
Registrable Securities, if, in the reasonable opinion of its counsel, all
Registrable Securities may be sold in the open market within a 90-day period
under SEC Rule 144 without registration under the Act.
7.3 Blue Sky
In the event of any Registration pursuant to this Section 7, the
Company will exercise its best efforts to Register and qualify the Registrable
Securities covered by the Registration Statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holder for the distribution of such securities; provided, however, that the
Company shall not be required (a) if the Company is listed on the Nasdaq
National Market, to register or qualify in any states or jurisdictions, except
New York, that do not have a Nasdaq National Market securities exemption from
registration and qualification, and (b) to qualify to do business, to file a
general consent to service of process or to subject itself to taxation in any
state or jurisdiction in which it is not now qualified. The Company will furnish
to the Holder written advice of its counsel with respect to registration or
exemption of such Registrable Securities in such jurisdictions.
7.4 Expenses of Registration
All Registration Expenses shall be borne by the Company and all Selling
Expenses shall be borne by the Holder of the Registrable Securities.
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7.5 Registration Procedures
7.5.1 Advice by Company
The Company will keep the Holder advised as to the initiation and
completion of such Registration. The Company, if requested by the Holder, will
furnish to the Holder, prior to filing with the SEC, a copy of the Registration
Statement proposed to be so filed. The Company will (a) use all reasonable
efforts to keep such Registration effective until (i) in the case of a
Registration on Form S-3, the earlier of (A) the date on which the Holder has
completed the distribution described in the Registration Statement, and (B) two
years from the date of this Agreement, or (ii) in the case of a Registration on
any form other than Form S-3, 120 days from the effective date of the
Registration Statement and (b) furnish (i) promptly after the same is prepared
and distributed, filed with the SEC, or received by the Company, one copy of the
Registration Statement and each amendment and supplement thereto, and (ii) such
number of prospectuses (including a preliminary prospectus, and all amendments
and supplements thereto) and such other documents as the Holder from time to
time may reasonably request.
7.5.2 Amendments
The Company will promptly prepare and file with the SEC such amendments
and prospectus supplements, including post-effective amendments, to the
Registration Statement as may be necessary or appropriate, and use its best
efforts to have such post-effective amendments declared effective as promptly as
practicable; cause the related prospectus to be supplemented by any prospectus
supplement, and as so supplemented, to be filed with the SEC; and notify the
Holders of any securities included in such Registration Statement and the
underwriter thereof, if any, promptly when a prospectus or any prospectus
supplement or post-effective amendment must be filed or has been filed and, with
respect to any post-effective amendment, when the same has become effective, and
make the same available to the Holder and any underwriter.
7.5.3 Other Agreements and Actions
The Company will enter into customary agreements (including an
underwriting agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the sale of such
Registrable Securities.
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7.5.4 Listing of Securities
The Company will use all reasonable efforts to (i) cause all such
Registrable Securities to be listed on each securities exchange on which similar
securities issued by the Company are then listed, or (ii) secure designation and
quotation of all such Registrable Securities on the Nasdaq National Market
System or, if despite the Company's best efforts to satisfy the preceding clause
(i) or (ii), the Company is unsuccessful is satisfying the preceding clause (i)
or (ii), to secure listing on a national securities exchange or Nasdaq
authorization and quotation for such securities and, without limiting the
generality of the foregoing, to arrange for at least two market makers to
register with the National Association of Security Dealers, Inc. as such with
respect to such Registrable Securities.
7.5.5 Piggyback Registration
If the Company proposes to file a Registration Statement under the Act
with respect to an underwritten offering of the Company's common stock at any
time within the period commencing one year from the date of this Agreement and
ending on the earlier of (a) the second anniversary of the date of this
Agreement and (b) the date of a request pursuant to Section 7.2 hereof to effect
a Registration (i) for the Company's own account (other than a Registration
Statement on Form S-4 or Form S-8 (or any similar or substitute form that may be
adopted by the SEC)) or (ii) for the account of any of its holders of common
stock, then the Company shall give written notice of such proposed filing to the
Holder as soon as practicable (but in no event less than 10 business days before
the anticipated filing date), and such notice shall offer the Holder the
opportunity to Register such number of shares of Registrable Securities as the
Holder may request on the same terms and conditions as the Company's common
stock. If the Company proposes to file a Registration Statement under the Act on
Form S-4 to effect an offer to existing shareholders to exchange the Company's
common stock not registered under the Act for common stock registered under the
Act (other than pursuant to this Section 7), the Company shall offer the Holder
the opportunity to exchange its Registrable Securities for common stock in such
offer on the same terms and conditions as the Company's other shareholders. If
the Holder exchanges Registrable Securities for the Company's common stock in
such offer, such common stock shall not be deemed Registrable Securities. The
Company shall not be required under this Section 7.5.5 to Register any of the
Holder's securities in connection with an underwritten offering of the Company's
securities unless the Holder accepts the terms of the underwriting as agreed
upon between the Company and the underwriters selected by it, and then only in
such quantity as will not, in the opinion of the managing underwriters,
interfere with the successful marketing of the offering by the Company. If the
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managing underwriters advise that the inclusion in such registration of all
Registrable Securities and securities held by other holders ("Other Piggyback
Securities") requested to be registered would interfere with the successful
marketing of securities that the Company proposes to offer for its own account,
then all securities for sale by the Company shall first be included and the
number of Registrable Securities and Other Piggyback Securities to be registered
shall be reduced pro rata among all holders thereof in proportion to the voting
rights of all outstanding shares held by such holders.
7.6 Information Furnished by the Holder
It shall be a condition precedent to the Company's obligations under
this Agreement that the Holder furnish to the Company in writing such
information regarding the Holder and the distribution proposed by it as the
Company may reasonably request.
7.7 Indemnification
7.7.1 Company's Indemnification of the Holder
The Company will indemnify and hold harmless the Holder, each person
who controls the Holder (within the meaning of the Act) and each of their
officers, directors and constituent partners, with respect to which
Registration, qualification or compliance of Registrable Securities has been
effected pursuant to this Agreement, against all claims, losses, damages or
liabilities (or actions with respect thereto) to the extent such claims, losses,
damages, liabilities or actions arise out of or are based upon any untrue
statement (or alleged untrue statement) of a material fact contained in any
prospectus or any related Registration Statement incident to any such
Registration, qualification or compliance, or any omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, or any violation by the Company of
any rule or regulation promulgated under the Act applicable to the Company and
relating to action or inaction required of the Company in connection with any
such Registration; and the Company will reimburse the Holder and each person who
controls the Holder for any legal and other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action; provided, however, that the indemnity contained in this
Section 7.7.1 shall not apply to amounts paid in settlement of any such claim,
loss, damage, liability or action if settlement is effected without the consent
of the Company (which consent shall not be unreasonably withheld or delayed);
and provided, further, that the Company will not be liable in any such case to
the extent that any such claim, loss, damage, liability or action arises out of
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or is based upon any untrue statement or omission based upon written information
furnished to the Company by the Holder or controlling person for use in
connection with the offering of securities of the Company. Notwithstanding the
above, the foregoing indemnity agreement is subject to the condition that,
insofar as it relates to any such untrue statement, alleged untrue statement,
omission or alleged omission made in a preliminary prospectus, such indemnity
agreement shall not inure to the benefit of the Holder if a copy of the final
prospectus was not furnished to the person asserting the loss, liability, claim
or damage at or prior to the time such action is required by the Act and if the
final prospectus corrected the untrue statement or omission or alleged untrue
statement or omission.
7.7.2 Holder's Indemnification of Company
The Holder will, if Registrable Securities held by the Holder are
included in the securities as to which a Registration is being effected pursuant
to this Agreement, indemnify and hold harmless the Company, each of its officers
and directors and each person who controls the Company within the meaning of the
Act against all claims, losses, damages and liabilities (or actions with respect
thereto) arising out of or based upon any untrue statement (or alleged untrue
statement) of a material fact contained in any such Registration Statement or
related prospectus, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and the Holder will reimburse the Company and such
directors, officers, partners, persons or control persons for any legal and
other expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such Registration Statement or
prospectus in reliance upon and in conformity with written information furnished
to the Company by the Holder and stated to be specifically for use in connection
with the offering of Securities of the Company; provided, however, that the
indemnity contained in this Section 7.7.2 shall not apply to amounts paid in
settlement of any such claim, loss, damage, liability or action if settlement is
effected without the consent of the Holder (which consent shall not be
unreasonably withheld or delayed).
7.7.3 Indemnification Procedure
Promptly after receipt by an indemnified party under this Section 7.7
of notice of the commencement of any action, such indemnified party will, if a
claim with respect thereto is to be made against an indemnifying party under
this Section 7.7, notify the indemnifying party in writing of the commencement
thereof and generally summarize such action. The indemnifying party shall have
the right to participate in and to assume the defense of such claim, and shall
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be entitled to select counsel for the defense of such claim with the approval of
any parties entitled to indemnification, which approval shall not be
unreasonably withheld. Notwithstanding the foregoing, the party entitled to
indemnification shall have the right to employ separate counsel (reasonably
satisfactory to the indemnifying party) to participate in the defense thereof,
but the fees and expenses of such counsel shall be the expense of such
indemnified party unless the named parties to such action or proceedings include
both the indemnifying party and the indemnified party and the indemnifying party
or such indemnified party shall have been advised by counsel that there are one
or more legal defenses available to it which are different from or additional to
those available to the indemnifying party (in which case, if the indemnified
party notifies the indemnifying party in writing that it elects to employ
separate counsel at the reasonable expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
or proceeding on behalf of the indemnified party, as the case may be, it being
understood, however, that the indemnifying party shall not, in connection with
any such action or proceeding or separate or substantially similar or related
action or proceeding in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate counsel at any time for the indemnifying party and all
indemnified parties, which counsel shall be designated in writing by the
Holder). If the indemnifying party withholds consent to a settlement or proposed
settlement by the indemnified party, it shall acknowledge to the indemnified
party its indemnification obligations hereunder.
7.7.4 Contribution
If the indemnification provided for in this Section 7.7 from an
indemnifying party is unavailable to an indemnified party hereunder with respect
to any claims, losses, damages, liabilities and actions referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses in such proportion as
is appropriate to reflect the relative fault of the indemnifying party and
indemnified party in connection with the statements or omissions which result in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by such indemnifying party or indemnified party and that party's
relative intent, knowledge, access to information supplied by such indemnifying
party or indemnified party and opportunity to correct or prevent such statement
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or omission. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action, suit, proceeding or
claim.
7.8 Transfer of Rights
The right to cause the Company to Register Registrable Securities
granted by the Company to the Holder under this Section 7 may not be assigned to
any other person except a permitted transferee described in Section 2.10(c)
hereof.
7.9 No-Action Letter or Opinion of Counsel in Lieu of Registration
Notwithstanding anything else in this Agreement, if the Company shall
have obtained from the SEC a "no-action" letter in which the SEC has indicated
that it will take no action if, without Registration under the Act, the Holder
disposes of Registrable Securities covered by any request for Registration made
under this Section 7 in the specific manner in which the Holder proposes to
dispose of the Registrable Securities included in such request (such as
including, without limitation, inclusion of such Registrable Securities in an
underwriting initiated by either the Company or the Holder), or if in the
opinion of counsel for the Company concurred in by counsel for the Holder, which
concurrence shall not be unreasonably withheld, no Registration under the Act is
required in connection with such disposition, the Registrable Securities
included in such request shall not be eligible for Registration under this
Agreement; provided, however, that any Registrable Securities not so disposed of
shall be eligible for Registration in accordance with the terms of this
Agreement with respect to other proposed dispositions to which this Section 7.9
does not apply.
8. Miscellaneous
8.1 Notices
All notices, requests and other communications to either party
hereunder shall be in writing (including telex, telecopy or similar writing) and
shall be given,
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if to the Company, to:
NeoRx Corporation
410 West Harrison Street
Seattle, Washington 98119-4007
Fax: (206) 284-7112
Attn: President
if to the Investor, to:
Johnson & Johnson Development Corporation
One Johnson & Johnson Plaza
New Brunswick, NJ 08933-7003
Fax: (908) 247-5309
Attn: President
with a copy to:
Office of General Counsel
Johnson & Johnson
One Johnson & Johnson Plaza
New Brunswick, NJ 08933
Fax: (908) 524-2788
8.2 Amendments; No Waivers
(a) Any provision of this Agreement may be amended or waived if, and
only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by the Investor and the Company or, in the case of a waiver, by the
party against whom the waiver is to be effective.
(b) No failure or delay by either party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
8.3 Expenses
All costs and expenses incurred in connection with this Agreement shall
be paid by the party incurring such cost or expense, except as provided in
Section 7 hereof with respect to Registration Expenses.
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8.4 Successors and Assigns
The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns; provided that, except as set forth in Section 2.10(c) hereof, neither
party may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the consent of the other party hereto.
8.5 Governing Law
The Investor agrees that this Agreement shall be enforced, governed and
construed in all respects in accordance with the laws of the State of
Washington, and that the rights, powers and duties set forth herein shall be
binding upon the Investor and its successors and permitted assigns, and shall
inure to the benefit of its successors and permitted assigns.
8.6 Counterparts; Effectiveness
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement shall become effective
when each party hereto shall have received a counterpart hereof signed by the
other party hereto.
8.7 Entire Agreement
This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior agreements,
understandings and negotiations, both written and oral, between the parties with
respect to the subject matter of this Agreement. No representation, inducement,
promise, understanding, condition or warranty not set forth herein has been made
or relied upon by either party hereto. Neither this Agreement nor any provision
hereof is intended to confer upon any person other than the parties hereto any
rights or remedies hereunder.
8.8 Captions
The captions herein are included for convenience of reference only and
shall be ignored in the construction or interpretation hereof.
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8.9 Survival
Notwithstanding any investigation made by any party to this Agreement,
all covenants, agreements, representations and warranties made by the Company
and the Investor herein and in the certificates for the Shares delivered
pursuant hereto shall survive the execution of this Agreement, the delivery to
the Investor of the Shares being purchased and the payment therefor.
8.10 Lock-Up Agreement
The Investor agrees that, if requested by the Company in conjunction
with an underwritten public offering, the Investor will enter into a written
agreement that it will not, directly or indirectly, offer, sell, contract to
sell, grant any option to purchase, make any short sale, pledge or grant any
interest in, or otherwise dispose of, transfer or make a distribution of any
shares of the Company's common stock for a period of 180 days after the date
such public offering is declared effective by the SEC; provided that the Company
may only "lock up" the Investor twice pursuant to this Section 8.10 so long as
more than 364 days have elapsed between the first and second requests for "lock
ups"; and, provided further, that all officers and directors of the Company and
all other persons with registration rights enter into arrangements with the
Company substantially similar to the provisions of this Section 8.10.
8.11 Publicity
Neither party shall originate any publicity, news release or other
public announcement, written or oral, containing the name of the other party
(or, in the case of any publicity, news release or other public announcement
originated by the Company, any reference to Johnson & Johnson or any wholly
owned subsidiary or affiliate thereof) relating to the performance under this
Agreement or the existence of any arrangement between the Company and the
Investor, without the prior written consent of the other party (which consent
shall be deemed to have been given if the party being requested to consent fails
to respond within three (3) business days of receipt of a written request
therefor), except where such publicity, news release or other public
announcement is required by law; provided that in such event, the Investor shall
be consulted by the Company in connection with any such publicity, news release
or other public announcement prior to its release and shall be provided with a
copy thereof.
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8.12 Further Assurances
Each party shall do and perform, or cause to be done and performed, all
such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
NEORX CORPORATION
/s/ Richard L. Anderson
------------------------
By Richard L. Anderson
Its Senior Vice President
JOHNSON & JOHNSON DEVELOPMENT CORPORATION
/s/ Ting Pau Oei
-------------------------
By Ting Pau Oei
Its Vice President
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