As filed with the Securities and Exchange Commission on January 9, 1999
Registration No. 333-67335
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
IMCLONE SYSTEMS INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 04-2834797
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
John B. Landes, Esq.
Vice President, Business Development
and General Counsel
ImClone Systems Incorporated
180 Varick Street 180 Varick Street
New York, New York 10014 New York, New York 10014
(212) 645-1405 (212) 645-1405
(Name, address, including zip code, Address, including zip code, and
and telephone number, area code, (telephone number, including including
of agent for service) area code, of registrant's
principal executive offices)
Copies of communications to:
Lawrence A. Darby III, Esq.
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022-3598
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] __
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the related registration statement filed with
the Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to completion dated January 9, 1999
PROSPECTUS
IMCLONE SYSTEMS
INCORPORATED
1,731,497 SHARES
COMMON STOCK
THE COMPANY
ImClone Systems Incorporated
180 Varick Street
New York, New York 10014
(212) 645-1405
THE SELLING STOCKHOLDERS
Certain of our officers and directors and a member of our Scientific Advisory
Board who participated in the founding of ImClone are having registered hereby
the offer and sale of the Shares which they may acquire by exercising warrants
we have issued to them at various times before the date of this prospectus.
TRADING SYMBOL:
NASDAQ NATIONAL MARKET - "IMCL'
THE OFFERING
The Selling Stockholders may sell Shares at various times and in various types
of transactions, including sales in the open market, sales in negotiated
transactions and sales by a combination of these methods. The Selling
Stockholders may sell Shares at the market price of our common stock at the time
of a sale, at prices relating to the market price of our common stock over a
period of time, or at prices negotiated with the buyers of Shares.
The Selling Stockholders will receive all proceeds from the sale of Shares, and
will pay all brokerage fees and commissions and similar sale-related expenses.
We will not receive any of the proceeds. When the Selling Stockholders exercise
their warrants to buy the Shares being sold, they will pay us the exercise
price. We are paying the expenses in connection with the registration of the
shares with the SEC.
This Investment Involves a High Degree of Risk. See "Risk Factors"
Beginning On Page 9.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if
this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
The date of this Prospectus is January [ ], 1999.
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TABLE OF CONTENTS
THE COMPANY....................................................................1
THE OFFERING...................................................................1
PROSPECTUS SUMMARY.............................................................1
THE OFFERING...................................................................7
WHERE YOU CAN FIND MORE INFORMATION............................................8
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS.....................................8
RISK FACTORS...................................................................9
Early Stage of Product Development; Technological Uncertainty.........9
History of Operating Losses and Accumulated Deficit...................9
Cash Requirements; Need for Additional Funding........................9
Dilution; Shares Available for Future Sale...........................10
Limited Manufacturing Experience.....................................12
Establishing Sales and Marketing Capability..........................12
Dependence on Certain Agreements with Corporate Partners.............12
Uncertainties as to Patents and Proprietary Technologies.............13
Reliance on and Attraction and Retention of Key Personnel and
Consultants.......................................................14
Technological Change and Risk of Obsolescence; Competition...........14
Extensive Government Regulation......................................14
Product Liability Exposure...........................................15
Hazardous Materials; Environmental Matters...........................15
Uncertainty of Health Care Reimbursement and Related Matters.........15
Possible Volatility of Stock Price...................................15
Limitations on Net Operating Loss Carryforwards......................15
Dividend Policy and Restrictions.....................................15
Year 2000............................................................15
USE OF PROCEEDS...............................................................16
SELLING STOCKHOLDERS..........................................................17
PLAN OF DISTRIBUTION..........................................................18
Manner of Sales; Broker-Dealer Compensation..........................18
Filing of Supplement to Prospectus In Certain Instances..............18
Certain Persons Deemed to be Underwriters............................18
Regulation M.........................................................18
LEGAL MATTERS.................................................................18
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES.............................................................19
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PROSPECTUS SUMMARY
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THE COMPANY
The following summarizes the business and operations of ImClone Systems
Incorporated (referred to in this prospectus as "we", "us", "ImClone" or the
"Company"). This summary highlights certain information about ImClone that is
included and incorporated by reference in this prospectus. This summary is not
complete and does not contain all of the information about us or all of the
information that you should consider before investing in our common stock. You
should read the entire prospectus carefully, including the information under the
caption "Risk Factors" and the information in the financial statements and the
notes to the financial statements that are incorporated by reference in this
prospectus. The securities offered by this prospectus involve a high degree of
risk. See "Risk Factors."
Overview of ImClone's Business
We are a biopharmaceutical company, primarily engaged in the research and
development of drugs and other products for the treatment of cancer and
cancer-related disorders.
When we have successfully tested our products, we intend to sell them to
the public when and if we receive Food and Drug Administration ("FDA") and any
other required regulatory approvals. We may manufacture and market the products
by ourselves or in cooperation with others.
ImClone's Cancer-Related Products.
We currently have three cancer-related products that we are developing,
two of which we are testing in clinical trials. A clinical trial is a study in
which a product being tested is administered to patients under the supervision
of a qualified principal investigator. A clinical study is intended to
determine, among other things, the product's safety and effectiveness. We have
not yet commercialized and marketed any of these products or sold them to the
public. We are currently involved in developing the following cancer-related
products:
o C225 Cancer Therapeutic ("C225").
o BEC2 Cancer Vaccine ("BEC2").
o c-p1C11 Chimerized Monoclonal Antibody Inhibitor of Angiogenesis ("c-p1C11").
We discuss each of these products more fully below under the heading "ImClone's
Development Programs."
Licensing of Diagnostics and Infectious Disease
Products.
We have also researched, developed and tested products to diagnose, and
vaccines for, infectious diseases such as the sexually transmitted diseases
gonorrhea and chlamydia. We have licensed the rights to these diagnostic and
infectious disease products and vaccines to corporate partners. We use the
licensing, research support and royalty fee revenues that we receive from these
corporate partners, in part, to fund our ongoing research and development of
cancer-related products.
Research Programs.
In addition to our development programs, we also continue to conduct
research in various areas. We conduct such research to discover new treatments
for cancer. We conduct such research in-house, as well as in cooperation with
certain corporate partners and academic institutions.
Background and Facilities.
ImClone was incorporated in Delaware in 1984 and began its principal
research and development operations in March 1986. ImClone's principal executive
offices and laboratories are located at 180 Varick Street, New York, New York,
10014, and the telephone number is (212) 645-1405.
We also operate a facility in Somerville, New Jersey where we manufacture
materials for product candidates of sufficient quality and in sufficient
quantity for human clinical trials.
ImClone's Development Programs
C225 Cancer Therapeutic.
Our main interventional therapeutic product candidate for cancer is a
chimerized (part mouse, part human) monoclonal antibody that blocks the
Epidermal Growth Factor ("EGF") receptor. An interventional therapeutic product
for cancer is a drug that interferes with the growth of tumors, and is used to
treat people who have developed cancer. An antibody is a protein that directly
attacks foreign substances in the body, including tumors. The "monoclonal"
nature of an antibody means that the antibody is derived from a single antibody
producing cell, called a hybridoma cell. C225 works to treat cancer in the same
manner as other growth factor receptor inhibitors, which process is discussed in
greater detail under the heading "ImClone's Research Programs -- Research on
Interventional Therapeutics."
The EGF receptor is found in excessive amounts in the cells of
approximately one-third of all solid cancers. It is also found in select normal
tissue. In vivo animal studies, which for cancer studies can be studies in which
animals have been implanted with human tumors, have shown that C225, when used
together with various agents used in chemotherapy (doxorubicin, cisplatin or
paclitaxel), helps these chemotherapeutic agents fight the tumors more
effectively.
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These studies showed that the human tumors established in these animals were
eliminated, and the animals survived tumor-free for a significant period of
time. We have also found that C225 used alone helps reduce tumors in animals
that have been implanted with renal cell carcinoma (kidney cancer) and
pancreatic carcinoma (pancreatic cancer).
Our C225 product is now in clinical trials. Clinical trials are typically
conducted in three sequential phases, Phase I, Phase II and Phase III, although
the phases may overlap. In Phase I, the initial introduction of the drug into
human subjects, the product is tested for safety, dosage tolerance, absorption,
metabolism, distribution and excretion. A Phase II clinical trial studies a
limited number of patients to determine (1) if the drug has any effect on the
disease, (2) the correct dosage of the drug needed to produce the desired effect
and (3) the side effects of the dosage selected.
Since December 1994, we have initiated several Phase Ib/IIa clinical
trials of C225 at Memorial Hospital (the patient care arm of Memorial
Sloan-Kettering Cancer Center) (referred to as "Sloan-Kettering"), Yale Cancer
Center, University of Virginia, MD Anderson Cancer Center and the University of
Alabama, among others. In these C225 Phase Ib/IIa studies, we have given C225
intravenously at selected doses, both alone and in combination with
chemotherapeutic drugs, to patients with various solid cancers, such as breast,
prostate, head and neck and renal cancers. Certain of these studies are ongoing.
These studies have shown that the drug is generally well-tolerated by patients.
We expect in the near future to begin Phase III clinical trials to further
test C225 in head and neck cancer, in combination with radiation therapy and in
combination with chemotherapy. A "Phase III" clinical trial is conducted
following a Phase II study which has shown that a product is effective and
acceptably safe. "Phase III" trials further evaluate clinical effectiveness and
further test for safety in a greater number of patients at multiple clinical
study sites. We also expect to begin in the near future several additional Phase
II clinical trials to continue to determine the types of tumors on which C225 is
most effective. In these clinical trials, C225 will most likely be used in
combination with chemotherapeutic agents or immune system agents called
cytokines.
On December 14, 1998, we entered into an agreement with Merck KGaA
("Merck"), a German-based drug company, relating to the development, marketing
and sale of C225. Under this agreement:
o We have granted Merck exclusive rights to market C225 outside of North
America. We have retained the right to market C225 within North America.
o We have retained the rights to be the exclusive manufacturer of C225.
o We will co-develop C225 in Japan.
In return, Merck is (1) paying to us $30 million in upfront fees and early
cash-based milestone payments based upon our achievement of certain milestones
set forth in the agreement, (2) paying to us an additional $30 million assuming
we achieve further milestones for which Merck will receive equity in ImClone
which will be priced at varying premiums to the then market price of the common
stock depending upon the timing of the achievement of the respective milestones,
(3) providing to us subject to certain terms a $30 million secured line of
credit or guaranty for the build-out of a manufacturing facility by us for the
commercial production of C225, (4) funding clinical development of C225 outside
of North America, and (5) required to pay us royalties on future sales of C225,
if any. Merck has also agreed not to own greater that 19.9% of our voting
securities through December 3, 2002.
The Agreement may be terminated (1) by either Merck or ourselves in the
event of the material breach of the other party, (2) by Merck in various other
instances, including (a) at its discretion on any date on which a milestone is
achieved (in which case no milestone payment will be made), or (b) for a
one-year period after first commercial sale of C225, upon Merck's reasonable
determination that the product is economically unfeasible (in which case Merck
is entitled to receive back 50% of the cash based milestones then paid to date,
but only based upon a royalty rate applied to our sales in North America, if
any). In the event of termination of the agreement, the due date for the payment
of the credit for the manufacturing facility will be accelerated, or in the
event of a guaranty, ImClone will be required to use its best reasonable efforts
to release Merck as guarantor. In the event by March 13, 1999 we fail to agree
with Merck on a production concept for the manufacturing facility or Merck fails
to provide us with the credit facility or guaranty then the agreement may be
terminated by either of us, in which case Merck is entitled to receive back all
milestone payments made to date.
BEC2 Cancer Vaccine.
BEC2 is our principal cancer vaccine product candidate. A cancer vaccine
is intended to be given to a patient after initial treatment of a tumor in order
to activate immune responses to protect against local spread, distant metastases
or recurrence of the cancer. It is currently in the clinical development stage.
BEC2 is a monoclonal anti-idiotypic antibody. Anti-idiotypic antibodies are
antibodies directed against the site of another antibody to which antigens bind.
An antigen is a substance in the body that stimulates the body to produce
antibodies and/or T cells to fight disease. T cells are cells that are involved
in the immune system's response to fight disease. In certain cases, the
anti-idiotypic antibody can resemble the original antigen and thus stimulate an
immune system response. Often, such an anti-idiotypic antibody produces a
stronger immune response than the immune response produced by the original
antigen which it resembles. As a result, the immune system of cancer patients
injected with an anti-idiotypic antibody that resembles an antigen on a tumor
will recognize the tumor antigen and destroy the tumor.
We have tested the BEC2 antibody since 1991 in Phase I clinical trials at
Sloan-Kettering against certain forms of cancer, including both limited disease
and extensive disease small cell lung carcinoma and melanoma (skin cancer).
Limited disease small cell lung carcinoma is limited to the lungs. Extensive
disease small cell lung carcinoma means that the disease has migrated to other
parts of the body. A statistically significant number of patients with small
cell lung carcinoma who participated in a pilot study involving BEC2 at
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Sloan-Kettering had a considerably longer disease-free period after treatment
with BEC2 than would otherwise have been expected. We have begun a Phase III
multinational clinical trial for BEC2 in the treatment of limited disease small
cell lung carcinoma, and patient enrollment has begun.
We have entered into an agreement with Merck relating to the manufacture,
marketing and sale of BEC2. Under this agreement:
o We have granted Merck exclusive rights to manufacture and market BEC2
worldwide but for North America where the parties share the right to
co-market BEC2.
o The parties intend that ImClone will be the bulk product manufacturer of
BEC2 to support worldwide sales.
In return, Merck (1) is paying us research support, (2) is required to pay
us certain milestone fees, and (3) is required to pay us royalties on future
sales of BEC2 by Merck outside North America, if any.
Chimerized Monoclonal Antibody Inhibitor of
Angiogenesis.
We have developed c-p1C11 as an inhibitor of angiogenesis. Angiogenesis is
the natural process of growth of new blood vessels. Vascular Endothelial Growth
Factor ("VEGF") regulates angiogenesis. VEGF is a natural growth factor which is
also produced by tumor cells. Once produced by the tumor, it stimulates the
body's endothelial cells, which are the cells that line all blood vessels, to
grow. This results in the production of new blood vessels and ensures an
adequate blood supply to the tumor. The growth of a tumor depends upon the
growth of new blood vessels in this manner. KDR is a growth factor receptor
found almost exclusively on the surface of human endothelial cells. VEGF must
recognize and bind to this KDR receptor in order to stimulate the endothelial
cells to grow.
c-p1C11 is a chimerized monoclonal antibody which specifically binds to
the KDR receptor for VEGF. By doing so, it prevents VEGF from binding to that
receptor, which, in turn, blocks endothelial cell growth and inhibits
angiogenesis. The c-p1C11 antibody, therefore, helps inhibit or eliminate cancer
by preventing the growth of new blood vessels and depriving the tumor of the
blood supply that it requires to grow. The c-p1C11 antibody is called
"chimerized" because part of the antibody is derived from a mouse, while the
other part is derived from a human. The benefit of the chimerization of this
antibody in this way is that the human part causes the antibody to be less
immunogenic. That is, it lessens the chance that the body will recognize the
antibody as foreign and reject it. An antibody such as c-p1C11 that inhibits
angiogenesis may also be useful in treating other diseases that, like cancer,
depend on the growth of new blood vessels. Such diseases include diabetic
retinopathy, macular degeneration and rheumatoid arthritis.
We are now conducting pre-clinical studies before filing an
Investigational New Drug Application with the FDA to allow us to further test
c-p1C11 as a possible cancer therapeutic. Pre-clinical studies are conducted
before the beginning of clinical trials, and include both laboratory evaluation
of the chemistry of the product and animal studies to determine the safety and
effectiveness of the product. The results of the pre-clinical studies are
submitted to the FDA as part of the Investigational New Drug Application.
We are also working with MRC Collaborative Center in England to prepare a
humanized form of c-p1C11. A "humanized" form of c-p1C11 would essentially be a
human antibody that contains only a minimal amount of mouse components that are
necessary for the antibody to have therapeutic value without resulting in the
body rejecting the antibody. The humanized form of c-p1C11 would serve as a
back-up, in the event that the chimerized c-p1C11 antibody causes an immune
response in the human body due to the presence of the mouse component.
ImClone's Research Programs
General.
In addition to concentrating on our products in development, we perform
ongoing research in a number of related areas. We conduct research in-house. We
also cooperate with corporate partners and academic institutions on research. We
hope that such research efforts will identify, among other things, additional
drugs and techniques to treat and prevent cancer which we can develop, test and
ultimately commercialize to manufacture and sell to the public.
Research on Interventional Therapeutics.
Tyrosine Kinase Receptor Inhibitors. We are conducting a research program
to develop inhibitors of tyrosine kinase receptors. Tyrosine kinase receptors
are a type of growth factor receptor. Tumor cells often depend on growth factors
to allow the tumor to continue to grow and multiply rapidly. These growth
factors act by binding to tyrosine kinase receptors, which are receptors located
on the surface of cells. When the growth factor binds to the receptor, this
activates the enzyme (kinase) part of the receptor, which initiates an "on
signal" in the cells. The kinase activity initiates the process of cell
division, which results in tumor growth. Therefore, a product that inhibits
tyrosine kinase receptors, would prevent the growth factor from binding with the
tyrosine kinase receptor. This would, in turn, prevent or inhibit the kinase
activity that would result from such binding, as well as the resulting cell
division and tumor cell growth.
In the past, we have chosen to inhibit tyrosine kinase receptors with
antibodies that block the binding of growth factors to the receptors. More
recently, we have started a discovery program to identify small molecules that
inhibit the enzyme part of growth factor receptors. In October 1997, we entered
into an agreement with CombiChem, Inc., a combinational chemistry company. Under
our agreement, we can use CombiChem's library of structures of chemical
compounds to help us identify candidates that interfere with the function of
growth factor receptors. CombiChem will also synthesize novel and improved
molecules that act as inhibitors of the growth factor receptors. We have also
entered into an agreement with the Institute for Molecular Medicine in Freiburg,
Germany, which permits us to test small molecules as
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therapeutic candidates to see if they are effective in inhibiting various
tyrosine kinase receptors.
VE-cadherin. In connection with our anti-angiogenesis research program, we
are also doing research to see whether antibodies that inhibit vascular-specific
cadherin ("VE-cadherin") also inhibit angiogenesis. Cadherins are a family of
cell surface molecules that help organize tissue structures. Researchers
generally believe that VE-cadherin plays an important role in angiogenesis by
organizing the assembly of endothelial cells into vascular tubes, which is a
necessary step in the formation of new blood vessels. As we stated above,
advanced tumor growth is dependent on the formation of a capillary blood vessel
network in the tumor to ensure an adequate blood supply to the tumor. Therefore,
antibodies that inhibit VE-cadherin may inhibit such capillary formation in
tumors, and help fight cancer by cutting-off an adequate blood supply to the
tumor. We intend to test various monoclonal antibodies against VE-cadherin to
see if they are effective in inhibiting the function of the VE-cadherin, and the
growth of blood vessels.
We also intend to use our chemical analysis techniques as well as
CombiChem's libraries to identify small molecules, in addition to antibodies,
that inhibit VE-cadherin. In connection with our VE-cadherin research program,
we have been assigned the exclusive rights to VE-cadherin-2, a
recently-developed form of vascular-specific cadherin, and to antibodies that
inhibit VE-cadherin. We also collaborate with the Mario Negri Institute for
Pharmacological Research (Milan, Italy) to do pharmacological research to better
determine the role of VE-cadherin in angiogenesis.
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Research on Potential Cancer Vaccines.
We are conducting research to discover possible cancer vaccines as another
route to cancer treatment. Cancer vaccines would activate immune responses to
tumors to protect against local spread, distant metastases or recurrence of
cancer. We focus our research efforts on choosing appropriate cancer cell
targets and producing effective immune responses in our cancer vaccine research
program.
For example, we are now doing research on a possible melanoma vaccine
based on the melanoma antigen gp75. A melanoma is a tumor or cancerous growth of
the skin. The gp75 antigen stimulates the body to produce antibodies and T cells
to attack the malignant melanoma. Animal studies have shown that a gp75 cancer
vaccine is very effective in creating an immune response in the body against
melanoma cells, and may prevent or inhibit growth of experimental melanoma
tumors in mice.
Research on Endothelial Stem Cell
Technology.
We have developed the technology necessary to isolate endothelial stem
cells. Endothelial stem cells are cells that may originate in the bone marrow.
These stem cells contribute to the development of new blood vessels throughout
the entire body. Endothelial stem cells help produce endothelial cells. We are
exploring the use of endothelial stem cells to stimulate collateral blood
circulation in ischemias. Ischemias are disease conditions where an organ of the
body does not receive enough blood. For example, a myocardial ischemia is the
clogging of the blood vessels in the heart.
We believe that the ability to isolate endothelial stem cells could allow
us to use these cells to treat many ischemia conditions by using them to
stimulate the growth of new blood vessels to increase the supply of blood to a
targeted area of the body. We also believe that the isolated endothelial stem
cells could be used to treat other conditions where the stimulation of new blood
vessel growth is desired. These uses include the treatment of burn patients and
the healing of wounds.
We are also exploring the use of endothelial stem cells in connection with
gene therapy. Gene therapy involves inserting one or more genes into cells. The
cells may then be delivered by various mechanisms to specific parts of the body
in order to treat disease. For example, in diabetes, a condition in which the
pancreas does not produce enough insulin, a gene therapy technique could be used
to alter cells to produce insulin and deliver such insulin producing cells to
the pancreas.
We believe that a gene therapy delivery approach could also be used with
endothelial cells in order to treat cancer. Tumors require angiogenesis to grow.
Tumors must attract endothelial stem cells in order for angiogenesis to occur.
We believe that a gene therapy technique could be used to alter endothelial stem
cells to express tumor destroying molecules and to deliver these altered
endothelial stem cells to the tumors.
Research on Hematopoiesis.
We are conducting research in hematopoiesis, which is the growth and
development of blood cell elements. Current cancer treatments such as radiation
and chemotherapy are limited because they are harmful to bone marrow, the part
of the body that manufactures the cellular elements of blood. Radiation and
chemotherapy would be less harmful and could be used more effectively if the
hematopoietic stem cells in the bone marrow (i.e., the cells which make blood
cells) could be shielded from these harmful effects. This could be accomplished
if these blood cell-making stem cells could be removed from the patient before
treatment with radiation or chemotherapy and returned to the patient afterwards.
Therefore, our research, on hematopoiesis has been aimed at discovering factors
to support these blood-making stem cells and to control their proliferation,
differentiation and functional deterioration. Our goal is to permit them to be
maintained in culture outside of the body without harming them.
Most stem cells, when they are removed from the patient's bone marrow,
quickly differentiate, that is, they become designated for a specific function
and lose their ability to make blood cells. The delta-like protein ("DLK") is a
protein which may help to maintain stem cells in their undifferentiated state
while they are outside the patient's body during radiation treatment or
chemotherapy. We have an exclusive license from The National Institutes of
Health ("NIH") to DLK for use in our studies involving stem cells. DLK may also
be useful in gene therapy using stem cells. DLK could be used to maintain the
stem cells in their undifferentiated state while they are genetically
manipulated outside the body. Then, the stem cells could be returned to the body
as functioning, rather than differentiated, stem cells.
In the course of our research on hematopoiesis, we discovered the
FLK-2/FLT-3 receptor (originally referred to by ImClone as FLK-2, by others as
FLT-3, and herein as FLK-2/FLT-3). We are the exclusive licensee of a family of
patents and patent applications covering the FLK-2/FLT-3 receptor. FLK-2/FLT-3
ligand is a protein that binds to and activates the FLK-2/FLT-3 receptor. The
FLK-2/FLT-3 ligand's role seems to be to stimulate the growth of the
hematopoietic blood making stem cells. Also, the FLK-2/FLT-3 ligand stimulates
the production of dendritic cells, which are potent cells that specialize in
processing foreign antigens and presenting these antigens to the immune system.
The addition of the FLK-2/FLT-3 ligand to stem cells may help stem cells
reproduce themselves while outside of the body during radiation treatment or
chemotherapy. This would increase the number of stem cells, and speed up the
bone marrow recovery process after return of the stem cells to the patient's
body after treatment.
We have entered into a non-exclusive license and supply agreement with
Immunex Corporation under which we have granted Immunex a license to the
FLK-2/FLT-3 receptor for the limited use of the manufacture of the FLK-2/FLT-3
ligand. Immunex is currently testing the ligand in human trials for stem cell
stimulation and for tumor inhibition. Under this agreement, we receive royalty
and licensing fees from Immunex, and Immunex has granted us a license to use the
FLK-2/FLT-3 ligand for use in our ex vivo research on stem cells.
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Corporate Partnerships for ImClone's Infectious
Disease Vaccines and Diagnostics
We have licensed our diagnostic and infectious disease vaccine products
and techniques, which are based on our earlier research, to corporate partners
for further development and commercialization.
Diagnostic Technologies.
We have a strategic alliance with Abbott Laboratories. We have licensed
some of our diagnostic products and techniques to Abbott on a worldwide basis.
In mid-1995, Abbott launched its first DNA-based diagnostic test in Europe,
using our Repair Chain Reaction ("RCR") DNA probe technology. Abbott's test is
used to diagnose the sexually transmitted disease chlamydia. The RCR DNA probe
technology uses DNA amplification techniques to detect the presence of DNA or
RNA in biological samples thereby indicating the presence of disease. Abbott has
since developed tests for other diseases, gonorrhea and mycobacteria, using the
RCR DNA probe technology, and has begun sales of those diagnostic products as
well.
In December 1996, we amended our agreement with Abbott to allow Abbott to
exclusively license our patented DNA signal amplification technology,
AMPLIPROBE, to Chiron Diagnostics. DNA signal amplification technology such as
AMPLIPROBE also uses DNA amplification techniques to detect the presence of DNA
or RNA in biological samples, thereby indicating the presence of disease. Abbott
receives a royalty payment from Chiron on all sales of Chiron branched DNA
diagnostic probe technology in countries covered by our patents. Abbott, in
turn, pays any such royalties it receives to us. Abbott has recently sold the
Chiron branched DNA diagnostic probe technology to Bayer Pharmaceutical
Corporation.
Infectious Disease Vaccines.
We have given the Wyeth/Lederle vaccine and pediatrics division of
American Home Products Corporation a worldwide license to manufacture and market
our infectious disease vaccines. These vaccines are being developed by American
Home. In January 1998, we extended our agreement with American Home to allow
them to continue pre-clinical research on these vaccines through September 1999,
in preparation for clinical trials of possible infectious disease vaccines for
the treatment of gonorrhea. Under the modified agreement, American Home must pay
us an annual license fee of $300,000, in semi-annual installments of $150,000
each, until September 1999.
ImClone's
Research and Development Operations
In-House Research and Development.
We began our in-house research and development activities in 1986. Since
that time, we have assembled a scientific staff with complementary skills in a
variety of advanced research technologies, including oncology, immunology,
molecular and cell biology, antibody engineering, protein and synthetic
chemistry and high-throughput screening. We also have a staff of technical and
professional employees who manufacture clinical trial materials at our
Somerville, New Jersey manufacturing facility.
Research and Development with Corporate
Partners.
In addition to our in-house research programs, we work with certain
corporations in areas related to our product development efforts. We obtain
funding and other assistance for the development and commercialization of our
products from major pharmaceutical companies in exchange for specific product
licensing rights.
We intend to enter into additional agreements of this nature with
pharmaceutical companies that have the resources and experience to assist us
financially to help us successfully bring our products to market, both in the
United States and abroad. It is not certain that we will be successful in
entering into any such arrangements.
6
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Research and Development with Academic
Institutions.
In addition to our research programs pursued in-house and together with
corporate partners, we work with certain academic institutions to support
research in areas related to our product development efforts. These institutions
include, but are not limited to, the National Cancer Institute, Sloan-Kettering,
the University of California, Princeton University, the University of North
Carolina, The Wistar Institute, The University of Texas Southwestern Medical
Center and The Mario Negri Institute for Pharmacological Research. Usually,
research supported at outside academic institutions is in addition to any
in-house research. We also work with various institutions to perform our
clinical trials. Such institutions include, but are not limited to,
Sloan-Kettering, Yale Cancer Center, the University of Virginia, MD Anderson
Cancer Center, and the University of Alabama.
THE OFFERING
Common Stock
Being Offered.............. 1,731,497 shares.
Selling Stockholders....... Certain officers and directors of ImClone and a
member of our Scientific Advisory Board.
Common
Stock
Outstanding
as of December 31, 1998... 24,512,107 shares.
Common Stock
Outstanding After
the Offering............... 25,263,607 shares. This assumes that (1) the
Selling Stockholders exercise all their warrants
for and sell all Shares covered by this prospectus
and (2) we do not issue any new shares of our
common stock until the offering is complete.
Risk Factors............... Investing in our common stock is very risky. See
"Risk Factors."
Use of Proceeds............ We will not receive any proceeds from the sale of
shares in this offering by the Selling
Stockholders.
If the Selling Stockholders exercise all of their
warrants, they will pay us a total of $1,127,250
to buy the Shares, not including amounts
previously paid to us by Selling Stockholders who
have already exercised warrants for Shares. We
will use that money for our development programs
and for general corporate purposes. See "Use of
Proceeds."
NASDAQ National
Market Symbol.............. "IMCL"
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----------------------------
WHERE YOU CAN FIND MORE
INFORMATION
-----------------------------
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on these public reference rooms. Our SEC filings are also available to the
public from the SEC's web site at http://www.sec.gov. Our common stock is traded
on the NASDAQ National Market under the ticker symbol "IMCL." You may also read
and copy our SEC filings at the NASDAQ National Market offices located in
Washington, D.C.
We filed a registration statement on Form S-3 to register the shares
offered by this prospectus with the SEC. As allowed by SEC rules, this
prospectus does not contain all the information that you can find in the
registration statement or the exhibits to the registration statement. The SEC
allows us to "incorporate by reference" the information we file with them. This
means that we can disclose important information to you by referring you to
those documents. The information incorporated by reference is considered to be a
part of this prospectus, except if it is superseded by information in this
prospectus or by later information that we file with the SEC. Information that
we file with the SEC after the date of this prospectus will automatically update
and supersede the information contained or incorporated by reference in this
prospectus. We incorporate by reference the documents listed below, as well as
any future filings we may make with the SEC under Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended, before the time that
all of the shares offered by this prospectus have been sold or de-registered.
These documents contain important information about our company and its
financial condition.
o Our Annual Report on Form 10-K for the fiscal year ended December 31,
1997.
o Our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31,
1998, June 30, 1998 and September 30, 1998.
o Our Current Report on Form 8-K, filed with the SEC on February 10, 1998
and December 16, 1998.
o The description of our common stock contained in our registration
statement on Form 8-A filed with the SEC under the Securities Exchange Act
of 1934, as amended, and any amendment or report filed for the purpose of
updating that description.
You may request a copy of these filings, excluding all exhibits unless we have
specifically incorporated by reference an exhibit, at no cost, by writing or
telephoning us at:
ImClone Systems Incorporated
180 Varick Street
New York, New York 10014
(212) 645-1405
Attention: Catherine M. Vaczy, Associate
General Counsel
When you are deciding whether to purchase the shares being offered by this
prospectus, you should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. We are not making any offer of
the shares in any state where the offer is not permitted. You should not assume
that the information in this prospectus or any supplement is accurate as of any
date other than the date on the front of those documents.
----------------------------
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
-----------------------------
The statements incorporated by reference or contained in this prospectus
discuss our future expectations, contain projections of our results of
operations or financial condition, and include other "forward-looking"
information within the meaning of Section 27A of the Securities Act of 1933, as
amended. Our actual results may differ materially from those expressed in
forward-looking statements made or incorporated by reference in this prospectus.
Forward-looking statements that express our beliefs, plans, objectives,
assumptions or future events or performance may involve estimates, assumptions,
risks and uncertainties. Therefore, our actual results and performance may
differ materially from those expressed in the forward-looking statements.
Forward-looking statements often, although not always, include words or phrases
such as the following:
o "will likely result"
o "are expected to"
o "will continue"
o "is anticipated"
o "estimate"
o "intends"
o "plans"
o "projection"
o "outlook"
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You should not unduly rely on forward-looking statements contained or
incorporated by reference in this prospectus. Factors discussed in the following
documents describe various uncertainties, estimates, assumptions and risks which
may cause actual results or outcomes to differ materially from those expressed
in forward-looking statements. You should read and interpret any forward-looking
statements together with these documents.
o Our most recent Annual Report on Form 10-K under the captions "Business",
and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
o Our Quarterly Reports on Form 10-Q.
o The risk factors contained in this prospectus under the caption "Risk
Factors."
o Our other SEC filings.
Any forward-looking statement speaks only as of the date on which that
statement is made. We will not update any forward-looking statement to reflect
events or circumstances that occur after the date on which such statement is
made.
----------------------------
RISK FACTORS
-----------------------------
An investment in the Shares offered by this prospectus involves a high
degree of risk. You should carefully consider the following factors as well as
the other information contained and incorporated by reference in this prospectus
before deciding to invest in our common stock.
Early Stage of Product Development; Technological
Uncertainty
ImClone was founded in 1984, and we opened our laboratory in New York
in 1986. Most of our products are now in research or the early stages of
development or clinical studies. They have not yet been commercialized and
marketed or sold to the public. Therefore, we do not sell or receive any
revenues from sales of these products. At this time, most of our revenues come
from payments we receive from our corporate partners under license and research
arrangements. These revenues have fluctuated significantly in the past, and we
expect them to continue to fluctuate significantly in the future. Therefore, our
results of operations, which are, in part, a function of our revenues, have also
fluctuated in the past, and we expect them to continue to fluctuate
significantly in the future. The level of our revenues and results of operations
at any given time is based primarily on the following factors:
o The status of development of our various products.
o The time at which we enter into research and license agreements with
corporate partners that provide for payments to us, and the timing of
payments to us under these agreements.
o Whether or not we achieve specified research or commercialization
milestones.
o Timely payment by our corporate partners of amounts payable to us.
o The addition or termination of research programs or funding support.
o The timing of sales by Abbott, our partner in diagnostics, of products
that use our technology, and the amount for which such products are sold.
o Variations in the level of expenses related to our proprietary products
during any given period.
Our products are only in the development stage. Before we can
commercialize our products and begin to sell them to generate revenues, they
will need substantial additional development and clinical testing, which will
cost a lot of money. Generally, to make a profit we will need to successfully
develop, test, introduce and market our products. It is not certain that any of
our products will be successfully developed or that required regulatory
approvals to commercialize them can be obtained. Further, even if we
successfully develop a product, there is no assurance that we will be able to
successfully manufacture or market that product or that customers will buy it.
History of Operating Losses and Accumulated
Deficit
We have had significant operating losses and have not earned a profit in
each year since we formed ImClone. These operating losses and failure to be
profitable have been due mainly to the significant amount of money that we have
had to spend on research and development. As of September 30, 1998, we had an
accumulated deficit of approximately $131.0 million. We expect to have
significant additional operating losses over each of the next several years.
Cash Requirements; Need for Additional Funding
Ongoing and Potential Cash Requirements.
Cash Required for Operations. At this time and for the foreseeable future,
we will need to spend a significant amount of money for, among others, the
following purposes:
o Ongoing pre-clinical and clinical trials of our existing products.
o Research and development of new products.
o Establishing both clinical-scale and commercial-scale manufacturing
capability in our own facilities and/or in the facilities of others.
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o Marketing our products if we receive necessary regulatory approvals.
We will need to spend a lot of money to expand our operations. Planned
expansion projects include expanding clinical trials of C225. We will need to
expand and modify our facilities and/or enter into arrangements with others, to
allow us to manufacture enough materials to support these expanded clinical
trials. We also plan to spend money to develop new product candidates and expand
research and development activities. To do this, we will have to hire new
employees, acquire new equipment and enter into new outside research agreements.
Potential Obligation to Repay Industrial Development Revenue Bonds. In
1990, the New York Industrial Development Agency issued $2.2 million of
Industrial Development Revenue Bonds on which we are responsible for the debt
service. We used the proceeds from that issuance to modify our New York facility
to our specifications. These bonds have a scheduled maturity in 2004, however,
they become due earlier if and when our lease for our New York facility
terminates before that time. Our lease is scheduled to expire in March 1999. We
currently expect to be able to extend the lease. However, if we cannot extend
the lease, then we will be obligated to pay the holders of the bonds a total of
approximately $2.4 million in principal and accrued interest in March 1999. We
cannot be certain that we will be able to extend the lease.
Dividend Payment Obligations to Holders of Series A Preferred Stock. Under
the terms of our Series A Convertible Preferred Stock, the holder of those
shares is entitled to receive annual dividends of $6.00 per share. If such
dividends are not paid in any year, we remain obligated to pay any unpaid
dividends in future years. Dividends are payable in cash on any Series A
Preferred Shares outstanding on the earlier of (1) annually on December 31st of
each year beginning on December 31, 1999; or (2) at the time of conversion or
redemption of the Series A Preferred Shares on which the dividend is being paid.
Dividends on the Series A Preferred Shares began to accumulate and accrue on
December 15, 1997 (the date of original issuance). As of September 30, 1998,
approximately $1.9 million of dividends had accrued on the Series A Preferred
Shares.
No Assurance of Continued Sources of Capital.
We will only receive certain future payments from our corporate partners
if we meet specified research and development milestones. We have not yet
achieved some of those milestones and we cannot be certain that we will ever do
so. We also cannot be certain that we will continue to receive expected payments
from our corporate partners. All of the above factors may require us to seek
additional levels of capital through additional arrangements with corporate
partners, equity or debt financings or from other sources. We cannot be certain
that we will be successful in completing any such arrangements or financings. If
adequate funds are not available, then we may be required to significantly cut
back on our planned operations.
Dilution; Shares Available for Future Sale
General.
The following securities that are convertible into shares of our common
stock were issued and outstanding as of December 31, 1998:
o Warrants. Various warrants to purchase 2,263,590 shares of our common
stock, at an average exercise price of approximately $2.79 per share
(subject to adjustment in certain circumstances).
o Options. Stock options to purchase 4,339,799 shares of our common stock at
an average exercise price of approximately $7.82 per share (subject to
adjustment in certain circumstances).
o Series A Convertible Preferred Stock. 400,000 shares of our Series A
Convertible Preferred Stock are outstanding. These shares are held by
Merck. These shares are referred to as the "Series A Preferred Shares." We
discuss below the general terms on which the Series A Preferred Shares can
be converted into shares of our common stock.
o Milestone Shares. Under our license agreement with Merck for C225, Merck
is entitled to receive shares of our common stock (or a non-voting
preferred stock or other non-voting stock convertible into our common
stock) in connection with Merck's payment to us of up to $30 million upon
our achievement of various milestones in the development of C225. These
shares are referred to as the "Milestone Shares". We discuss below how
these shares may be obtained.
The market price of our common stock could drop as a result of sales of a
large number of shares of our common stock in the market or the public
perception that such sales could occur. This could make it more difficult for us
to raise money through future offerings of common stock. Therefore, any of the
following events could have a negative effect on our financial condition and
results of operations:
o The exercise of a significant number of options or warrants.
o The sale of a substantial number of shares of our common stock acquired
upon the exercise of options or warrants.
o The conversion of a significant number of shares of Series A Preferred
Stock into shares of our common stock.
o The receipt by Merck of a significant number of Milestone Shares.
o The registration by Merck of a significant number of shares of common
stock received upon the conversion of Series A Preferred Shares and the
Milestone Shares.
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We do not control the timing of any of these events or the number of
shares issued or sold if any such events take place.
Warrants and Options.
The shares of our common stock which may be issued under the warrants and
options, including the shares included herein, are either currently registered
with the SEC, or will be registered with the SEC before the shares are purchased
by the holders of the warrants and options.
During the term of the warrants and options, their holders can take
advantage of a rise in the market price of our common stock by purchasing the
shares under the warrants and options at the exercise prices, which may be much
lower than the market price of our common stock. Therefore, the holders of the
options and warrants will most likely exercise them at times when the market
price of our common stock is high with the intention of promptly re-selling the
shares. This will allow them to take the greatest advantage of the relatively
low exercise prices of the options and warrants.
If we are required to issue shares of our common stock to exercising
holders of warrants and options at below-market prices, our other stockholders
may be negatively affected in two ways:
o Dilution. The interest of other stockholders will be diluted by the
issuance of additional shares for below-market purchase prices.
o Effect on Equity Financings. We will most likely be selling shares of our
common stock to exercising holders of warrants and options at below-market
prices (i.e., the exercise prices) at times when we would otherwise prefer
to be able to sell shares to the public ourselves at the higher market
prices.
Series A Preferred Shares.
100,000 of the Series A Preferred Shares could be immediately converted
into shares of our common stock beginning on December 15, 1997. An additional
100,000 Series A Preferred Shares will be able to be converted into shares of
our common stock on or after each of January 1, 2000, January 1, 2001 and
January 1, 2002.
Any Series A Preferred Shares converted into common stock before January
1, 2000 will be converted at a conversion price of $12.50 per share of common
stock. After that, the number of shares of common stock into which Series A
Preferred Shares are convertible is not fixed. Instead, the conversion price is
determined under a formula based upon the market price of our common stock at
specified measurement dates, which are generally one year apart. The lower the
market price of our common stock on the measurement date in question, the
greater the number of shares of common stock into which the Series A Preferred
Shares may be converted (i.e., the lower the conversion price). The conversion
price is determined as of the measurement date, and remains fixed until adjusted
on the next measurement date to reflect the market price of our common stock.
During the year 2002, the conversion price is 88% of the market price of our
common stock. This means that the common stock may be purchased at a price that
is 12% lower than the price for which it is being sold on the open market.
Therefore, it is possible that the conversion price for the Series A
Preferred Shares may be determined as of a measurement date, and the market
price of our common stock may then increase significantly during the period of
time following that measurement date but before the next measurement date. In
such a case, the conversion of a significant number of Series A Preferred Shares
into common stock during that period would dilute our other stockholders. This
is because, in such a situation, we would be required to issue a significant
number of shares of our common stock at a relatively low price (i.e., the
conversion price determined on the most recent measurement date), as compared to
the then market price of our common stock.
The terms of the Series A Preferred Shares also give us the right, in
certain circumstances, to require the holders of the Series A Preferred Shares
to convert those shares into common stock at the conversion price then in
effect. Generally, if after the determination of the conversion price for the
Series A Preferred Shares on a measurement date, the average market price of our
common stock for any period of five trading days is greater than 150% of that
conversion price, we can require the conversion of the then convertible Series A
Preferred Shares at that conversion price.
Milestone Shares.
Under our license agreement with Merck for C225, we are entitled to
receive from Merck up to $60 million upon our achievement of various milestones
in the development of C225. In connection with the final $30 million of these
milestones, Merck is entitled to receive from us Milestone Shares upon making
the applicable milestone payment. The Milestone Shares will be shares of our
common stock (or a non-voting preferred stock or other non-voting stock
convertible into our common stock). The number of shares issued to Merck will be
determined by dividing the particular milestone payment due by the purchase
price of the common stock when the milestone is achieved. The purchase price
will relate to the then market price of our common stock, plus a premium which
varies depending upon whether we achieve the milestone early, on-time or late.
The Milestone Shares will be a non-voting preferred stock or other non-voting
stock convertible into our common stock if the shares of common stock that
otherwise would be issued to Merck would result in Merck owning greater than
19.9% of our common stock. This 19.9% limitation is in place through December
2002. These convertible securities will not have voting rights. They will be
convertible at a price determined in the same manner as the purchase price for
shares of our common stock if shares of common stock were to be issued. They
will not be convertible if as a result of the conversion Merck would own greater
than 19.9% of our common stock. This 19.9% limitation is in place through
December 2002 except that after this date, Merck must sell shares they receive
as a result of conversion to the extent such shares result in their owning in
excess of 19.9% of our common stock.
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In addition, we granted Merck certain registration rights regarding the
shares of common stock that they may acquire upon conversion of the Series A
Preferred Shares and Milestone Shares.
Limited Manufacturing Experience.
We can only be profitable if our products are manufactured in commercial
quantities in compliance with regulatory requirements and at acceptable costs.
So far, we have developed products in the laboratory and, in some cases, we have
produced enough for pre-clinical animal trials and early stage clinical trials.
However, it may be difficult for us to produce large enough quantities for late
stage clinical trials or commercial distribution. If we commercialize any of our
products, we may try to adapt our Somerville, New Jersey manufacturing facility
for such purposes. Alternatively, we may outfit a new facility for use as a
commercial-scale manufacturing facility. However, we have limited experience in
clinical-scale manufacturing and no experience in commercial-scale
manufacturing. Therefore, we cannot be certain that we will be able to
successfully make the transition to late stage clinical or commercial production
of our products.
We do not know when or if we will need to adapt our existing facility or
outfit a new facility to meet any future clinical-scale or commercial-scale
manufacturing needs. Nor do we know how much such an adaptation or new facility
will cost us. Those variables will depend on many factors beyond our control,
including how quickly our products progress through clinical trials. Therefore,
we may in the future unexpectedly need a significant amount of money to adapt
our facility or build a new facility to accommodate commercial-scale
manufacturing of our products. It is not certain that we will be able to obtain
such funds. If we were not able to do so, we may be required to delay or give up
our plans to commercialize our products and sell them to the public.
Under our license agreement with Merck for C225, Merck has agreed to give
us a secured direct credit facility or a guaranty of up to $30 million for the
build-out of a manufacturing facility for the commercial production of C225. In
the event of termination of the agreement, the due date for our payment of the
credit for the manufacturing facility will be accelerated, or in the event of a
guaranty, we will be required to use our best reasonable efforts to release
Merck as guarantor. In the event by March 13, 1999 we fail to agree with Merck
on a production concept for the manufacturing facility or Merck fails to provide
us with the credit facility or guaranty then the agreement may be terminated by
either of us, in which case Merck is entitled to receive back all milestone
payments made to date.
Establishing Sales and Marketing Capability
Because we are primarily a research and development company, we do not
have a lot of experience in selling or marketing new products. We do not
necessarily plan to market our products on our own. We may decide to do so
initially through, or together with, our corporate partners. See "Risk Factors
- -- Dependence on Certain Contractual Agreements with Corporate Partners." If and
when we want to market a new product on our own, we will need expertise in sales
and marketing. We cannot be certain that we will be able to hire qualified or
experienced sales and marketing personnel or that any marketing or sales efforts
by such personnel will be successful. Under our agreement with Merck for BEC2,
we have the right to co-market BEC2 in North America if it is approved for sale
in North America. Under our agreement with Merck for C225, we have the exclusive
right to market C225 in North America if it is approved for sale in North
America. We also will co-develop C225 with Merck in Japan.
Dependence on Certain Agreements with
Corporate Partners
So far, we have earned almost all of our revenues from research and
development funding and license fees and royalties paid to us under agreements
with our corporate partners. We expect this to be the case over the next several
years as well. These agreements usually provide the corporate partner with
certain rights to manufacture and/or market in certain geographic areas
specified products which they develop using our technology. In return, the
corporate partner pays us royalties based on their future sales of those
products, if any. Certain corporate partners give us funding for our research
and development activities. Sometimes, our corporate partners pay us license
fees under these agreements. These license fees may be payable either when we
first enter into an agreement or when and if we or they, depending on the
agreement, reach agreed-upon research, regulatory and commercialization
milestones, or both. We do not receive any of these payments at regular
intervals, and their amounts have fluctuated in the past, and are expected to
continue to fluctuate in the future.
In most cases, our corporate partners can terminate these arrangements,
including their payment obligations, on relatively short notice under specified
circumstances. In the past, some of these arrangements have in fact been
terminated. We cannot be certain that we will continue to receive revenues from
these arrangements, or that we will enter into any new similar agreements.
Under these agreements, in most cases, the corporate partner controls and
is responsible for the design and conduct of pre-clinical and clinical trials.
They are also most often also responsible for seeking and obtaining regulatory
approvals and for manufacturing and marketing the products. Therefore, the
amount and timing of funding and the investment of other resources are not
controlled by us. This means that the successful development and sale and
marketing of the products are subject to the risk of financial or other
difficulties that may be experienced by our corporate partners. The amount and
timing of payments we receive under our arrangements with these parties depend
upon all of these variables which are out of our control.
Also, these corporate partners or their affiliates may be developing their
own products or technologies which may directly compete with products that are
the subject of their arrangement with us. While we believe that our corporate
partners are or will be economically motivated to work toward a successful
arrangement with us, we cannot be certain that their corporate interests and
motivations will remain consistent with ours.
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Uncertainties as to Patents and Proprietary
Technologies
Generally.
The patent position of biopharmaceutical companies is generally very
uncertain and involves complex legal and factual questions. Our success will
depend, in part, on whether we can :
o Obtain patents to protect our own products.
o Obtain licences to use the technologies of third parties which may be
protected by patents.
o Protect our trade secrets and know-how.
o Operate without infringing the intellectual property and proprietary
rights of others.
Patent Rights; Licenses. We may not be able to obtain patents that
adequately protect our own products. Also, our proprietary technologies could
conflict with the rights of others. Our ability to commercialize and market our
products using any such technologies could be materially and negatively
affected.
We have exclusive licenses or assignments of 48 issued patents worldwide.
25 of those are issued U.S. patents. We have exclusive licenses or assignments
of approximately 38 families of patent applications that relate to our
proprietary technology in the U.S. and in foreign countries. We cannot be
certain that patents will be issued as a result of any of these applications.
Nor can we be certain that any issued patents would protect or benefit us or
give us adequate protection from competing products. For example, issued patents
may be challenged and declared invalid. In addition, under many of the
agreements under which we have licenses to the patents or patent applications of
others, we are required to meet specified milestone or diligence requirements in
order to keep our license. We cannot be certain that we will satisfy any of
these requirements.
We hold rights under the patents of certain third parties that we consider
necessary for the development of our technology. We will most likely need to
obtain additional licenses to patents of others in order to commercialize
certain of the products that we are currently developing. We cannot be certain
that we will be able to obtain any such licenses or, if we can do so, how much
they will cost.
We know that others have filed patent applications in various countries
that relate to several areas in which we are developing products. Some of these
patent applications have already been issued as patents and some are still
pending. The pending patent applications may issue as patents. Issued patents
are entitled to a rebuttable presumption of validity under the laws of the U.S.
and certain other countries. These issued patents may therefore limit our
ability to develop commercial products. If we need licenses to such patents to
permit us to develop or market our products, we cannot be certain that we would
be able to get such licenses on acceptable terms.
Cost of Intellectual Property Litigation. There has been significant
litigation in the biopharmaceutical industry over patents and other proprietary
rights. Such litigation has cost the parties involved a lot of money. If we
became involved in similar litigation over our intellectual property rights, the
cost of such litigation could be substantial and could have a material negative
effect on us.
Trade Secrets and Know-How. Certain of our proprietary trade secrets and
unpatented know-how are important to our research and development activities. We
cannot be certain that others will not develop the same or similar technologies
on their own. Although we have taken steps, including entering into
confidentiality agreements with our employees and third parties, to protect our
trade secrets and unpatented know-how and keep them secret, third parties may
still obtain such information.
Specific Intellectual Property Issues.
The following are some of the specific areas in which we may be negatively
affected by the patents and patent applications of others:
C225 Patent Issues. We have an exclusive license to an issued U.S. patent
for the murine form of C225, our EGF receptor antibody product. Our licensor of
this patent, however, did not obtain patent protection outside the U.S. for this
antibody. We have, however, sought additional patent protection for C225 and its
use with chemotherapy and radiation therapy. We have done this by filing
specific patent applications in the U.S. and elsewhere and by exclusively
licensing from a major pharmaceutical company patent applications that relate to
the use of EGF receptor antibodies together with chemotherapy. We are currently
prosecuting these applications. We cannot be certain that we will be successful
in these efforts or that patents will ever be issued.
C225 is a "chimerized" monoclonal antibody, which means that it is made of
antibody fragments derived from more than one type of animal. Patents have been
issued to other biotechnology companies that cover the chimerization of
antibodies. Therefore, we may be required to obtain licenses under these patents
before we can commercialize our own chimerized monoclonal antibodies, including
C225. We cannot be certain that we will be able to obtain such licenses in the
territories where we want to commercialize, or how much such licenses would
cost.
BEC2 Patent Issues. We know that others have been issued patents in the
U.S. and Europe covering anti-idiotypic antibodies and/or their use for the
treatment of tumors. These patents, if valid, could be interpreted to cover our
BEC2 monoclonal antibody and certain uses of BEC2. Merck, our worldwide licensee
of BEC2, has informed us that it has obtained non-exclusive, worldwide licenses
to these patents in order to market BEC2 in its territory. We are entitled to
co-promote BEC2 in the U.S., however, we cannot be certain that we could obtain
such licenses on commercially acceptable terms, if at all.
Angiogenesis Inhibitor Patent Issues. We have patents and have filed
patent applications to protect our proprietary rights to anti-angiogenic
therapeutics, as well as
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<PAGE>
therapeutic methods of treating angiogenic disease. We are aware that others
have filed patent applications that could affect our ability to commercialize
some of our anti-angiogenic therapeutics or therapeutic treatments.
Diagnostic Product Patent Issues. We are aware that third parties have
filed patent applications in areas that could affect our ability or Abbott's
ability to commercialize our diagnostic products. These areas could include
target amplification technology and signal amplification technology. Third party
patents have already been issued in the field of target amplification such as
polymerase chain reaction technology (also known as PCR).
Reliance on and Attraction and Retention of Key
Personnel and Consultants
Our ability to successfully develop marketable products and to maintain a
competitive position will depend in large part on our ability to attract and
retain highly qualified scientific and management personnel. We will also need
to develop and maintain relationships with leading research institutions and
consultants. Our success is also very dependent upon the principal members of
our management, scientific staff and Scientific Advisory Board. Competition for
such personnel and relationships is intense, and we cannot be certain that we
will be able to continue to attract and retain such personnel and maintain such
relationships.
Technological Change and Risk of Obsolescence; Competition
The biopharmaceutical industry is subject to rapid and significant
technological change. We have many competitors, including major drug and
chemical companies, specialized biotechnology firms, universities and other
research institutions. These competitors may develop technologies and products
that are more effective than our products or which would make our technology and
products obsolete and non-competitive. Many of these competitors have much
greater financial and technical resources and production and marketing
capabilities than we do. In addition, many of our competitors have much more
experience than we do in pre-clinical testing and human clinical trials of new
or improved drugs, as well as in obtaining FDA and other regulatory approvals.
We know of various products being developed or manufactured by competitors
that are used for the prevention, diagnosis or treatment of diseases that we
have targeted for product development. Some of these competitive products use
therapeutic approaches that compete directly with certain of our product
candidates. We have little experience in conducting and managing the
pre-clinical testing necessary to enter the clinical trials that are needed to
obtain government approvals. Therefore, our competitors may succeed in obtaining
FDA approval for their competitive products sooner than we do for ours. This
could hurt our ability to further develop and market our products. Also, if we
do begin significant commercial sales of our products, we will be competing with
the established manufacturing and marketing capabilities of our competitors.
These are areas in which we have limited or no experience. See "Risk
Factors--Limited Manufacturing Experience" and "Risk Factors--Establishing Sales
and Marketing Capability."
Extensive Government Regulation
The research, pre-clinical development, clinical trials, manufacturing and
marketing of our products are all subject to extensive regulation by U.S. and
foreign governmental authorities. The FDA and similar foreign regulatory
authorities regulate our clinical trials as well as our manufacturing and
marketing operations. They require us to comply with product-specific testing
and approval processes. It may take many years and cost a significant amount of
money to obtain the required regulatory approvals for our products. Once we
begin clinical trials for a new biologic therapeutic or vaccine product, it may
take five to ten years (or more) to receive the required FDA approval to
commercialize that product and begin to sell and market it to the public. We may
need two to six years to develop a new in vitro diagnostic product, depending
upon the clinical data requirements or approval process specified by the FDA for
the approval of the product. The FDA also has the power to request additional
data and to substantially extend these approval processes. Moreover, we cannot
even be certain that we will ultimately receive FDA approval at the end of these
approval processes. In addition, even if granted, product approvals may be
withdrawn or limited at a later time if products do not comply with regulatory
standards or if unexpected problems occur following initial marketing.
We have not sought or received regulatory approval for the commercial sale
of any of our products or for any manufacturing techniques or facilities. We and
our licensees may experience long delays or excessive costs when we do attempt
to get necessary approvals or licenses. Future federal, state, local or foreign
legislative or administrative acts could also prevent or delay regulatory
approval of our products or the products of our licensees. We cannot be certain
that we or our corporate partners will be able to get the necessary approvals
for clinical testing, manufacturing or marketing of our products, or that the
clinical data we obtain in our studies will be sufficient to establish that our
products are safe and effective. If we fail to get or maintain required
governmental approvals, we or our licensees could be delayed or prevented from
further developing particular products or from marketing our products. Such
failure could also limit the commercial use of the products and therefore have a
material negative effect on their marketability and, in turn, on our liquidity
and financial condition.
Product Liability Exposure
Because our product candidates are new treatments for diseases, their use
during testing or after approval could expose us to product liability claims. We
cannot be certain that we would have enough money available to satisfy any
liability that might result from any such claims. We try to obtain
indemnification from our corporate partners against certain of these types of
claims. However, we cannot be certain that these parties would choose to honor,
or have the financial resources to honor, any such indemnity obligations. We
carry product liability insurance which covers liabilities that may arise in
connection with pre-clinical and clinical testing of our products. However, we
cannot be certain that this coverage
14
<PAGE>
will be adequate to protect us in the event of a successful product liability
claim against us.
Hazardous Materials; Environmental Matters
We use hazardous materials, chemicals, viruses and various radioactive
compounds in our research and development activities. Therefore, we are subject
to federal, state and local laws and regulations governing the use, manufacture,
storage, handling and disposal of these materials and certain waste products. We
believe that our safety procedures for handling and disposing of these materials
comply with the applicable standards. However, we cannot completely eliminate
the risk of accidental contamination or injury from these materials. If such an
accident happened, we could be held liable for any resulting damages. Any such
liability could exceed our financial resources. Also, we may be required to
spend a significant amount of money to comply with environmental laws and
regulations in the future. Current or future environmental laws or regulations
may have a material negative effect on our operations, business or assets.
Uncertainty of Health Care Reimbursement and Related Matters
Once we have commercialized our products and market them to the public,
our ability to sell them at a reasonable profit may depend, in part, on the
extent to which government health administration authorities, private health
coverage insurers and other organizations reimburse purchasers or users of our
products for the costs of such products and related treatments. If people are
not entitled to adequate healthcare reimbursement for the cost of using our
products, they may not use them or may reduce such use. The reimbursement status
of newly-approved health care products is uncertain, and there can be no
assurance that the reimbursement that will be available to purchasers and users
of our products will be enough to ensure profitable sales of our products.
Possible Volatility of Stock Price
We believe that the following factors, among others, have caused the
market price of our common stock to fluctuate substantially, and that they will
continue to do so in the future :
o The status of our products in development.
o The formation or termination of our corporate alliances.
o Determinations regarding our patent applications and those of others.
o Variations in our quarterly operating results.
Also, the stock market has recently experienced extreme price and volume
fluctuations. These fluctuations have especially affected the market price of
the stock of many high technology and healthcare-related companies. Such
fluctuations have often been unrelated to the operating performance of these
companies. Nonetheless, these broad market fluctuations may negatively affect
the market price of our common stock.
Limitations on Net Operating Loss
Carryforwards
At December 31, 1997, we had (1) net operating loss carryforwards for
federal income tax purposes of approximately $115,000,000 which expire at
various dates from 2000 through 2012 and (2) research credit carryforwards of
approximately $2,303,000 which expire at various dates from 2001 through 2012.
These "carryforwards" are tax assets which we can use in future years to offset
our federal taxable income and reduce the amount of federal taxes that we are
required to pay in those years. There can be no assurances that the Company will
ever generate income which would enable it to utilize the net operating loss
carryforwards.
Under Section 382 of the Internal Revenue Code of 1986, as amended, a
company's annual ability to use these carryforwards to offset income and
therefore reduce income tax expense may be limited if that company experiences a
change in ownership of more than 50 percentage points within any three-year
period. Since 1986, we have experienced two such ownership changes. As a result,
we are only permitted to use in any one year $5,159,000 of our available net
operating loss carryforwards that relate to periods before these ownership
changes to offset federal taxable income. Similarly, we are limited in using our
research credit carryforwards related to years before the ownership changes to
offset future federal income tax expense. Accordingly, as a result of these
ownership changes, we may be required to pay more federal income tax in future
years than we would have been required to pay had the ownership changes not
occurred. There can be no assurance that the Company will ever generate income
which would enable it to utilize these net operating loss carryforwards.
Dividend Policy and Restrictions
We have never paid any cash dividends on our common stock. Our Board of
Directors will decide our future dividend policy based on our results of
operations, financial condition, capital requirements and other circumstances.
We do not anticipate that any dividends will be declared on our common stock in
the foreseeable future. Any earnings which we may earn, other than earnings
which may be used to pay dividends owed to the holder of our Series A Preferred
Stock, will be retained to finance our growth. In addition, the terms of the
Series A Preferred Stock restrict our ability to pay dividends on our stock. See
"Prospectus-Summary--The Company--BEC2 Cancer Vaccine" and "Risk
Factors--Dilution."
Year 2000.
We have completed a review of our internal computer systems and we are in
the process of making inquiries of groups with which we do business with respect
to their computer systems, to determine whether these systems will experience a
"Year 2000 problem". A Year 2000 problem would result from a computer system
recognizing the first two digits of a year after the year 1999 as "19" instead
of "20", thereby reading the wrong year. We expect to have identified and
replaced or corrected all computer systems which would cause a Year 2000 problem
by the first quarter of 1999. There
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is no assurance that we will be able to successfully do this, or that the groups
with which we do business will timely identify and replace their computer
systems which would cause a Year 2000 problem. The failure to identify and
remedy Year 2000 problems could disrupt important operations which could affect
the development and ultimate marketing of potential products as well as put us
at a competitive disadvantage relative to companies that have corrected such
problems.
-----------------------------
USE OF PROCEEDS
-----------------------------
We will not receive any proceeds from the sale by the Selling Stockholders
of the Shares. They will receive all such proceeds. However, the Selling
Stockholders will pay us the purchase price for the Shares when they exercise
their warrants. If all Selling Stockholders exercised all of their warrants that
they have not yet exercised, we would receive total proceeds of about
$1,127,250. We expect to use any such proceeds (1) to continue to pay for and
expand our research and development programs and (2) for general corporate
purposes, including working capital. There can be no assurance that the Selling
Stockholders will exercise any of their warrants.
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-----------------------------
SELLING STOCKHOLDERS
-----------------------------
The table below presents the following information about the number of
shares of our common stock owned by the Selling Stockholders: (1) the number of
shares such Selling Stockholder beneficially owns as of the date of this
prospectus, (2) the number of Shares that such Selling Stockholder is offering
under this prospectus, (3) the number of shares that such Selling Stockholder
will beneficially own after the completion of this offering and (4) the
percentage of our outstanding shares of common stock that such Selling
Stockholder will beneficially own after the completion of the offering.
Dr. Harlan W. Waksal is our Executive Vice President and Chief Operating
Officer and is a member of our Board of Directors. Dr. Samuel D. Waksal is our
President and Chief Executive Officer and a member of our Board of Directors.
Dr. Samuel D. Waksal and Dr. Harlan W. Waksal are brothers. Mr. John B. Landes
is our Vice President-Business Development and General Counsel. Dr. Zvi Fuks is
a member of our Scientific Advisory Board. Mr. Robert F. Goldhammer is the
Chairman of our Board of Directors.
<TABLE>
<CAPTION>
Percentage of
Number of Shares To Outstanding Shares To
Number of Shares Number of Shares Be Owned After Be Owned After
Beneficially Offered By This Completion Completion of
Selling Stockholder(1) Owned(1) Prospectus(2) of Offering(3) Offering(3)
- ------------------------ -------- ------------- -------------- -----------
<S> <C> <C> <C> <C>
Samuel D. Waksal 1,470,583(4) 431,997(4) 1,038,586 3.8%
Harlan W. Waksal 1,245,780(5) 734,500(5) 511,280 1.9%
Robert F. Goldhammer 836,576(6) 418,000(6) 418,576 1.6%
John B. Landes 337,000(7) 135,000(7) 202,000 *
Zvi Fuks 116,500(8) 12,000(8) 104,000 *
</TABLE>
- --------------------
* Less than 1%.
(1) Assumes that all options or warrants to purchase shares of our common
stock held by the Selling Stockholders are exercisable within 60 days of
the date of this prospectus.
(2) Assumes that the Selling Stockholders would currently be allowed to
exercise all of their warrants to purchase all of the Shares offered by
this prospectus.
(3) Assumes that the Selling Stockholders have sold all of the Shares offered
by this prospectus and that all options or warrants to purchase shares of
our common stock held by them are exercisable within 60 days. Because the
Selling Stockholders may sell the shares offered by this prospectus from
time to time, we do not currently know the date of the completion of the
offering. Therefore, the number and percentages of shares included are
based on 24,512,107 shares, the total number of our shares of common stock
outstanding as of December 31, 1998, giving effect to the exercise of all
of the Selling Stockholders' warrants to purchase Shares offered by this
prospectus. Shares of our Series A Convertible Preferred Stock are not
included, because such shares carry no voting rights.
(4) Includes an aggregate of 431,997 Shares previously acquired by Dr. Waksal
upon the exercise of warrants.
(5) Includes (i) an aggregate of 337,500 Shares subject to warrants issued to
Dr. Waksal and (ii) an aggregate of 397,000 Shares previously acquired by
Dr. Waksal upon the exercise of warrants.
(6) Includes (i) an aggregate of 120,000 Shares previously acquired by Mr.
Goldhammer upon the exercise of warrants and (ii) an aggregate of 298,000
Shares subject to warrants issued to Mr. Goldhammer. The additional shares
of our common stock listed under the column "Number of Shares Beneficially
Owned" include 13,314 shares of our common stock held in trust, as to
which Mr. Goldhammer disclaims beneficial ownership.
(7) Includes (i) 31,000 Shares previously acquired by Mr. Landes upon the
exercise of warrants and (ii) 104,000 Shares subject to warrants issued to
Mr. Landes.
(8) Includes 12,000 Shares subject to warrants issued to Dr. Fuks.
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<PAGE>
-----------------------------
PLAN OF DISTRIBUTION
-----------------------------
Manner of Sales; Broker-Dealer Compensation
The Selling Stockholders may sell any Shares that they acquire when they
exercise their warrants using this prospectus. The Selling Stockholders may
elect to sell any such Shares in privately negotiated transactions or in the
over-the-counter market through brokers and dealers. Such brokers and dealers
may act as agent or as principals. They may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholders or from the
purchasers of their Shares for whom the broker-dealers may act as agent or to
whom the broker-dealers may sell as principal, or both. The Selling Stockholders
may also sell the shares in reliance upon Rule 144 under the Securities Act of
1933, as amended, at such times as they are eligible to do so. We have been
advised by the Selling Stockholders that they have not made any arrangements for
the distribution of the Shares. Broker-dealers who effect sales for the Selling
Stockholders may arrange for other broker-dealers to participate. Broker-dealers
engaged by the Selling Stockholders will receive commissions or discounts from
them in amounts to be negotiated prior to the sale.
Filing of Supplement to Prospectus In Certain
Instances
If any Selling Stockholder notifies us that he or she has entered into a
material arrangement (other than a customary brokerage account agreement) with a
broker or dealer for the sale of Shares under this prospectus through a block
trade, purchase by a broker or dealer or similar transaction, we will file a
supplement to the prospectus under Rule 424(c) under the Securities Act of 1933,
as amended. Such a supplement will disclose:
o The name of each such broker-dealer.
o The number of Shares involved.
o The price at which those Shares were sold.
o The commissions paid or discounts or concessions allowed to such broker
dealer(s).
o If applicable, that such broker-dealer(s) did not conduct any
investigation to verify the information contained or incorporated by
reference in this prospectus, as supplemented.
o Any other facts material to the transaction.
Certain Persons Deemed to be Underwriters
The Selling Stockholders and any broker-dealers who execute sales for them
may be deemed to be "underwriters" within the meaning of the Securities Act of
1933, as amended, because of the number of Shares to be sold or resold by such
persons or entities or the manner of sale of such Shares, or both. If a Selling
Stockholder or any broker-dealer or other holders were determined to be
underwriters, any discounts, concessions or commissions received by them or by
brokers or dealers acting on their behalf and any profits received by them on
the resale of their Shares might be deemed to be underwriting discounts and
commissions under the Securities Act of 1933, as amended.
Regulation M
The Selling Stockholders have represented to us that any purchase or sale
of Shares by them will comply with Regulation M promulgated under the Securities
Exchange Act of 1934, as amended. In general, Rule 102 under Regulation M
prohibits any person connected with a distribution of our common stock (a
"Distribution") from directly or indirectly bidding for, or purchasing for any
account in which he or she has a beneficial interest, any of our common stock or
any right to purchase our common stock, for a period of one business day before
and after completion of his or her participation in the distribution (we refer
to that time period as the "Distribution Period").
During the Distribution Period, Rule 104 under Regulation M prohibits the
Selling Stockholders and any other persons engaged in the Distribution from
engaging in any stabilizing bid or purchasing our common stock except for the
purpose of preventing or retarding a decline in the open market price of our
common stock. No such person may effect any stabilizing transaction to
facilitate any offering at the market. Inasmuch as the Selling Stockholders will
be reoffering and reselling our common stock at the market, Rule 104 prohibits
them from effecting any stabilizing transaction in contravention of Rule 104
with respect to our common stock.
-----------------------------
LEGAL MATTERS
-----------------------------
Kaye, Scholer, Fierman, Hays & Handler, LLP will issue an opinion about
the validity of the shares for us.
18
<PAGE>
-----------------------------
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
-----------------------------
ImClone's Certificate of Incorporation and Bylaws provide for
indemnification of officers and directors in instances, among others, in which
they acted in good faith and in a manner they reasonably believed to be in, or
not opposed to, our best interests and in which, with respect to criminal
proceedings, they had no reasonable cause to believe their conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
ImClone pursuant to the foregoing provisions, or otherwise, we have been advised
that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of
1933, as amended, and is, therefore, unenforceable.
19
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth all expenses payable by ImClone in
connection with the sale of the shares offered by this prospectus.
SEC Registration Fee: $ 4,328
Blue Sky Fees and Expenses*: 1,000
Legal Fees and Expenses*: 35,000
Accounting Fees and Expenses*: 5,000
Miscellaneous*: 2,672
---------
Total*: $48,000
- -----------------
* Estimated.
Item 15. Indemnification of Directors and Officers.
Our Certificate of Incorporation and Bylaws set forth the extent to which
our officers and directors may be indemnified by us against any liabilities
which they may incur. The general effect of such provisions is that, on the
terms and conditions set forth in our Certificate of Incorporation and Bylaws,
any person made a party or threatened to be made a party to an action, suit or
proceeding by reason of the fact that he or she is or was a director or officer,
or is or was serving as a director, officer, employee or agent of another
corporation or other enterprise at our request, shall be indemnified by us
against expenses (including attorneys' fees, judgments, fines and amounts paid
in settlement) reasonably incurred or suffered by him or her in connection with
such action, suit or proceeding, to the full extent permitted under the laws of
the State of Delaware; provided, however, that, subject to certain limited
exceptions, we shall indemnify any such person seeking indemnification in
connection with a proceeding initiated by such person only if such proceeding
was authorized by our Board of Directors. Our Certificate of Incorporation gives
our Board of Directors the authority to extend such indemnification to our
employees and other agents as well.
The general effect of the indemnification provisions contained in Section
145 of the General Corporation Law of the State of Delaware (the "DGCL") is as
follows: A director or officer who, by reason of such directorship or
officership, is involved in any action, suit or proceeding (other than an action
by or in the right of the corporation) may be indemnified by the corporation
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding if he or she acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, has no
reasonable cause to believe that his or her conduct was unlawful. A director or
officer who, by reason of such directorship or officership, is involved in any
action or suit by or in the right of the corporation may be indemnified by the
corporation against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection with the defense or settlement of such
action or suit if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification may be made in respect of any claim,
issue or matter as to which he or she shall have been adjudged to be liable to
the corporation unless and only to the extent that a court of appropriate
jurisdiction shall approve such indemnification.
Our Certificate of Incorporation provides that, to the maximum extent
permitted under the DGCL, a director of ImClone shall not be personally liable
to us or to any of our stockholders for monetary damages for breach of fiduciary
duty as a director of ImClone. Section 102(b)(7) of the DGCL permits a
corporation to include in its certificate of incorporation a provision that
eliminates or limits the personal liability of a director to the corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director; provided, that such provision shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the DGCL or (iv) for any transaction from which the
director derived in improper personal benefit.
Item 16. Exhibits.
Exhibit No. Description
- ----------- -----------
5.1 Opinion of Kaye, Scholer, Fierman, Hays & Handler, LLP regarding the
legality of the securities being registered. *
10.70 Development and License Agreement between the Company and Merck KGaA
dated December 14, 1998. **
20
<PAGE>
23.1 Consent of KPMG LLP.***
23.2 Consent of Kaye, Scholer, Fierman, Hays & Handler, LLP. (Included in
Exhibit 5.1).
* Previously Filed
** Filed herewith. Confidential Treatment has been requested with
respect to certain portions of this Exhibit.
*** Filed herewith.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in this Registration Statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above do not apply
if the registration statement is on Form S-3, Form S-8 or Form F-3 and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement;
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of
21
<PAGE>
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on the 8th day of
January 1999.
IMCLONE SYSTEMS INCORPORATED
By: /s/ Samuel D. Waksal
-------------------------------------
Samuel D. Waksal
President and Chief Executive Officer
Signature Title Date
--------- ----- ----
*
- -------------------------- Chairman of the Board and Director January 8, 1999
Robert F. Goldhammer
*
- -------------------------- President, Chief Executive Officer January 8, 1999
Samuel D. Waksal and Director
(Principal Executive Officer)
*
- -------------------------- Executive Vice President, Chief January 8, 1999
Harlan W. Waksal Operating Officer and Director
*
- -------------------------- Vice President of Finance and January 8, 1999
Carl Goldfischer Chief Financial Officer
(Principal Financial and
Accounting Officer)
*
- -------------------------- Director January 8, 1999
Jean Carvais
*
- -------------------------- Director January 8, 1999
Vincent T. DeVita, Jr.
*
- -------------------------- Director January 8, 1999
Paul B. Kopperl
*
- -------------------------- Director January 8, 1999
William R. Miller
*
- -------------------------- Director January 8, 1999
David M. Kies
*
- -------------------------- Director January 8, 1999
John Mendelsohn
*
- -------------------------- Director January 8, 1999
Richard Barth
/s/ John B. Landes
- --------------------------
John B. Landes
as attorney-in-fact
S-1
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
5.1 Opinion of Kaye, Scholer, Fierman, Hays & Handler, LLP regarding
the legality of the securities being registered.*
10.70 Development and License Agreement between the Company and Merck
KGaA dated December 14, 1998.**
23.1 Consent of KPMG LLP***
23.2 Consent of Kaye, Scholer, Fierman, Hays & Handler, LLP.
(Included in Exhibit 5.1).
* Previously Filed
** Filed herewith Confidential Treatment has been requested with respect to
certain portions of this Exhibit.
*** Filed herewith.
Exhibit 10.70
CONFIDENTIAL TREATMENT REQUESTED
DEVELOPMENT AND LICENSE AGREEMENT
This Development and License Agreement (this "Agreement"), dated the 14th
day of December, 1998, by and between:
ImClone Systems Incorporated, a Delaware corporation, having an address at
180 Varick Street, New York, New York, 10014 USA (hereinafter referred to as
"ImClone"), and
Merck KGaA, a German corporation with general partners, having an address
at Frankfurter Stra(beta)e 250, D-64293 Darmstadt, Federal Republic of Germany
(hereinafter referred to as "Merck").
W I T N E S S E T H :
WHEREAS, ImClone is a research-based corporation having expertise in the
area of biotechnology leading to the development of innovative biotechnological
products, including the area of cancer therapeutics;
WHEREAS, ImClone possesses certain knowledge, know-how, trade secrets,
technical information, and expertise with respect to the research and
development of cancer therapeutics;
WHEREAS, Merck possesses related know-how and trade secrets and intends to
achieve a substantial business presence in the area of biotechnological
products, including but not limited to cancer therapeutics, and possesses the
capability to evaluate, develop, manufacture and commercialize products for uses
therein;
WHEREAS, the parties desire to develop, manufacture and commercialize C225
(as described in Schedule A, attached hereto and specifically incorporated
herein);
WHEREAS, ImClone has filed or licensed certain patent applications with
respect to targeting Epidermal Growth Factor Receptors (sometimes referred to as
"EGFr") in combination with
<PAGE>
chemotherapy and radiotherapy, respectively, as further described in Schedule B,
attached hereto and specifically incorporated herein;
WHEREAS, Merck desires to develop and commercialize cancer therapeutics as
part of its cancer therapeutics business; and
WHEREAS, ImClone desires to grant to Merck and Merck accepts certain
rights and licenses, all as set forth herein, under the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and obligations
hereinafter provided, both parties agree to the following:
ARTICLE I
Definitions
The following terms, as used in this Agreement, shall have the meanings
set forth in this Article I.
1.1. The term "Acquired Non-Voting Shares" shall mean those shares of
non-voting securities of ImClone, which shall be newly issued shares of
non-voting securities of ImClone, acquired by Merck upon making certain
Milestone Payments under certain circumstances, and which shall be convertible
into shares of Common Stock as provided in Section 4.1(b) and Schedule E,
attached hereto and specifically incorporated herein.
1.2. The term "Acquired Voting Shares" shall mean those shares of Common
Stock, which shall be newly issued shares of Common Stock, acquired by Merck
upon making certain Milestone Payments, as provided in Section 4.1(a) and
Schedule E hereof.
1.3. The term "Affiliate" shall mean with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under common control
with such other Person. The term "control" (and the derivative terms
"controlling" and "controlled") as used herein means the possession,
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<PAGE>
directly or indirectly, of the power to direct or cause the direction of the
management and the policies of a Person, whether through ownership of voting
securities, or by contract or otherwise.
1.4. The term "Alternative Products" shall mean those products which, as
part of the Research and Development, may be developed and/or acquired
subsequent to the execution of this Agreement solely by ImClone or any of its
Affiliates or jointly with Merck or any of its Affiliates as an alternative to
the Compound, including but not limited to any inhibitors of EGFr or
improvements thereto that are not the Compound or an Improvement.
1.5. The term "Alternative Product Patents" shall mean any and all of
ImClone's right, title and interest in any patent application covering any
Alternative Products and/or process for the manufacture or use of such
Alternative Products, together with any divisions, reissues, continuations,
continuations-in-part, extensions, restorations, and/or additions therefor,
owned, licensed or otherwise controlled individually by ImClone or any of its
Affiliates or jointly by ImClone or any of its Affiliates and Merck or any of
its Affiliates, during the term of this Agreement and developed as part of the
Research and Development with respect to Alternative Products, and all patents
that may issue from time to time from any such patent applications.
1.6. The term "Alternative Product Technology" shall mean any and all of
ImClone's right, title and interest in any technology that is developed and/or
acquired by ImClone or any of its Affiliates, or jointly with Merck or any of
its Affiliates, subsequent to the date of this Agreement and which is reasonably
necessary to enable the making, use or sale of Alternative Products, including
but not limited to methods of manufacture, characterization and assaying
techniques, biological materials such as compounds, DNA, RNA, plasmids, vectors,
organisms, antibodies, hybridomas, fusion partners, systems for the augmentation
of the biological response, including but not limited to adjuvants and other
carriers and/or enhancers, and processes employed for producing or developing
Alternative Products, purification methods and methods for using Alternative
Products.
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1.7. The term "C225" shall mean the chimerized monoclonal antibody to EGFr
known as C225, as described in Schedule A, attached hereto and specifically
incorporated herein.
1.8. The term "Chemotherapy Patent" shall mean the patents and patent
applications specified in Schedule B as "Applications of Schlessinger et al.,
assigned to Rhone Poulenc Rorer."
1.9. The term "Merck Products" shall mean any and all products
incorporating the humanized antibody of Merck or any of its Affiliates to EGFr
(including any improvements to such products) which, but for the licenses
granted herein, would infringe the Chemotherapy Patent and/or the Radiotherapy
Patent.
1.10. "Merck Products Net Sales" shall mean the total invoiced amount
related to all sales in the Territory by Merck and its Affiliates of Merck
Products in any form to a Person which is not Merck or an Affiliate of Merck, a
sublicensee, or an Affiliate of a sublicensee, less the following:
(a) Customary or usual trade or quantity discounts or other
charge-backs actually taken by the customer and not already credited on an
invoice;
(b) Sales, use, value-added or other excise taxes, imposed and paid
directly with respect to the sale, and included within the invoice price,
and separately stated on the invoice;
(c) Refunds for customer returns, not already credited on an
invoice; and
(d) Customs, duties, transportation charges and other similar
expenses separately invoiced.
1.11. The term "Collateral License Agreements" shall mean certain license
agreements, both currently existing and not yet entered into with third parties,
to be negotiated and entered into by ImClone, subject to Section 11.7 hereof, as
more fully described in Schedule F, attached hereto and specifically
incorporated herein.
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<PAGE>
1.12. The term "Collateral License Agreement Royalties" shall have the
meaning attributed to such term in Section 9.6 hereof.
1.13. The term "Common Stock" shall mean ImClone's common stock, par value
$0.001 per share.
1.14. The term "Compound" shall mean the monoclonal antibody targeting
EGFr developed by ImClone and known as C225, as more specifically described in
Schedule A, attached hereto and specifically incorporated herein.
1.15. "Conversion Notification Date" shall have the meaning set forth in
Schedule E, attached hereto and specifically incorporated herein.
1.16. The term "Conversion Triggering Date" shall have the meaning set
forth in Schedule E, attached hereto and specifically incorporated herein.
1.17. The term "Fully-Loaded Cost of Goods" shall have the meaning set
forth in Schedule C, attached hereto and specifically incorporated herein.
1.18. The term "Gross Margin" shall mean [ *** ] .
1.19. The term "Improvements" shall mean all enhancements ImClone or any
of its Affiliates may make to the Compound prior to the termination of this
Agreement, whether or not patentable, which are invented, developed, discovered
or otherwise acquired by ImClone or any of its Affiliates.
1.20. The term "Licensed Product Patents" shall mean any and all of
ImClone's right, title and interest in any non-U.S. and non-Canadian patent
application covering the Compound and/or any Improvement and/or process for the
manufacture or use of the Compound and/or such Improvement, including but not
limited to, those set forth in Schedule B, attached hereto and specifically
incorporated herein, as amended from time to time, together with any divisions,
reissues, continuations, continuations-
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<PAGE>
in-part, extensions, restorations, and/or additions therefor, owned, licensed or
otherwise controlled by ImClone or any of its Affiliates during the term of this
Agreement, and all patents that have issued or that may issue from time to time
from any such patent applications.
1.21. The term "Licensed Products" shall mean the Compound, any and all
products incorporating the Compound and any and all products made by use of any
compound or product covered by any Licensed Product Patent, including, but not
limited to, any Improvements to the Compound.
1.22. The term "Licensed Product Technology" shall mean any and all of
ImClone's right, title and interest in any technology that is owned, licensed or
otherwise controlled by ImClone or any of its Affiliates as of the date of this
Agreement, as well as any and all technology developed and/or acquired by
ImClone or any of its Affiliates during the term of the Agreement, and which is
reasonably necessary to enable the making, use or sale of Licensed Products,
including but not limited to methods of manufacture, characterization and
assaying techniques, biological materials such as compounds, DNA, RNA, plasmids,
vectors, organisms, antibodies, hybridomas, fusion partners, systems for the
augmentation of the biological response, including but not limited to adjuvants
and other carriers and/or enhancers, and processes employed for producing or
developing the Compound and/or Licensed Products, purification methods, Licensed
Products per se, and methods for using Licensed Products.
1.23. The term "Loss" means, with respect to the indemnification
provisions set forth in Article X, any and all damages, claims, demands,
liabilities, losses, costs or expenses of any kind, including, but not limited
to, all costs and expenses of investigating or defending any claims, demands,
liabilities or losses, and reasonable attorneys' fees and litigation expenses.
1.24. The term "Manufacturing Facility Line of Credit" shall have the
meaning attributed to such term in Section 4.9.
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1.25. The term "Milestone" shall have the meaning attributed to such term
in Schedule E, attached hereto and specifically incorporated herein.
1.26. The term "Milestone Conversion Shares" shall have the meaning set
forth in Schedule E attached hereto and specifically incorporated herein.
1.27. The term "Milestone Payment" shall have the meaning attributed to
such term in Section 4.1 hereof.
1.28. The term "Milestone Payment Date" shall have the meaning attributed
to such term in Section 4.1 hereof. 1.29. The term "Net Sales" shall mean the
total invoiced amount related to all sales by Merck and its Affiliates of
Licensed Products and Alternative Products in any form to any Person which is
not Merck, an Affiliate of Merck, a sublicensee or an Affiliate of a
sublicensee, less the following:
(a) Customary or usual trade or quantity discounts or other
charge-backs actually taken by the customer and not already credited on an
invoice;
(b) Sales, use, value-added or other excise taxes, imposed and paid
directly with respect to the sale, and included within the invoice price,
and separately stated on the invoice; ]
(c) Refunds for customer returns, not already credited on an
invoice; and
(d) Customs duties, transportation charges and other similar
expenses separately invoiced.
1.30. The term "Person" means an individual, corporation, partnership,
limited liability company, association, trust or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
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1.31. The term "Preferred Stock Purchase Agreement" means that certain
Preferred Stock Purchase Agreement, dated as of December 3, 1997, by and between
ImClone and Merck.
1.32. The term "Radiotherapy Patent" shall mean the patent applications
specified in Schedule B as "Applications of Waksal et al., assigned to ImClone."
1.33. The term "Research and Development" shall mean that work which
ImClone and Merck undertake to conduct in connection with Licensed Products,
and, to the extent applicable, Alternative Products, as set forth in the
Research and Development Protocol.
1.34. The term "Research and Development Protocol" shall mean the plan for
the conduct of the Research and Development during the period of Research and
Development, as set forth in Schedule D, attached hereto and specifically
incorporated herein, and as may be amended by the parties from time to time.
1.35. The term "Series A Convertible Preferred Stock" shall mean the
Series A Convertible Preferred Stock of ImClone, $1.00 par value per share.
1.36. The term "Standstill Period" shall mean the time period beginning on
the date of this Agreement and terminating on the fifth (5th) anniversary of the
Preferred Stock Purchase Agreement, i.e. December 3, 2002.
1.37. The term "Steering Committee" shall mean the committee as defined in
Section 3.1.
1.38. The term "Territory" shall mean worldwide, excluding the Dominion of
Canada and the United States of America (including all territories and
possessions thereof).
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ARTICLE II
Grant of Rights
2.1. Subject to Section 2.3, ImClone hereby grants to Merck an exclusive
license with the right to sublicense as limited by Section 2.6, to make, use and
sell Licensed Products and Alternative Products within the Territory and a
non-exclusive license to use Licensed Product Technology and Alternative Product
Technology for the manufacture of the Compound.
2.2. ImClone hereby grants to Merck an exclusive license, without the
right to sublicense other than to Merck's Affiliates or to sublicensees with
ImClone's prior written consent, which consent shall not be unreasonably
withheld, the Radiotherapy Patent and the Chemotherapy Patent, respectively, to
make, use and sell Merck Products within the Territory for a term beginning on
the date of this Agreement and continuing throughout the life of the
Radiotherapy Patent and of the Chemotherapy Patent, respectively, in each case,
as such patent may be extended or restored. In the event that the Compound fails
in the United States and Canada ("Product Failure"), then the exclusive license
granted under this Section 2.2 shall automatically become a worldwide exclusive
license granted to Merck for a term beginning on the date of the Product Failure
and continuing throughout the life of the Radiotherapy Patent and/or the
Chemotherapy Patent, as the case may be, in each case, as such patent may be
extended or restored. This Section 2.2 shall survive the termination of the
Agreement.
2.3. The parties hereby agree to use their best reasonable efforts to
reach a separate agreement within twelve (12) months of the first commercial
sale of any Licensed Product in the Territory pursuant to which Merck and
ImClone will collaboratively develop and market Licensed Products and
Alternative Products in Japan; provided, however, that if no such agreement is
reached within such twelve-month period, the parties shall have co-exclusive
rights with the right to sublicense with respect to Licensed Products and/or
Alternative Products in Japan. Notwithstanding any other provision of this
Agreement, ImClone acknowledges and agrees that ImClone shall under no
circumstances take any unilateral action
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<PAGE>
with respect to any Licensed Products
and/or Alternative Products in Japan without Merck' prior written consent, which
consent shall not be unreasonably withheld.
2.4. Notwithstanding any other provision of this Agreement, if at any time
during the term of this Agreement ImClone determines to grant a license,
exclusive or otherwise, to make, have made, use, sell or have sold Licensed
Products or Alternative Products outside the Territory (not including a right to
distribute), it shall so notify Merck in writing. Merck shall have thirty (30)
calendar days from the receipt of such written notification to notify ImClone in
writing of its desire to negotiate for such a license. Should Merck make such a
written notification, then for a period of sixty (60) calendar days therefrom,
the parties shall negotiate in good faith the terms of such a license. Should
the parties not consummate a license in this period of sixty (60) calendar days,
the offer to Merck shall be deemed formally withdrawn and ImClone shall have the
right to negotiate and consummate a license with a third party; provided,
however, that ImClone shall not consummate such a license with such third party
unless the terms of such license offered to such third party are no more
favorable than the terms previously offered to Merck. If such terms, in the
aggregate, are more favorable than the terms previously offered to Merck, then
ImClone, by written notice, shall offer such terms to Merck and Merck shall have
fifteen (15) calendar days from ImClone's notice in which to accept such offer
and consummate such license.
2.5. To the fullest extent permitted by law, any license granted herein
shall extend for a term beginning on the date of this Agreement and, unless
terminated sooner as herein provided, shall, in the case of Licensed Products
sold under Licensed Product Patents and Alternative Products sold under
Alternative Product Patents, continue throughout the life of the last-to-expire
patent included in Licensed Product Patents or Alternative Product Patents, as
the case may be, in each case, as such Licensed Product Patents and/or
Alternative Product Patents may be extended or restored, or in the case of
Licensed Products or Alternative Products that incorporate or utilize Licensed
Product Technology or Alternative Product Technology, as the case may be,
continue as a royalty-bearing license for fifteen (15) years from the date of
first commercial sale of a Licensed Product, as the case may be, after which
time the licenses
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under Licensed Product Technology or Alternative Product Technology, as the case
may be, shall survive without further royalty payment and shall be irrevocable,
except that the licenses shall become nonexclusive.
2.6. Merck shall have the right to sublicense the manufacture and/or sale
of Licensed Products and/or Alternative Products, provided Merck notifies
ImClone in writing of any such sublicense, and continues to fulfill all of its
material obligations contained in this Agreement, including but not limited to
the payment of all royalties, keeping of records, and reporting of sales; and
further provided, however, that Merck shall not so sublicense without the
consent of ImClone and ImClone shall have the right to withhold its consent to
any such sublicensee and sublicense, which consent shall not be unreasonably
withheld. Notwithstanding any other provision of this Agreement, the respective
rates of royalties payable to ImClone on sales of Licensed Products, Alternative
Products and Merck Products in the Territory by Merck's sublicensees and their
Affiliates shall be calculated in a manner mutually agreed by the parties. Any
sublicense agreement shall contain terms obligating the sublicensee to provide
and make available its books and records pursuant to Article V hereunder and to
comply with the confidentiality provisions of Article VI and the restrictions
set forth at Section 9.7, Section 9.10 and Section 9.11.
2.7. Under no circumstances shall this Agreement be construed to grant any
right or license other than those rights or licenses expressly granted in this
Article II. Any other right or license shall be evidenced by a separate written
license agreement between Merck and ImClone, executed by both parties. ImClone
and Merck hereby specifically reserve all rights to their respective patents,
technology, products, and any other applicable information not licensed herein.
2.8. With the exception of [ *** ] for research purposes and those matters
described in Schedule 2.8, ImClone shall not for a period of [ *** ] after the
execution of this Agreement [ *** ].
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ARTICLE III
Research and Development
3.1. In order to establish a fruitful cooperation between the parties,
immediately after the execution of this Agreement, the parties shall exchange
know-how (Merck) and Licensed Product Technology (ImClone) relating to Licensed
Products. Merck and ImClone shall conduct Research and Development toward
commercialization of Licensed Products and, if applicable, Alternative Products,
in the Territory, in accordance with the Research and Development Protocol. The
Research and Development shall be reviewed and defined on a regular basis, at
least quarterly, by a committee consisting of two representatives from Merck and
two representatives from ImClone (the "Steering Committee").
3.2. Meetings of the Steering Committee shall be chaired by one
responsible person (project leader) from each of ImClone and Merck in an
alternating manner. Each party shall have one vote. The project leader of either
party shall have the power fully to represent the position of his or her company
and the decisions of his or her company's management. In case a unanimous
decision cannot be reached, the principal executive officers of ImClone and
Merck or their designees shall use reasonable efforts to resolve the dispute in
good faith.
3.3. Meetings of the Steering Committee shall be held at least quarterly
and at such times as shall be necessary or useful for the Research and
Development contemplated herein and as shall be agreed upon between the parties
hereto. Additional persons, including persons from each party representing
different developmental functions, may attend meetings of the Steering
Committee, without voting rights, at the invitation of the respective project
leaders.
3.4. The Steering Committee shall be responsible for:
(1) establishing, supplementing and modifying the Research and
Development Protocol from time to time;
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(2) defining the goals and time frames of the Research and
Development Protocol; and
(3) allocating tasks and costs and coordinating activities required
to carry out the tasks laid down in the Research and Development Protocol.
Through the Steering Committee, to the extent permitted by any applicable
law, including but not limited to antitrust and competition laws, the parties
shall consult with each other concerning commercialization strategies, including
but not limited to pricing of Licensed Products and Alternative Products within
the Territory; provided, however, that Merck shall have the right to determine
at its sole discretion all prices of Licensed Products and Alternative Products
sold within the Territory.
3.5. Both parties shall report at least semi-annually, or at such other
times as the Steering Committee shall determine, any and all Research and
Development activities to the Steering Committee in writing. Such written
reports shall contain, among other things, all information relevant to enabling
Merck to enter into and conduct human clinical studies in the Territory.
3.6. The Research and Development Protocol includes, or may include, the
conduct and management of clinical trials and the filing for appropriate
regulatory approvals for the sale of the Licensed Products and Alternative
Products, as applicable, in the Territory. Each party hereby agrees to share all
data generated in its respective territory with respect to Licensed Products and
Alternative Products for the support of any regulatory submissions related to
Licensed Products and Alternative Products to any government authority by the
other party. Each party further agrees to use its reasonable best efforts to
design studies (including design with respect to implementation of studies and
collection of data from studies) in cooperation with the other party in order to
expedite regulatory approvals in each such territory. The parties further agree
that:
(a) All such clinical trials and regulatory efforts in the Territory
shall be the sole responsibility of Merck and shall be coordinated through
the Merck regulatory group. Merck shall cause all necessary governmental
approvals to be filed in the Territory.
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(b) All such clinical trials and regulatory efforts outside the
Territory shall be the sole responsibility of ImClone and shall be
coordinated through the ImClone regulatory group. ImClone shall cause all
necessary governmental approvals to be filed outside the Territory.
(c) The respective responsibilities and costs of the parties with
respect to clinical trials, regulatory efforts and filing of applications
for necessary governmental approvals in Japan shall be negotiated in good
faith and set forth in a separate written agreement or agreements by and
between the parties as contemplated in Section 2.3 hereof.
3.7. Licensed Product Technology and Alternative Product Technology,
including, but not limited to, Licensed Products and Alternative Products,
delivery formulations for Licensed Products and Alternative Products,
experimental, pre-clinical and clinical trial data, regulatory submissions with
all back-up (including a right of reference to such submissions) in connection
with Licensed Products and Alternative Products, shall be freely available to
Merck in the Territory and ImClone outside the Territory in a manner consistent
with the rights and obligations of the parties hereunder. In the case of a
termination resulting in a reversion of rights under Section 11.8 to an original
licensor, the parties shall, to the extent permitted by applicable law,
negotiate in good faith to reach an agreement with usual and customary terms for
similar agreements under comparable circumstances providing for access and/or
transfer of ownership, as necessary to all necessary regulatory filings and
supporting documentation and data related to application for approval to sell
Licensed Products or Alternative Products.
3.8. ImClone shall supply and Merck shall purchase from ImClone
manufactured Licensed Products and Alternative Products for the conduct of
clinical trials and commercialization in the Territory. Prior to
commercialization, ImClone shall use its best reasonable commercial efforts to
supply Licensed Products or Alternative Products, as the case may be, to Merck
in the quantities reasonably requested by Merck. ImClone shall supply all such
Licensed Products and Alternative Products for use in the conduct of clinical
trials at a price equal to the Fully-Loaded Cost of Goods. The parties shall
negotiate and enter
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into separate supply agreements, with usual and customary terms for similar
agreements under comparable circumstances, which provide for (a) the supply to
Merck for the commercialization of Licensed Products at a price equal to the
Fully-Loaded Cost of Goods and (b) the supply to Merck for the commercialization
of each Alternative Product at a price equal to the Fully-Loaded Cost of Goods.
ARTICLE IV
Milestone Payments; Royalties; Line of Credit
4.1. For good and valuable consideration, including, but not limited to,
the licenses granted by ImClone to Merck herein, the research to be performed by
ImClone in connection with the Research and Development, and the technology to
be transferred in connection with those licenses and said research, ImClone
shall be compensated by means of certain milestone payments, as specified on
Schedule E, attached hereto and specifically incorporated herein (the "Milestone
Payments"). The date on which any given Milestone Payment is due and payable is
referred to in this Agreement as a "Milestone Payment Date."
(a) Subject to Section 4.1(b) hereof, upon the payment of certain
Milestone Payments, as provided in Schedule E, ImClone shall issue and
deliver to Merck, or to an Affiliate or Affiliates of Merck designated by
Merck, Acquired Voting Shares at a purchase price calculated in the manner
specified in Schedule E. The parties acknowledge and agree that
notwithstanding any other provision of this Agreement, ImClone shall not
be obligated during the Standstill Period to issue additional Acquired
Voting Shares to Merck if such issuance would cause the aggregate
beneficial ownership of Common Stock of Merck and its Affiliates
(including all shares of Common Stock that Merck and its Affiliates may
have the right to acquire as of the relevant Milestone Payment Date upon
the conversion of the Series A Convertible Preferred Stock) to exceed
19.9% of the total outstanding shares of Common Stock on a primary basis
as of the relevant Milestone Payment Date.
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(b) In the event Merck is prohibited at any time from receiving
Acquired Voting Shares due to the operation of Section 4.1(a) above, then
ImClone shall issue to Merck in the manner specified in Schedule E, in
lieu of such Acquired Voting Shares, an amount of Acquired Non-Voting
Shares equal to the number of Acquired Voting Shares that Merck would have
acquired but for the operation of this Section 4.1(b) at a purchase price
equal to the purchase price that would have been applicable to Acquired
Voting Shares delivered on such Milestone Payment Date. The Acquired
Non-Voting Shares shall have no voting rights and shall be convertible
into shares of Common Stock on a share-per-share basis, as described in
Schedule E; in all other respects, the Acquired Non-Voting Shares shall
have terms identical to those of shares of Common Stock.
(c) With respect to all Registrable Securities (as defined in
Schedule G hereof), Merck shall have the registration rights set forth in
the registration rights agreement appended hereto as Schedule G, and
specifically incorporated herein. This Section 4.1(c) and Schedule G shall
survive the termination of the Agreement.
(d) If at any time during the term of this Agreement stockholder
approval is necessary for the issuance of any Acquired Voting Shares,
Acquired Non-Voting Shares or Milestone Conversion Shares to Merck or its
Affiliates pursuant to this Agreement, ImClone shall use its best
reasonable efforts to obtain such stockholder approval as soon as
practicable.
(e) Nothing in this Section 4.1 shall require ImClone to take any
action in connection with the issuance of any of its securities that would
contravene (or subject ImClone to de-listing of any of its securities for
failure to satisfy all requirements under) the rules and regulations of
any exchange or quotation system on which ImClone's securities are listed
or quoted including, but not limited to, Section 4460(i)(1)(D) of the
Marketplace Rules of the National Association of Securities Dealers.
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4.2. Merck shall pay ImClone royalties quarterly on (i) sales in the
Territory by Merck and its Affiliates of (A) Licensed Products and (B)
Alternative Products developed and/or acquired by ImClone or any of its
Affiliates and (ii) sales in the Territory, subject to Section 2.2 hereof, by
Merck and its Affiliates of Merck Products as follows:
(a) Merck shall pay ImClone a royalty of [***] of [***] of Licensed
Products sold in the Territory on the first [***];
(b) Merck shall pay ImClone a royalty of [***] of [***] of Licensed
Products sold in the Territory in excess of [ *** ];
(c) Merck shall pay ImClone [ *** ], on sales in the Territory of
Alternative Products developed and/or acquired by ImClone or any of its
Affiliates; provided, however, that such amount shall not exceed [***] of
[ *** ]; and
(d) Merck shall pay ImClone a royalty of [***] of [ *** ].
4.3. Within thirty (30) calendar days after the first day of January,
April, July and October in each year during the term of this Agreement, Merck
shall prepare a written report setting forth for the preceding fiscal quarter,
on a country-by-country and product-by-product basis, such of the following as
may be applicable under the royalty payment provisions of this Article IV:
(i) the [ *** ] and [ *** ] of all Licensed Products and Alternative
Products sold by Merck and its Affiliates and sublicensees and their
Affiliates under this Agreement;
(ii) the Merck Products Net Sales;
(iii) the amount of royalty payments; and
(iv) any other information reasonably necessary to show the basis on
which such payment has been computed.
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4.4. Each payment report rendered shall be accompanied by the payment by
wire transfer of all royalty payments due for the fiscal quarter in question.
4.5. All payments due under this Article IV shall be paid in U.S. dollars
in immediately available funds by wire transfer to a bank account in New York,
N.Y., USA designated by ImClone. For purposes of computing the royalty payments
on products sold outside the United States, such royalty payments first shall be
determined in the currency in which such products are sold and then converted
into the equivalent in U.S. dollars at the selling rate for the last day of the
quarter as reported in The Wall Street Journal (Eastern Edition).
4.6. With regard to the royalty obligations contemplated in this Article
IV, products shall be deemed to have been sold when billed or shipped, whichever
shall first occur, in an arm's-length transaction with a buyer. If the buyer is
an Affiliate of Merck that resells products, products shall be deemed to have
been sold when billed or shipped, whichever shall first occur, by such Affiliate
and said sale shall bear the royalty. In the case of a sale of products by a
sublicensee, unless otherwise stated herein, such sale shall bear the royalty.
Only one royalty shall be payable respecting any given sale or use of any
specific product licensed hereunder.
4.7. ImClone hereby covenants and agrees that it will perform all
calculations with respect to the [ *** ] in good faith and in accordance with
generally accepted accounting principles in the United States.
4.8. Notwithstanding any other provision of this Article IV, the
obligation of Merck to pay royalties under this Agreement shall terminate upon
the expiration of the term of the license, as set forth in Section 2.5 hereof;
provided, however, that nothing hereunder shall relieve Merck of its obligation
to pay any royalties under this Agreement which have accrued prior to the
termination of this Agreement.
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4.9. Manufacturing Facility.
(a) Promptly after the execution of this Agreement, ImClone shall
use its best reasonable efforts to take the lead in developing, in
consultation with Merck, a commercially feasible production concept for a
new manufacturing facility of ImClone. Such production concept shall be
proposed to Merck as soon as practicable, but in no event later than sixty
(60) days after the date of this Agreement. Upon ImClone's proposal of a
production concept to Merck, both parties shall negotiate in good faith to
reach agreement on a commercially feasible production concept; provided,
however, that Merck shall have the right, at its sole discretion, to
reject a production concept.
(b) Subject to the parties' reaching agreement as to a production
concept, as described in Section 4.9(a) and Schedule 4.9, Merck agrees to
provide to ImClone as soon as reasonably practicable after such agreement,
a guarantee of a line of credit, or a direct credit, for the purpose of
funding the new manufacturing facility of ImClone (the "Manufacturing
Facility Line of Credit"), which guarantee or direct credit, as the case
may be, shall incorporate, among other mutually agreed terms, the terms
set forth in Schedule 4.9. The manufacturing facility shall be constructed
in accordance with the mutually agreed production concept, as described in
Section 4.9(a) and Schedule 4.9.
(c) In the event that the parties fail to agree on a commercially
feasible production concept for the manufacturing facility or Merck fails
to provide the Manufacturing Line of Credit within three months after the
date of this Agreement, either party, provided that such party has fully
performed all of its obligations under Section 4.9(a), shall have the
right to terminate this Agreement upon notice to the other party, in which
case Merck shall have no further obligations with respect to the
Manufacturing Facility Line of Credit.
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(d) Notwithstanding any other provision of this Agreement, if this
Agreement is terminated by either party pursuant to Section 4.9(c),
ImClone shall promptly repay Merck all Milestone Payments paid by Merck as
of the date of such termination.
4.10. Royalties for the sale of Licensed Products, Alternative Products
and Merck Products, as the case may be, arising out of sales in a particular
country shall be paid as provided in this Agreement but only to the fullest
extent permitted by law.
ARTICLE V
Books and Records
5.1. Merck shall keep full and true books of account and other records in
sufficient detail so that the payments to ImClone hereunder can be properly
calculated and audited.
5.2. Each party agrees, at the request and expense of the other party, to
permit an independent certified public accountant selected by such other party,
barring a reasonable objection, to have access at a single location, once each
calendar year, during ordinary business hours, to such books and records as may
be necessary, including any quantitative unit data that may be necessary for the
proper performance of the audit:
(i) to determine, in respect to any calendar year ending not more
than five (5) years prior to the date of such request, the correctness of
any report and/or payment made under this Agreement; or
(ii) to obtain information as to royalties payable for any such
period in case of failure to report and/or pay pursuant to the terms of
this Agreement.
ARTICLE VI
Confidentiality
6.1. ImClone shall disclose to Merck and Merck shall disclose to ImClone
such technology as shall be necessary or useful to assist the parties in
successfully carrying out the objectives of this
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Agreement, including, but not limited to, know-how and trade secrets, results of
the Research and Development, Licensed Product Technology and Alternative
Product Technology (hereinafter "Confidential Information"). Merck or ImClone,
as the case may be, shall not, during the term of this Agreement and for the
longer of the following: (i) such time as there continue to be royalty-bearing
sales pursuant to the terms of Section 2.5, (ii) the life of all Licensed
Product Patents and/or Alternative Product Patents, and (iii) ten years from the
execution date of this Agreement, disclose to any third party the other's
Confidential Information, without the express written permission of the other;
shall exercise the same degree of care as is exercised with respect to its own
Confidential Information to prevent disclosure of the same to any third party;
and shall not use the same for any purpose other than exercising any right or
rights granted to it herein; provided, however, that nothing herein contained
shall restrict either party with respect to the disclosure and/or use of
information which the recipient party can show by written records:
(i) was in its possession at the time of its receipt of same from
the disclosing party;
(ii) was part of the public knowledge or literature at the time of
its receipt from the disclosing party, or thereafter becomes part of the
public knowledge or literature other than as a result of an act or
omission to act on the part of the recipient; or
(iii) was received from a third party having the right to disclose
such information.
Specific technology disclosed by one party to the other hereunder shall
not be deemed to be within any of the above three (3) exclusions merely because
it is included within more general information falling within one of the
exclusions.
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6.2. Notwithstanding the provisions of Section 6.1 above, and to the
extent necessary:
(a) a party may disclose and use the other party's Confidential
Information for purposes of securing the registration of, and or
governmental approval to market pursuant to this Agreement, any Licensed
Products or Alternative Products;
(b) a party may disclose and use the other party's Confidential
Information where the disclosure and use of such will be useful or
necessary to the procurement of patent protection, pursuant to this
Agreement, for any Improvement relative to any Licensed Products or
improvements relative to any Alternative Products; and
(c) a party may disclose and use the other party's Confidential
Information to the extent that it is necessary or useful to aid in the
development and commercialization, pursuant to this Agreement, of any
Licensed Products or any Alternative Products.
ARTICLE VII
Patent Filing, Maintenance and Expenses
7.1. With respect to the filing of patent applications relating to the
Compound or any Improvement exclusively developed or acquired by ImClone,
ImClone shall be the primary filing party in the Territory and outside the
Territory. With respect to the filing of patent applications relating to the
Compound or any Improvement that are exclusively developed or acquired by Merck
or any of its Affiliates, Merck shall prepare and file a patent application in a
patent office of its choosing, and shall be the primary filing party in the
Territory and outside the Territory. The primary filing party shall cause the
applications to be filed through its attorneys. All expenses of the patent
applications and/or patent filings, prosecution and/or maintenance costs shall
be borne by the party that has the right to exploit the patent in the country in
which the application is filed.
7.2. In the case of patent applications relating to compounds jointly
developed or acquired by the parties, Merck shall be the primary filing party
for filings in the Territory and ImClone shall be the
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primary filing party for all filings outside the Territory and each party shall
inform the other of all activities with respect to filings, prosecution and
maintenance of the patent applications, and shall provide to the other party
copies of all office actions/official actions and other communications
concerning said applications within two (2) weeks after receipt thereof;
provided, however, that all applications shall first be filed internationally
under the Patent Cooperation Treaty and diligently prosecuted by a patent
attorney or patent agent mutually acceptable to the parties. Both parties shall
be apprised by such patent attorney or patent agent of all office
actions/official actions and shall be entitled for a period of thirty (30)
calendar days, or such shorter period of time as may be necessary in order not
to prejudice the parties' rights pursuant to such filings, to review and make
comments with respect to all applications to and other communications with
patent authorities prior to the delivery or communication thereof.
7.3. Either party, at its option and at its sole expense, may elect to
have the normal term of any Licensed Patent or Alternative Product Patent
extended or restored under a given country's procedure of extending life for
time lost in government regulatory approval processes. The non-filing party
shall assist the filing party and take whatever reasonable action is necessary
to obtain such extension.
ARTICLE VIII
Infringement
8.1. Each party to this Agreement shall promptly notify the other of any
material infringement of Licensed Product Patents or Alternative Product Patents
or misappropriation of Licensed Product Technology or Alternative Product
Technology of which it becomes aware within the Territory, and shall provide the
other with any available evidence thereof. ImClone shall have the right, but not
the obligation, to bring, defend and maintain any appropriate suit, action or
proceeding involving any such infringement (an "Infringement Action"). ImClone
shall give Merck notice of its intention to commence any such Infringement
Action and Merck may at any time elect to participate in such Infringement
Action in accordance with Section 8.2.
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8.2. In an Infringement Action brought in accordance with Section 8.1(a),
Merck shall, upon the reasonable request of ImClone, cooperate with and assist
ImClone by, for example, executing all papers and performing such other acts as
reasonably may be required and, at its option, may be represented by counsel of
its choice at Merck's expense. Should ImClone lack standing or jurisdiction to
bring any Infringement Action, Merck shall do so at ImClone's request, at
ImClone's expense.
8.3. Subject to the right of Merck to be represented by counsel of its
choice, ImClone shall have the exclusive right to control any Infringement
Action brought, defended or maintained by ImClone pursuant to this Section 8.3
or by Merck pursuant to the last sentence of Section 8.2; provided, however,
that ImClone may not, without the prior written consent of Merck (which consent
may not be unreasonably withheld), enter into any agreement or other arrangement
effecting a settlement of such Infringement Action.
8.4. Subject to Section 8.5 hereof, any damages collected pursuant to this
Article VIII (whether by judgment or settlement) first shall be applied to
reimburse the parties for their respective litigation expenses. If the damages
are insufficient to reimburse both parties for such litigation expenses, the
parties shall receive reimbursement pro rata. Any remaining amounts of damages
shall be justly and equitably distributed between the parties in order to
reflect the relative benefits, as reflected in the royalties provisions set
forth in Section 4.2 hereof, the parties would have received hereunder but for
the infringement or misappropriation that was the subject of the Infringement
Action.
8.5. If Merck shall have given notice of a material infringement of
Licensed Product Patents or Alternative Product Patents in accordance with
Section 8.1, and ImClone shall have failed to bring such an Infringement Action
within thirty (30) calendar days of receiving such notice, Merck, at Merck's
expense, shall have the right to bring and maintain an Infringement Action;
provided, however, that Merck may not, without the prior written consent of
ImClone, which consent shall not be unreasonably withheld, enter into any
agreement or other arrangement effecting a settlement of such Infringement
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Action. Notwithstanding any other provision in this Agreement, any damages
collected pursuant to this Section 8.5 (whether by judgment or settlement) shall
be paid in their entirety solely to Merck.
8.6. If either party institutes an Infringement Action, the other party
shall fully cooperate with and supply at its own expense all assistance
reasonably requested by the party which instituted such Infringement Action.
ARTICLE IX
Representations and Warranties; Certain Covenants
9.1. Representations and Warranties of ImClone.
ImClone hereby represents and warrants that:
(a) ImClone is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware, and has all
corporate powers and all governmental licenses, authorizations, consents,
permits, registrations and approvals required to carry on its business as
now conducted except for such matters as would not have a materially
adverse effect on the business, assets or results of operations of ImClone
and its subsidiaries, taken as a whole, and except any such effect
resulting from or arising in connection with (i) changes or conditions
affecting the biopharmaceuticals industry generally or (ii) changes in
economic, regulatory or political conditions generally.
(b) The execution, delivery and performance by ImClone of this
Agreement are within ImClone's corporate powers and have been duly
authorized by all necessary corporate action on the part of ImClone. This
Agreement constitutes a valid and binding agreement of ImClone,
enforceable in accordance with its terms, subject to (i) bankruptcy,
insolvency or similar laws affecting creditors' rights generally, (ii)
general equitable principles and (iii) the Exon-Florio Act, Section 721 of
Title VII of the Defense
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Production Act of 1950, as amended, and the rules and regulations
promulgated thereunder.
(c) Any Acquired Voting Shares or Milestone Conversion Shares, at
the time issued and delivered to Merck pursuant to Section 4.1 and
Schedule E of this Agreement, shall be newly issued shares of Common
Stock, validly issued, fully paid and non-assessable and free and clear of
any and all liens, encumbrances and claims of ownership of any kind of any
third party and such Acquired Voting Shares or Milestone Conversion Shares
shall be free of preemptive or similar rights. Any Acquired Non-Voting
Shares, at the time issued and delivered to Merck pursuant to Section 4.1
and Schedule E of this Agreement, shall be newly issued shares of
non-voting capital stock of ImClone, validly issued, fully paid and
non-assessable and free and clear of any and all liens, encumbrances and
claims of ownership of any kind of any third party and such Acquired
Non-Voting Shares shall be free of preemptive or similar rights. Based
only on the market price of the Common Stock as of the date of this
Agreement, ImClone represents and warrants that a sufficient number of
shares of Common Stock has been authorized and reserved for Merck's
acquisition of Acquired Voting Shares and Milestone Conversion Shares.
ImClone covenants and agrees that a sufficient number of shares of Common
Stock shall continue to be authorized and reserved for Merck' purchases of
Acquired Voting Shares and Milestone Conversion Shares hereunder.
(d) The execution, delivery and performance by ImClone of this
Agreement require no action by or in respect of, or declaration to or
filing with, any governmental body, agency, official or authority other
than compliance with (i) any applicable requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act") and state securities or
"blue sky" laws, (ii) any applicable requirements of Delaware law, (iii)
the rules and regulations of the National Association of Securities
Dealers and the Nasdaq Stock
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Market, and (iv) any applicable requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and
regulations promulgated thereunder (the "HSR Act").
(e) The execution, delivery and performance by ImClone of this
Agreement do not and will not (i) contravene or conflict with the
certificate of incorporation or bylaws of ImClone; (ii) 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 ImClone; (iii) contravene, conflict with, constitute a
breach of or default under, or give rise to any right of termination,
cancellation or acceleration of any right or obligation of ImClone under,
any provision of any agreement, contract or other instrument binding upon
ImClone or any of its properties or (iv) result in the creation or
imposition of any lien, encumbrance of claim of ownership of any kind by
any third party on any asset, whether tangible or intangible, of ImClone.
(f) ImClone owns the Licensed Product Patents and such rights are
not subject to any lien, encumbrance or claim of ownership of any kind by
any third party.
(g) To ImClone's knowledge the Licensed Product Patents are valid
and enforceable.
(h) To ImClone's knowledge, ImClone has not engaged in any conduct,
or omitted to perform any necessary act, the result of which could
invalidate any of the Licensed Product Patents or materially adversely
affect the enforceability of any of the Licensed Product Patents.
(i) With the exception of the patents for which Collateral License
Agreements are to be obtained, ImClone is unaware of any patent or claim
by any third party upon the basis of which ImClone has any reason to
believe that Merck's practice of the Licensed Product Technology will
infringe any valid patent.
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9.2. Representations and Warranties of Merck.
Merck hereby represents and warrants that:
(a) Merck is a corporation with general partners duly incorporated,
validly existing and in good standing under the laws of the Federal
Republic of Germany, and has all corporate powers and all governmental
licenses, authorizations, consents, permits, registrations and approvals
required to carry on its business as now conducted except for such matters
as would not have a materially adverse effect on the business, assets or
results of operations of Merck and its subsidiaries, taken as a whole, and
except any such effect resulting from or arising in connection with (i)
changes or conditions affecting the biopharmaceuticals industry generally
or (ii) changes in economic, regulatory or political conditions generally.
(b) The execution, delivery and performance by Merck of this
Agreement are within Merck's corporate powers and have been duly
authorized by all necessary corporate action on the part of Merck. This
Agreement constitutes a valid and binding agreement of Merck, enforceable
in accordance with its terms, subject to (i) bankruptcy, insolvency or
similar laws affecting creditors' rights generally, (ii) general equitable
principles and (iii) the Exon-Florio Act, Section 721 of Title VII of the
Defense Production Act of 1950, as amended, and the rules and regulations
promulgated thereunder.
(c) The execution, delivery and performance by Merck of this
Agreement require no action by or in respect of, or declaration to or
filing with, any governmental body, agency, official or authority other
than compliance with any applicable requirements of the HSR Act.
(d) The execution, delivery and performance by Merck of this
Agreement do not and will not (i) contravene or conflict with the Satzung
and other constitutive documents of
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Merck; (ii) 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 Merck; or (iii) contravene, conflict with,
constitute a breach of or default under, or give rise to any right of
termination, cancellation or acceleration of any right or obligation of
Merck under, any provision of any agreement, contract or other instrument
binding upon Merck or any of its properties.
(e) In entering into this Agreement, Merck has relied solely on its
own scientific, marketing and distribution expertise and experience and
its analysis and evaluation of both the scientific and commercial value of
the intended Licensed Products.
(f) Merck will purchase any Acquired Voting Shares for its own
account for investment only and not with a view towards the public sale or
distribution thereof except pursuant to sales registered under the U.S.
Securities Act of 1933, as amended (the "1933 Act") or an exemption
therefrom.
(g) Merck is an "accredited investor" as that term is defined in
Rule 501(a)(3) of Regulation D under the 1933 Act.
(h) Merck understands that any Acquired Voting Shares, Acquired
Non-Voting Shares and Milestone Conversion Shares will be offered and sold
to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that
ImClone will rely upon the truth and accuracy of, and Merck's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of ImClone set forth herein in order to determine the
availability of such exemption and the eligibility of Merck to acquire any
Acquired Voting Shares, Acquired Non-Voting Shares or Milestone Conversion
Shares.
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(i) Merck and its advisors, if any, will be furnished with all
materials relating to the business, finances and operations of ImClone and
materials relating to the offer and sale of any Acquired Voting Shares,
Acquired Non-Voting Shares or Milestone Conversion Shares requested by
Merck. Merck and its advisors, if any, will be afforded the opportunity to
ask questions of ImClone and receive complete and satisfactory answers to
any such inquiries. Merck understands that its investment in any Acquired
Voting Shares, Acquired Non-Voting Shares or Milestone Conversion Shares
will involve a high degree of risk.
(j) Merck understands that no United States federal or state agency
or any other government or governmental agency will pass on or make any
recommendation or endorsement of any Acquired Voting Shares, Acquired
Non-Voting Shares or Milestone Conversion Shares.
(k) Merck understands that the Acquired Voting Shares, Acquired
Non-Voting Shares and Milestone Conversion Shares have not been, are not
being, and will not be registered under the 1933 Act or any United States
state securities laws or any other laws, and may not be transferred unless
subsequently registered thereunder or pursuant to an exemption from such
registration and, except as specified in this agreement, neither ImClone
nor any other Person is under any obligation to register such securities
under the 1933 Act or any state securities laws or to comply with the
terms and conditions of any exemption thereunder.
(l) Merck agrees (and shall cause each of its Affiliates to agree)
that in no event shall it make a disposition, directly or indirectly, of
such Acquired Non-Voting Shares other than to Merck or to an Affiliate of
Merck, unless it shall have first obtained the prior written consent of
ImClone.
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(m) Merck understands that any Acquired Voting Shares, Acquired
Non-Voting Shares and Milestone Conversion Shares may bear a restrictive
legend in substantially the following form (and a stop-transfer order may
be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED UNLESS AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT OR
PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION.
9.3. The parties hereby covenant and agree as follows:
(a) ImClone covenants that at no time during the term of this
Agreement or at any time thereafter, so long as Merck shall enjoy a
right originating under this Agreement, shall ImClone assign,
transfer, encumber, hypothecate or grant rights in or with respect
to any Licensed Product and/or Alternative Product to any Person,
including any Affiliate of ImClone, inconsistent with the grants and
other rights reserved to Merck under this Agreement.
(b) Merck covenants that at no time during the term of this
Agreement or at any time thereafter, so long as ImClone shall enjoy
a right originating under this Agreement shall Merck assign,
transfer, encumber, hypothecate or grant rights in or with respect
to any Licensed Product and/or Alternative Product to any Person,
including any Affiliate of Merck, inconsistent with the grants and
other rights reserved to ImClone under this Agreement.
9.4. ImClone hereby covenants and agrees that it shall not, for a period
of six months after the execution of this Agreement, without the prior written
consent of Merck, directly or indirectly, take (nor
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shall ImClone authorize or permit its officers, directors, employees,
representatives, investment bankers, attorneys, accountants or any other agent
or any Affiliate of ImClone, to take) any action to:
(a) encourage, solicit or initiate the submission of any Acquisition
Proposal (as defined below);
(b) except as permitted below, enter into any agreement with respect
to or propose any Acquisition Proposal; or
(c) except as permitted below, participate in any way in discussions
or negotiations with, or furnish any information to, any Person (other
than Merck, its Affiliates or its officers, directors, employees,
representatives, investment bankers, attorneys, accountants or other
agents of Merck) in connection with, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes,
or may reasonably be expected to lead to, any Acquisition Proposal;
provided, however, that ImClone may participate in discussions or
negotiations or enter into an agreement (including as a part thereof making any
counter-proposal) with or furnish information to any third party (so long as it
has complied with this Section 9.4) if the Board of Directors determines in good
faith, based upon advice of outside counsel, that the failure to provide such
information or participate in such discussions or negotiations or consummate
such Acquisition Proposal would cause the directors to be subject to a
substantial risk of breach of their fiduciary duties under Delaware law. For
purposes of this Agreement, "Acquisition Proposal" shall mean any bona fide
proposal made to acquire (i) beneficial ownership (as defined under Rule 13d-3
under the 1934 Act) of a 10% or greater equity interest in ImClone in any single
or multi-step transaction or series of related transactions which is structured
to permit any Person to acquire beneficial ownership of a 10% or greater equity
interest in ImClone or (ii) a material part of the business or assets of
ImClone. ImClone hereby acknowledges and agrees that Merck
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has agreed to enter into this Agreement in reliance on the covenants and
agreements set forth in this Section 9.4.
9.5. As a condition to Merck's entering into this Agreement and making the
Milestone Payments, Merck shall receive, respectively, on the date of the
execution of this Agreement and on the date of the issuance of Acquired Voting
Shares, Acquired Non-Voting Shares or Milestone Conversion Shares to Merck,
opinion letters of the general counsel of ImClone, in form and substance
satisfactory to Merck, substantially in the form set forth in Schedule H,
attached hereto and specifically incorporated herein.
9.6. Subject to Section 11.7 hereof, ImClone hereby covenants and agrees
to use its best reasonable commercial efforts to negotiate and enter into, at
the earliest practicable date, all of the Collateral License Agreements, which
agreements shall be in form and substance reasonably satisfactory to Merck.
Merck hereby covenants and agrees to use its best reasonable commercial efforts
to cooperate with ImClone to take any appropriate action and/or execute any
documents of any kind which may be reasonably necessary for ImClone to fulfill
its obligations under this Section 9.6. Each party shall bear its own expenses
with respect to the negotiation of such agreements. Merck and ImClone shall
share equally the payment of royalties due under the Collateral License
Agreements in the Territory ("Collateral License Agreement Royalties").
9.7. Merck hereby covenants and agrees that all sales of Licensed
Products, Alternative Products and Merck Products pursuant to this Agreement,
other than sales to Merck's Affiliates, shall be made on an arms-length basis.
9.8. Merck shall use its best reasonable commercial efforts to develop
(including the timely and diligent pursuit of clinical trials and all applicable
regulatory approvals) and market the Licensed Products within the Territory;
provided, however, that Merck shall have the right, at its sole discretion,
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not to develop and market the Licensed Products in a given country in order to
optimize sales of Licensed Products within the Territory taken as a whole.
9.9. Standstill.
(a) During the Standstill Period Merck shall not, and shall not
permit its Affiliates to, purchase or otherwise acquire (whether through
conversion of the Series A Convertible Preferred Stock, acquisition of
Acquired Voting Shares or Acquired Non-Voting Shares or conversion
thereof, open-market purchases, privately-negotiated purchases, merger,
tender offer or otherwise), or agree or offer to purchase or otherwise
acquire (whether through conversion of the Series A Convertible Preferred
Stock, acquisition of Acquired Voting Shares or Acquired Non-Voting
Shares, open-market purchases, privately-negotiated purchases, merger,
tender offer or otherwise) beneficial ownership of any Voting Securities,
if after giving effect thereto Merck and its Affiliates would beneficially
own Voting Securities representing more than 19.9% of Total Voting Power.
As used herein, "Total Voting Power" means the aggregate number of votes
which may be cast by holders of outstanding Voting Securities and "Voting
Securities" means all securities of ImClone entitled, in the ordinary
course, to vote in the election of directors of ImClone. As used in this
Agreement, the terms "beneficial ownership" and "beneficially own" shall
be determined in accordance with Rules 13d-3 and 13d-5 under the 1934 Act;
provided, however, that for purposes of this Section 9.9(a) only, Merck
shall not be deemed to beneficially own any Common Stock which may be
issued solely upon conversion of the Series A Preferred Stock until such
time as such Series A Preferred Stock is converted into Common Stock;
provided, further, that nothing herein shall permit Merck or its
Affiliates during the Standstill Period to convert any Series A Preferred
Stock if after such conversion Merck and its Affiliates would beneficially
own Voting Securities representing more than 19.9% of Total Voting Power.
Notwithstanding
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anything in this Agreement to the contrary, beginning on the date which is
six months from the date of the execution of this Agreement and ending
upon the conclusion of the Standstill Period, Merck and its Affiliates
shall not directly or indirectly purchase or otherwise acquire beneficial
ownership of Voting Securities through open-market or privately-negotiated
transactions.
(b) During the Standstill Period Merck shall not, and shall not permit its
Affiliates to (i) make, or take any action to solicit, initiate or encourage, an
Acquisition Proposal; (ii) "solicit," or become a "participant" in any
"solicitation" of, any "proxy" (as such terms are defined in Regulation 14A
under the 1934 Act) from any holder of Voting Securities in connection with any
vote on any matter, or agree or announce its intention to vote with any Person
undertaking a "solicitation"; (iii) form, join or in any way participate in a
"group" (within the meaning of Section 13(d)(3) of the 1934 Act) with respect to
any Voting Securities; (iv) grant any proxies with respect to any Voting
Securities to any Person (other than as recommended by the Board of Directors of
ImClone) or deposit any Voting Securities in a voting trust or enter into any
other arrangement or agreement with respect to the voting thereof; or (v)
assist, advise or encourage any Person with respect to, or seek to do, any of
the foregoing.
(c) Merck agrees that any breach by it of this Section 9.9 would
irreparably injure ImClone and that money damages would be an inadequate
remedy therefor. Accordingly, Merck agrees that ImClone shall be entitled
to one or more injunctions enjoining any such breach and requiring
specific performance of this Section 9.9 and consents to the entry
thereof, in addition to any other remedy to which ImClone is entitled at
law or in equity.
(d) This Section 9.9 shall supercede Section 4(e) of the Preferred
Stock Purchase Agreement, which Section 4(e) shall be of no further
effect.
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9.10. Prohibited Transactions. Merck hereby agrees that it shall not (and
shall not permit any Affiliate or any sublicensee or its Affiliate to), directly
or indirectly, sell, export, reexport, transmit or transfer (i) any Licensed
Products, Alternative Products, Licensed Product Technology or Alternative
Product Technology or (ii) any products, technology or technical data
incorporating any of the foregoing to (a) any countries or Persons that are
subject to restrictions under the U.S. Export Administration Regulations; (b)
any end-user which Merck knows or has reason to know will utilize such Licensed
Products, Alternative Products or Licensed Product Technology in the design,
development or production of nuclear, chemical or biological weapons; or (c) any
other country or Person to which the sale, export, reexport, transmission or
transfer is restricted pursuant to U.S. economic sanctions laws and regulations,
including but not limited to the restrictions set forth at Title 31, Chapter V
of the Code of Federal Regulations; in each case of clauses (a), (b) and (c)
above without the prior written consent of the Bureau of Export Administration
of the U.S. Department of Commerce, the Office of Foreign Assets Control of the
U.S. Department of the Treasury, and/or such other governmental entity as may
have jurisdiction over such sale, export, reexport, transmission, transfer or
transactions. Merck hereby covenants and agrees that it shall not (and shall not
permit any Affiliate or any sublicensee or its Affiliate to) require ImClone or
any of its Affiliates to take any of the actions proscribed pursuant to this
Section 9.10.
9.11. Merck hereby covenants and agrees that it shall not (and shall not
permit any Affiliate or any sublicensee or its Affiliate) directly or indirectly
to sell or otherwise transfer any Licensed Products or Alternative Products (i)
outside the Territory or (ii) to any Person which Merck or any of its Affiliates
or any sublicensee or its Affiliate knows or has reason to know intends to use,
sell or transfer Licensed Products or Alternative Products in or to any location
outside of the Territory.
9.12. ImClone hereby covenants and agrees that it shall not (and shall not
permit any Affiliate or any sublicensee or its Affiliate) directly or indirectly
to sell or otherwise transfer any Licensed Products or Alternative Products (i)
within the Territory or (ii) to any Person which ImClone or any of its
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Affiliates or any sublicensee or its Affiliate knows or has reason to know
intends to use, sell or transfer Licensed Products or Alternative Products in or
to any location within of the Territory.
ARTICLE X
Indemnification
10.1. ImClone shall indemnify, hold harmless and defend Merck and its
Affiliates from and against any and all Losses resulting directly from any
claims or actions for patent infringement, or from any judgment entered therein,
which may be brought against Merck or any of its Affiliates for patent
infringement as a result of its activities under the Agreement in connection
with the development or commercialization of the Compound, except for (a)
potential claims or actions (other than potential claims or actions with respect
to the Collateral License Agreements and the related patent applications and
patents) of which Merck and its Affiliates have actual knowledge as of the date
of this Agreement and (b) potential claims or actions based on patents not yet
issued unless, as of the date of this Agreement, ImClone had or should have had
knowledge of such patents.
10.2. Prior to the commercialization of Licensed Products and Alternative
Products, respectively, in the Territory, each party shall indemnify, hold
harmless and defend (the "Indemnifying Party") the other party and its
Affiliates (each, an "Indemnified Party") against any and all Losses suffered by
an Indemnified Party arising out of, relating to, or based upon any claim by a
third party, or in any criminal or regulatory proceeding, relating or pertaining
in any way to a Licensed Product or Alternative Product, including but not
limited to claims that (a) a Licensed Product or Alternative Product was or is
unsafe, unfit or otherwise deficient in quality or condition or (b) a Licensed
Product or Alternative Product caused any death or personal injury of any kind,
including but not limited to any death or personal injury occurring during the
conduct of any clinical trial, in each case, to the extent that such Loss was
directly or indirectly caused by services performed or actions taken by an
Indemnifying Party or its employees, agents or subcontractors, including but not
limited to the manufacture, design, packaging, shipment, handling or storage of
any Licensed Product or Alternative Product, as the case may
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be. Upon the commercialization of any Licensed Product or Alternative Product,
as the case may be, the parties hereby agree that the respective supply
agreements that are to be negotiated, as described in Section 3.8 hereof, shall
include usual and customary terms of indemnification for similar agreements
under comparable circumstances.
10.3. ImClone shall indemnify, hold harmless and defend Merck and its
Affiliates against any and all Losses suffered by Merck arising out of, relating
to, or based upon
(a) the breach of any representation or warranty made by ImClone in
this Agreement, or
(b) the breach or failure to perform by ImClone of any agreement or
covenant contained in this Agreement.
10.4. Merck shall indemnify, hold harmless and defend ImClone and its
Affiliates against any and all Losses suffered by ImClone arising out of,
relating to, or based upon
(a) the breach of any representation or warranty made by Merck in
this Agreement, or
(b) the breach or failure to perform by Merck of any agreement or
covenant contained in this Agreement.
10.5. This Article X shall survive the termination of the Agreement.
ARTICLE XI
Duration and Termination
11.1. This Agreement, unless it is sooner terminated as herein provided,
shall remain in full force and effect for that period or periods set forth in
Section 2.5 hereof.
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11.2. The parties may mutually agree at any time to terminate this Agreement at
a fixed date. Prior to or at termination, as the case may be, if any portion of
any royalty payment under Article IV is due ImClone through the agreed-upon
termination date, based on a proration according to calendar time, such
portion
shall be paid by Merck to ImClone.
11.3. On each Milestone Payment Date after the execution of this
Agreement, Merck shall have the unconditional right, at its sole discretion, to
terminate this Agreement by delivering a written notice to that effect to
ImClone, in which case Merck shall have no obligation to make any payment with
respect to any Milestone Payment that otherwise would have been due and payable
on such Milestone Payment Date but for the operation of this Section 11.3.
11.4. If, within one year of the first commercial sale of the first
Licensed Product in the Territory, Merck reasonably determines that it is not
economically feasible to market Licensed Products in the Territory, then Merck
shall have the right, upon written notice delivered to ImClone, to terminate the
development and sale of Licensed Products in the Territory, in which case
ImClone shall be obligated to repay Merck 50% of all cash amounts paid by Merck
with respect to Milestone Payments as of such date; provided, however, that
ImClone shall not be obligated to repay Milestone Payments in respect of
purchases by Merck of Acquired Voting Shares or Acquired Non-Voting Shares
pursuant to Section 4.1 and Schedule E hereof; provided, further, that ImClone
only shall be required to make such repayments out of revenues received by
ImClone from the sale of Licensed Products in the United States and Canada at
the rate of [ *** ] of the [ *** ] of such sales in Canada and the United States
for the first [ *** ] and [***] of the [ *** ] of any such sales in Canada and
the United States in excess of [ *** ]; provided, further that to the extent
ImClone shall have sublicensed Licensed Products to a Person other than an
Affiliate of ImClone, ImClone only shall be required to make such payments at
the rate of [ *** ] of the fees and royalties received from such sublicensee on
account of the sale of Licensed Products in the United States and Canada.
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11.5. In the event that Merck or ImClone shall at any time default in the
performance of any of the material covenants or conditions contained herein,
Merck or ImClone, as the case may be, shall have the right to notify the other
of such default and that the notifying party intends to terminate this Agreement
unless such default is corrected. Unless such default shall be corrected by the
defaulting party within sixty (60) calendar days from receipt by it of such
notice, the notifying party shall be entitled, by notice to the other, to
terminate this Agreement at any time after the end of the sixty (60) calendar
day period if the default continues.
11.6. Either party may terminate this Agreement and the license hereunder,
by delivering a written notice to that effect to the other party, in the event
that such other party:
(a) is the subject of an order for relief by a bankruptcy court;
(b) applies for or consents to the appointment of any receiver,
trustee, custodian, conservator, liquidator, rehabilitator, or similar
officer for it or for all or substantially all of its property; or any
receiver, trustee, custodian, conservator, liquidator, rehabilitator, or
similar officer is appointed without the application or consent of such
other party and the appointment continues undischarged or unstayed for
sixty (60) calendar days; or
(c) institutes or consents to any bankruptcy, proposal in
bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
dissolution, custodianship, conservatorship, liquidation, rehabilitation,
or similar proceeding relating to all or substantially all of its property
under the laws of any jurisdiction.
11.7. ImClone acknowledges and agrees that the execution of all of the
necessary Collateral License Agreements is integral to the transactions
contemplated herein. If, as of the first anniversary of the date on which all
patents and patent applications referred to in the first paragraph of Schedule F
are deemed valid and no longer subject to opposition or appeal, ImClone shall
not have (i) entered into all of the Collateral License Agreements, or (ii)
demonstrated to the satisfaction of Merck that some or all of
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such agreements are either not necessary or are required to be entered into by
Merck rather than ImClone and ImClone has entered into those not so
demonstrated, then Merck shall have the right, at its sole option, upon written
notice delivered to ImClone, to terminate this Agreement, in which case ImClone
shall be obligated to repay in full all cash amounts with respect to Milestone
Payments paid by Merck as of the date of such notice of termination; provided,
however, that Merck shall retain all its rights with respect to the Chemotherapy
Patent and Radiotherapy Patent, as provided in Section 2.2 hereof, and Section
2.2 and Section 4.2(d) shall survive termination of this Agreement. The parties
acknowledge and agree that the actual amount of damages that would be suffered
by Merck if ImClone or Merck, as the case may be, fails to enter into all of the
Collateral License Agreements before the first anniversary referred to above
cannot be, or would be difficult to, determine. It is hereby agreed, therefore,
that if ImClone or Merck, as the case may be, fails to enter into all of the
Collateral License Agreements within said one-year period, then ImClone, upon
written demand from Merck, shall be obligated to pay to Merck within ten (10)
calendar days of ImClone's receipt of such written demand, $500,000 as
liquidated damages. This payment of liquidated damages shall be in addition to
the repayments of Milestone Payments described above in this Section 11.7 and to
any other rights to indemnification or damages to which Merck may be entitled
hereunder or according to any applicable law.
11.8. Upon termination of this Agreement, the license and other rights
granted herein shall terminate in accordance with the appropriate provisions,
and all rights related to the terminated portion of the license shall revert to
the party(ies) herein which are their respective original licensors.
11.9. Termination or expiration of this Agreement shall be without
prejudice to the right of any party that is not in default hereunder to receive
all payments accrued and unpaid at the effective date of such expiration or
termination, to the remedy of either party in respect to any previous breach of
any of the covenants herein contained, and to any other provisions herein which
expressly or necessarily call for performance after such expiration or
termination. Article I, Section 2.2, Section 3.7, Section 4.1(c), Section
4.2(d), Section 4.3, Section 4.4, Section 4.5, Section 4.6, Section 4.8, Section
4.9(d), Section 4.10
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(only with respect to Merck Products), paragraphs 2 and 4 of Schedule E,
Schedule G, Article V, Article VI, Section 9.2(h), (i), (j), (k), (l) and (m),
Section 9.7 (only with respect to Merck Products), Section 9.9, Section 9.10,
Section 9.11, Article X, Section 11.8, Section 11.9, Article XIII, Section 16.2,
Section 16.4, Section 16.5, Section 16.6, Section 16.7 and Section 16.8 shall
survive expiration or termination.
11.10. If Merck fails in a country in which Merck has the right to sell
Licensed Products or Alternative Products to pursue in a timely fashion and with
all due diligence regulatory approval or sale of a Licensed Product or
Alternative Product, and such failure is not remedied within one hundred twenty
(120) calendar days after written notice from ImClone specifying such failure,
ImClone may immediately, upon written notice to Merck, terminate the license
with respect to such Licensed Products and/or Alternative Products in such
country; provided, however, that Merck shall have the right, at its sole
discretion, not to pursue such regulatory approvals or sales in a given country
in order to optimize sales within the Territory taken as a whole, in which case
ImClone shall not have the right to terminate such license with respect to such
country pursuant to this Section 11.10.
ARTICLE XII
Successors and Assigns
12.1. 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. Neither party may assign, delegate or otherwise transfer any of its
rights or obligations under this Agreement without the prior written consent of
the other party hereto except to the successor of all or substantially all of
the assigning party's pharmaceutical business (whether by merger, asset sale,
operation of law or otherwise).
12.2. Notwithstanding the foregoing, Merck may assign its rights, in whole
or in part, and delegate its duties and obligations, in whole or in part,
without the consent of ImClone to a directly or indirectly majority-owned
subsidiary of Merck, (the "Assignee") which Assignee shall enter into an
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assignment and assumption agreement acceptable in form and substance to ImClone.
In the event that Merck assigns its rights or delegates its duties and
obligations hereunder in accordance with this Article XII, all references to
Merck shall refer to the Assignee as well as to Merck and Merck shall remain
primarily liable for the performance of its obligations hereunder.
ARTICLE XIII
Arbitration
13.1. Any dispute between the parties, relating to the interpretation,
implementation or application of this Agreement which cannot be resolved by
negotiation shall be settled by arbitration, at the request of either party, by
written notice to the other, under the Commercial Rules of Arbitration of the
American Arbitration Association as in effect at the time such request for
arbitration is made, except that each party shall select one arbitrator, and the
two arbitrators thus selected shall thereafter select a third in accordance with
the aforesaid Rules of the American Arbitration Association. The arbitration
shall be conducted at the domicile of the defendant. All expenses and fees of
the arbitrators shall be divided equally between the parties unless otherwise
ordered by the arbitrators. The award in any such arbitration proceeding shall
be final and binding upon the parties and shall not be subject to appeal or
other legal recourse by either party. This provision shall not be construed to
preclude any action for an injunction or other equitable relief before any court
of competent jurisdiction.
ARTICLE XIV
Notices
14.1. Any notice expressly provided for under this Agreement shall be in
writing, shall be given either manually, by express courier, or by facsimile and
shall be deemed sufficiently given if and when received by the party to be
notified as follows:
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if Merck, to:
Frankfurter Stra(beta)e 250
D-64293 Darmstadt
Federal Republic of Germany
Attention: Klaus-Peter Brandis
Facsimile: 011-49-6151-72-7773,
with a copy (which shall not constitute notice) to:
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166 USA
Attention: Klaus H. Jander, Esq.
Facsimile: (212) 878-8375; and
if to ImClone, to:
180 Varick Street
New York, New York, 10014 USA
Attention: John B. Landes, Esq.
Facsimile: (212) 645-2054
with a copy (which shall not constitute notice) to
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017 USA
Attention: Phillip R. Mills, Esq.
Facsimile: (212) 450-4800.
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ARTICLE XV
Entire Agreement
15.1. This Agreement constitutes the entire agreement between Merck and
ImClone relating to the subject matter hereof. No variation or modification of
this Agreement, or waiver of any of the terms or provisions thereof, shall be
deemed valid unless in writing as an amendment hereto, signed by both parties.
ARTICLE XVI
Miscellaneous
16.1. The parties hereby represent and warrant that the persons executing
this Agreement below hold the offices designated, that they are duly authorized
to execute this Agreement and thereby bind the respective parties to its terms
and provisions, and that all required approvals of each signatory's superiors or
any committee or board have been obtained.
16.2. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to the conflicts-of-law rules
of such State.
16.3. 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
were upon the same instrument.
16.4. The captions herein are included for convenience of reference only
and shall be ignored in the construction or interpretation hereof.
16.5. After the execution of this Agreement, the parties hereto shall
cooperate with one another to take any appropriate action and/or execute any
documents of any kind which may be reasonably necessary to carry out any
provision of this Agreement, including but not limited to preparing and filing
any required notifications under the HSR Act in connection with the issuance of
Acquired Voting Shares, Acquired Non-Voting Shares or Milestone Conversion
Shares to Merck.
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16.6. 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.
16.7. Force Majeure. Neither party shall be liable for delay or failure to
perform this Agreement, in whole or in part, by reason of contingencies beyond
the reasonable control of the party affected, whether herein specifically
enumerated or not, including among others, acts of God, war, acts of war,
revolution, civil commotion, riots, acts of public enemies, blockage or embargo,
delays of carriers, car shortage, fire, explosion, breakdown of equipment or
facilities, strike, lockout, labor dispute, casualty or accident, earthquake,
epidemic, flood, cyclone, tornado, hurricane or other windstorm, delays of
vendors or other contingencies interfering with production or with customary or
usual means of transportation of raw materials or products or with the supply of
coal, natural gas, oil or fuel, or by reason of any law, order, proclamation,
regulation, ordinance, demand, requisition or requirement or any other act of
any governmental authority, local, state, provincial or federal, including court
orders, judgments or decrees, or actions of any governmental authority
respecting the registration, re-registration, cancellation, suspension,
labeling, and/or ability to transport or sell products, or any other cause
whatsoever, whether similar or dissimilar to those enumerated above; provided,
that the party so affected shall within 24 hours give written notice to the
other party whenever such contingency or other act becomes reasonably
foreseeable and shall use its best efforts to overcome the effects of the
contingency as promptly as possible. Neither party shall be required to resolve
a strike, lockout or other labor problem in a manner which it alone does not
deem proper and advisable. The party affected by an event of the sort enumerated
in or contemplated by this Section may suspend performance of this Agreement for
a period of time equal to the duration of the event excusing such performance.
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16.8. Nothing contained herein shall, by virtue of this Agreement, create
a partnership, joint venture, agency or employment relationship between the
parties hereto. No agent or employee or either party hereto shall be the agent
or employee of the other party by virtue of this Agreement.
16.9. Nothing in this Agreement shall require ImClone to take any action
in connection with the issuance of any of its securities that would contravene
any federal or state securities laws applicable to ImClone.
16.10. Any notices to third parties and all other publicity concerning the
existence and terms of this Agreement and the transactions contemplated hereby
shall be jointly planned and coordinated by the parties hereto. Neither party
shall act unilaterally in this regard without the prior written consent of the
other party, which consent shall not be unreasonably withheld. Notwithstanding
the foregoing provisions of this Section 16.10, either party may make such
announcements of, and/or provide publicity concerning, the existence and terms
of this Agreement and the transactions contemplated hereby as is reasonably
necessary or advisable, in the opinion of such party's counsel, to comply with
the provisions of any applicable law or regulation, including but not limited to
filings with the U.S. Securities and Exchange Commission or any other
governmental authority or with the National Association of Securities Dealers;
provided, however, that to the extent practical each party shall give the other
party prior notice of any such announcement or publicity.
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IN WITNESS WHEREOF, this Agreement has been executed on the date first
above written.
IMCLONE SYSTEMS INCORPORATED
By: /s/ Dr. Samuels D. Waksal
---------------------------------
Name: Dr. Samuel D. Waksal
Title: President
MERCK KGaA
By: /s/Prof. Dr. Bernhard Scheuble
---------------------------------
Name: Prof. Dr. Bernhard Scheuble
Title: General Partner, member of the
Executive Board, and CEO Pharma
By: /s/ Klaus Peter Brandis
---------------------------------
Name: Klaus-Peter Brandis
Title: Head of Legal Department
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SCHEDULES
SCHEDULE 2.8
Proposed License Agreement between ImClone and [ *** ] concerning exclusive
licensing by ImClone of intellectual property rights of ImClone in up to [***].
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SCHEDULE 4.9
FINANCING ASSISTANCE FOR MANUFACTURING FACILITY
PROPOSED TERMS
The Manufacturing Facility Line of Credit shall incorporate, among other
mutually agreed terms, the following terms:
Financing Assistance: Financing assistance will be provided by Merck
either in the form of (i) a credit facility
directly to ImClone ("Direct Credit") or (ii) a
guaranty of payment to a commercial bank providing
such credit facility to ImClone ("Guaranty");
provided, however, that such financing assistance
shall be subject to the prior approval by Merck of
a production concept, and such assistance shall be
exclusively for the realization of that concept.
In either case, the credit facility shall be
accessed by ImClone through the issuance of notes
(each, a "Note" and, collectively, the "Notes").
The Steering Committee may recommend an
alternative project to be undertaken to provide
for a production facility, in which case, at
Merck's sole option, Merck's obligations hereunder
shall be modified accordingly.
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Direct Credit If financing assistance is provided by means of a
Agreement: Direct Credit, the parties shall negotiate a
mutually satisfactory construction loan agreement
with usual and customary terms for similar
agreements under comparable circumstances.
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Guaranty: If financing assistance is provided by means of
the Guaranty, the parties shall negotiate a
mutually satisfactory guaranty agreement with
usual and customary terms for similar agreements
under comparable circumstances (including but not
limited to a reimbursement agreement).
- --------------------------------------------------------------------------------
Amount: Up to thirty million U.S. dollars ($30 million).
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Maturity Date: At a date certain, between the [ *** ] and [ *** ]
anniversary of the first drawdown.
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Interest Rate: If financing assistance is provided by means of
Direct Credit, at an adjustable interest rate per
annum equivalent to [ *** ].
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Interest Payments: If financing assistance is provided by means of
Direct Credit, interest payments to Merck shall be
[ *** ] for the term of the Notes, payable in
cash; provided, however, that interest shall
accrue during the first [ *** ] quarters after the
issuance of the first Note and such interest, plus
compounded interest thereon, shall be due and
payable on the last day of the [ *** ] quarter.
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Principal Repayment: [ *** ].
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Drawdown Schedule: [ *** ] delivers written notice to Merck at least
10 days prior to any drawdown.
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Use of Proceeds: Planning, development and construction of a
manufacturing facility in conformity with the
production concept, including the purchase of
related
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equipment, to produce the Compound, Improvements,
Licensed Products and Alternative Licensed
Products and, subject to the prior approval of the
Steering Committee, other pharmaceutical products.
- --------------------------------------------------------------------------------
Security Interest: As long as any Note shall remain outstanding and
prior to the maturity date, Merck shall retain the
senior security interest in the manufacturing
facility, including but not limited to all plant
and equipment, and a security interest in all
other assets of ImClone, including but not limited
to all of ImClone's patents, trademarks and other
intellectual property, such that Merck shall be
fully secured with respect to the total amount of
the Direct Credit or Guaranty, as the case may be.
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Change of Control: Upon a change of control of ImClone, (a) in the
case of a Direct Credit, the agreement with
respect to which the Direct Credit is provided to
ImClone shall terminate and all outstanding
principal and interest shall become immediately
due and payable, or (b) in the case of the
Guaranty, the Person taking control of ImClone
shall be obligated, as a condition to its taking
control, to cause the prompt release of Merck from
all of Merck's obligations under the Guaranty,
which release shall occur no later than thirty
(30) calendar days after the effective date of
such change of control.
- --------------------------------------------------------------------------------
Termination Upon the termination of the Agreement pursuant to
of Agreement: Section 11.2, Section 11.5 (if such termination is
the result of a breach of the Agreement by
ImClone), Section 11.6, or Section 11.7, [ *** ].
Upon the termination of the Agreement pursuant to
Section 11.4, [ *** ]. Upon the termination of the
Agreement pursuant to Section 11.3 or Section 11.5
(if such termination is the result of a breach of
the Agreement by Merck), [ *** ].
Upon the termination of the Agreement for any
reason other than those listed in the three
paragraphs above, [ *** ].
Upon the termination of the Agreement for any
reason, in the case of a Guaranty, ImClone shall
be obligated to use its best reasonable efforts to
cause the prompt release of Merck from all of
Merck's obligations under the Guaranty.
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SCHEDULE A
DESCRIPTION OF C225
C225 - Epidermal Growth Factor Receptor (EGFr) Inhibitor
The active substance is C225 chimeric monoclonal antibody, a chimerized antibody
of the IgG1 subclass, derived from mouse hybridoma. The chimerization process
resulted in an IgG1 subclass antibody with binding affinity to EGFr and inhibits
EGF/TGF(alpha) induced activation of this tyrosine kinase receptor. C225 also
will result in the stimulation of EGFr internalization, effectively removing the
receptor from the cell surface for interaction with the ligand.
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SCHEDULE B
C225 INTERNATIONAL PATENTS AND PATENT APPLICATIONS
[ *** ]
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SCHEDULE C
DEFINITION OF "FULLY LOADED COST OF GOODS"
[ *** ]
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SCHEDULE D
RESEARCH AND DEVELOPMENT PROTOCOL
[ *** ].
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SCHEDULE E
MILESTONE PAYMENTS
1. The Milestone Payments under Section 4.1 of the Agreement, subject to Section
11.3 thereof, shall be made by Merck within thirty (30) calendar days of
ImClone's fulfillment of any given Milestone designated on the charts below
(each, a "Milestone"), in the amounts summarized therein (each, a "Milestone
Payment Date"). Such expected dates of achievement of Milestones shall be set
promptly by the Steering Committee following the execution of the Agreement, and
this Schedule E shall be amended accordingly. On the Milestone Payment Dates
designated below as "Milestone Payments with Equity Purchases" (Milestones
designated numbers 11 through 17 below), ImClone shall issue Acquired Voting
Shares or, as provided in Section 4.1(b) of the Agreement, Acquired Non-Voting
Shares to Merck, in each case at a per-share purchase price calculated in the
manner described below. The aggregate purchase price shall be the amount of the
respective Milestone Payment.
2. Conversion of Acquired Non-Voting Shares.
(a) During the Standstill Period, Acquired Non-Voting Shares shall be
convertible into shares of Common Stock, on a share-for-share basis (the
"Milestone Conversion Shares"), to the extent that the aggregate beneficial
ownership of Common Stock of Merck and its Affiliates (including for the
purposes of this calculation, all shares of Common Stock that Merck or its
Affiliates may have the right to acquire upon the conversion of the Series A
Convertible Preferred Stock but not including the Common Stock that Merck or its
Affiliates may have the right to acquire upon conversion of the Acquired
Non-Voting Shares) does not exceed 19.9% of the total outstanding shares of
Common Stock, on a primary basis on the date Merck notifies ImClone of its or
its Affiliate's intent to convert such Acquired Non-Voting Shares (the
"Conversion Notification Date"); provided, however, that the Acquired Non-Voting
Shares shall be convertible only if the Conversion Notification Date occurs
within five years of the date of the occurrence of the Milestone Payment Date to
which the Acquired Non-Voting Shares relate; and further, provided, that ImClone
shall not be obligated during the Standstill Period to issue the Milestone
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Conversion Shares if such issuance would cause the aggregate beneficial
ownership of Merck and its Affiliates of Common Stock (including for the
purposes of this calculation, all shares of Common Stock that Merck and its
Affiliates may have the right to acquire upon the conversion of the Series A
Convertible Preferred Stock but excluding the Common Stock that Merck and its
Affiliates may have the right to acquire upon the conversion of the Acquired
Non-Voting Shares) to exceed 19.9% of the total outstanding shares of Common
Stock on a primary basis as of the Conversion Notification Date.
(b) After the termination of the Standstill Period, Acquired Non-Voting
Shares shall be freely convertible into shares of Common Stock, on a
share-for-share basis; provided, however, that, with respect only to Acquired
Non-Voting Shares that were acquired by Merck during the Standstill Period, in
the event that Merck chooses to convert such Acquired Non-Voting Shares to
Milestone Conversion Shares after the termination of the Standstill Period and
Merck's beneficial ownership of Common Stock exceeds 19.9% of the total
outstanding shares of Common Stock on a primary basis as of the relevant
Conversion Notification Date, by the resolution of the ImClone Board of
Directors, Merck shall be obligated, without prejudice to Merck's registration
rights pursuant to Schedule G of the Agreement, to sell as soon as commercially
practicable the Milestone Conversion Shares it received upon such conversion.
(c) Merck agrees that in no event shall it make a disposition directly or
indirectly of any Acquired Non-Voting Shares, other than to an Affiliate of
Merck, unless it shall have first obtained the prior written consent of ImClone.
3. The purchase price of any Acquired Voting Shares or Acquired Non-Voting
Shares to be issued to Merck on any given Milestone Payment Date pursuant to
Section 4.1(a) and (b), respectively, of the Agreement and this Schedule E shall
be calculated as follows: On any given Milestone Payment Date, the purchase
price of the Acquired Voting Shares or Acquired Non-Voting Shares shall be the
sum of:
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(a) the average of the closing prices of shares of Common Stock as traded
on Nasdaq (or if the Common Stock is not then trading on Nasdaq on any
securities exchange or national automated inter-dealer stock quotation system on
which shares of Common Stock at any given time are listed or quoted) during the
preceding 30 trading days prior to such Milestone Payment Date and
(b) a premium on such 30-day average share price (the "Average Share
Price") to be calculated as follows:
(i) If ImClone achieves a Milestone on a date that is designated
"Early" on the table below, the premium shall be [ *** ]of the Average Share
Price;
(ii) If ImClone achieves a Milestone on a date that is designated
"On Time" on the table below, the premium shall be [ *** ] of the Average Share
Price; or
(iii) If ImClone achieves a Milestone on a date that is designated
"Late" on the table below, the premium shall be [ *** ] of the Average Share
Price;
provided, however, that in determining whether a Milestone is achieved on
a date that is designated "Early," "On Time" or "Late," such dates shall be
adjusted forward to take account any delays associated with activities within
Merck's sole control.
4. Notwithstanding any other provision of this Agreement, at least sixty (60)
calendar days prior to any issuance of any Acquired Voting Shares, Acquired
Non-Voting Shares or Milestone Conversion Shares to Merck hereunder, counsel for
both parties shall determine whether such issuance of shares to Merck or an
Affiliate of Merck will require any notification or any other action by either
party under the HSR Act, as then in effect. The parties hereto shall cooperate
with one another in good faith and, at their own expense, take any appropriate
actions, execute any documents, and prepare and file any required notifications
under the HSR Act prior to the issuance of any Acquired Voting Shares, Acquired
Non-Voting Shares or Milestone Conversion Shares to Merck or its Affiliates. No
Acquired Voting Shares,
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Acquired Non-Voting Shares or Milestone Conversion Shares shall be issued to
Merck or its Affiliates except in compliance with the applicable requirements of
the HSR Act.
[ *** ]
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SCHEDULE F
DESCRIPTION OF COLLATERAL LICENSE AGREEMENTS
Collateral License Agreements as follows:
License agreement to be entered into with [ *** ].
Sublicense rights in the Territory to [ *** ].
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SCHEDULE G
REGISTRATION RIGHTS
1. Demand Registration.
(a) One time during any 12-month period, Merck shall have the right to
make a written request for registration under the 1933 Act of all or part of the
Registrable Securities (a "Demand Registration"); provided, however, that
ImClone shall be obligated hereunder to make no more than four Demand
Registrations in total. A registration shall not count as a Demand Registration
until it has become effective. If Merck so elects, the offering of such
Registrable Securities pursuant to such Demand Registration shall be in the form
of an underwritten offering. Merck shall select the book-running and other
managing underwriters in connection with such offering and any additional
underwriters or investment bankers to be used in connection with the offering;
provided, that such underwriters and investment bankers must be reasonably
satisfactory to ImClone. Upon written request of Merck in compliance with the
preceding sentence that ImClone effect registration with respect to all or a
part of the Registrable Securities, ImClone shall, as expeditiously as
reasonably possible:
(i) prepare and file within 45 days of such request for registration
with the Commission a registration statement on Form S-3 or on any form for
which ImClone then qualifies or which counsel for ImClone shall deem
appropriate, as the case may be, and which form shall be available for the sale
of the Registrable Securities; provided, that before filing with the Commission
a registration statement or prospectus or any amendments or supplements thereto,
ImClone shall (i) furnish to one counsel selected by Merck copies of all such
documents proposed to be filed, which documents shall be subject to reasonable
advance review of such counsel, and (ii) notify Merck of any stop order issued
or threatened by the Commission and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered;
(ii) keep such registration effective for a period of no longer than
two (2) years after the date of filing of such registration statement or until
Merck and/or its Affiliates have completed the distribution described in the
registration statement relating thereto, whichever first occurs;
(iii) prepare and file with the Commission such amendments and
supplements to such registration statements and the Prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement;
(iv) furnish to Merck such number of copies of such registration
statement, each amendment and supplement thereto (in each case including all
exhibits thereto), the Prospectus included in such registration statement
(including each preliminary prospectus), in conformity with the requirements of
the 1933 Act and such other documents as Merck may reasonably request in order
to facilitate the disposition of the Registrable Securities;
(v) advise Merck and the managing underwriters, if any, and, if
requested by Merck or the managing underwriters, if any, confirm such advice in
writing, when a registration statement or any amendment thereto has been filed
with the Commission and when the registration statement or any post-effective
amendment thereto has become effective;
(vi) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of any registration statement, or the lifting of
any suspension of the qualification (or
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exemption from qualification) of the Registrable Securities for sale in any
jurisdiction, at the earliest possible time;
(vii) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by ImClone are then
listed;
(viii) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(ix) immediately notify Merck at any time when a Prospectus relating
thereto is required to be delivered under the 1933 Act, of the happening of any
event as a result of which the Prospectus included in such registration
statement contains an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and shall
promptly prepare and furnish to Merck a supplement or amendment to such
Prospectus so that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus shall not contain an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing;
(x) make available for inspection by Merck, any underwriter
participating in any disposition pursuant to such registration statement, and
any attorney, accountant or other agent retained by Merck, its Affiliates or an
underwriter (collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of ImClone (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause ImClone's officers, directors and employees
to supply all information reasonably requested by any such Inspectors in
connection with such registration statement; provided, however, that such
Inspectors shall first agree in writing with ImClone that any Records that are
reasonably and in good faith designated by ImClone as confidential at the time
of delivery of such Records shall be kept confidential by such Inspectors; and
in connection with underwritten offerings, use its reasonable best efforts to
obtain a comfort letter from ImClone's independent public accountants in
customary form and covering such matters of the type customarily covered by
comfort letters as Merck reasonably requests.
(b) Merck agrees that, upon receipt of any notice from ImClone of the
happening of any event of the kind described in Section 1(a)(ix) of this
Schedule G, Merck shall forthwith discontinue disposition of Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until Merck's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 1(a)(ix) of this Schedule G, and, if so
directed by ImClone, Merck shall deliver to ImClone (at ImClone's expense) all
copies, other than permanent file copies then in Merck's possession, of the
Prospectus covering such Registrable Securities current at the time of receipt
of such notice.
(c) Holdback Agreements. Merck agrees not to offer, sell, contract to sell
or otherwise dispose of any Common Stock, or any securities convertible into or
exchangeable or exercisable for such securities, during the 14 days prior to,
and during the 90-day period beginning on, the effective date of any
registration statement registering Registrable Securities other than (a) the
Registrable Securities to be sold pursuant to such registration statement, (b)
any shares of Common Stock sold upon the exercise of an option or warrant or the
conversion of a security outstanding at such date and (c) if and to the extent
permitted by applicable law, and the managing underwriter or underwriters in the
case of an underwritten public offering, in a private placement exempt from
registration under the 1933 Act.
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2. Piggyback Registration. If ImClone proposes to file a registration statement
under the 1933 Act with respect to an offering by ImClone of any class of
securities after the Closing Date (other than a registration statement on Form
S-4 or S-8 or any successor form to such Forms, or filed in connection with a
merger, exchange offer or an offering of securities solely to the existing
stockholders in connection with a rights offering or solely to employees of
ImClone), then ImClone shall give written notice of such proposed filing to
Merck at least twenty days before the anticipated filing date, and such notice
shall offer Merck the opportunity to register such amount of Registrable
Securities as Merck may request. ImClone shall use its best efforts to cause the
managing underwriter or underwriters of a proposed underwritten offering to
permit Merck to include such securities in such offering on the same terms and
conditions as any similar securities of ImClone included therein.
Notwithstanding the foregoing, (i) if the managing underwriter or underwriters
of such proposed underwritten offering delivers a written notice to Merck that
the total amount of securities which Merck and its Affiliates, ImClone and any
other Persons or entities (other than such other Persons or entities with whom
ImClone has agreements on the date hereof prohibiting reduction or limitation as
contemplated herein) having registration rights, intend to include in such
offering is sufficiently large as to materially and adversely affect the success
of such offering, then the amount of securities to be offered for the accounts
of Merck and its Affiliates and for the accounts of such other Persons or
entities shall be reduced or limited in proportion to their respective amounts
of securities to the extent necessary to reduce the total amount of securities
to be included in such offering to the amount recommended by such managing
underwriter; provided, that no reduction shall be made in the securities to be
offered for the account of ImClone; and (ii) if such proposed underwritten
offering involves only equity securities and the managing underwriter or
underwriters thereof shall have delivered a written notice to Merck that the
inclusion of any Registrable Securities in such offering will materially and
adversely affect the success of such offering, then no Registrable Securities
shall be included in such offering.
3. Expenses of Registration.
All Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 1 or Section 2 of this Schedule
G shall be borne by ImClone. All Selling Expenses relating to securities so
registered shall be borne by Merck.
4. Indemnification.
(a) Indemnification by ImClone. ImClone shall, and it hereby does, agree
to indemnify and hold harmless, to the full extent permitted by law, Merck and
its Affiliates and their respective directors and officers and each other
Person, if any, who controls Merck within the meaning of the 1933 Act or the
Exchange Act, against any and all losses, claims, damages or liabilities, joint
or several, and expenses (including any amounts Personally paid in any
settlement) to which Merck or its Affiliates or any such director or officer or
controlling Person may become subject under the 1933 Act, common law or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) or expenses arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
in any registration statement under which such securities were registered under
the 1933 Act, any preliminary, final or summary prospectus contained therein, or
any amendment or supplement thereto, or (ii) 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 ImClone shall reimburse Merck or its
Affiliates and each such director, officer or controlling Person for any legal
or any other expenses reasonably incurred by them in connection with
investigating or defending such loss, claim, liability, action or proceedings;
provided, that ImClone shall not be liable in any such case to the extent that
any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expenses arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement or amendment or supplement thereto or in any such
preliminary, final
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or summary prospectus in reliance upon and in conformity with written
information furnished to ImClone by Merck or its Affiliates for use in the
preparation thereof; and provided, further, that ImClone shall not be liable to
Merck or its Affiliates or any other Person, if any, who controls Merck, under
the indemnity agreement in this Section 4(a) with respect to any preliminary
prospectus as amended or supplemented as the case may be, to the extent that any
such loss, claim, damage or liability of Merck, its Affiliates or controlling
Person results from the fact that Merck or its Affiliates sold Registrable
Securities to a Person to whom there was not sent or given, at or prior to the
written confirmation of such sale, a copy of the final prospectus (including any
documents incorporated by reference therein), whichever is most recent, if
ImClone has previously furnished copies thereof to Merck and its Affiliates and
such final prospectus, as then amended or supplemented, has corrected any such
misstatement or omission. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of Merck or its Affiliates
or any such director, officer or controlling Person and shall survive the
transfer of such securities by Merck or its Affiliates. It is agreed that the
indemnity agreement contained in this Section 4(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of ImClone (which consent has not
been unreasonably withheld).
(b) Indemnification by Merck. Merck shall, if the Registrable Securities
are included in the securities as to which such registration, qualification, or
compliance is being effected, indemnify and hold harmless (in the same manner
and to the same extent as set forth in subdivision (a) of this Section 4)
ImClone, any underwriter and their respective controlling Persons within the
meaning of the 1933 Act and the Exchange Act, and all other prospective sellers
and their respective controlling Persons with respect to any statement or
alleged statement in or omission or alleged omission from such registration
statement, any preliminary, final or summary prospectus contained therein, or
any amendment or supplement, if such statement or alleged statement or omission
or alleged omission was made in reliance upon and in conformity with written
information furnished to ImClone by Merck or its Affiliates for use in the
preparation of such registration statement, preliminary, final or summary
prospectus or amendment or supplement, or a document incorporated by reference
into any of the foregoing. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of ImClone or any
underwriter or any of Merck or its Affiliates or any of their respective
directors, officers and controlling Persons and shall survive the transfer of
such securities by Merck or its Affiliates; provided, however, that the
obligations of Merck hereunder shall not apply to amounts paid in settlement of
any such claims, losses, damages, or liabilities (or actions in respect thereof)
if such settlement is effected without the consent of Merck (which consent shall
not be unreasonably withheld).
(c) Notices of Claims, Etc. Each party entitled to indemnification under
this Section 4 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of such
claim or any litigation resulting therefrom, provided, that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided, further,
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Section
4, to the extent such failure is not prejudicial. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.
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(d) Contribution. If the indemnification provided for in this Section 4 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statements of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
5. Miscellaneous.
(a) Rule 144. ImClone covenants that it shall file any reports required to
be filed by it under the 1933 Act and the 1934 Act and that it shall take such
further action as Merck may reasonably request, all to the extent required from
time to time, to enable Merck and its Affiliates to sell Registrable Securities
without registration under the 1933 Act within the limitation of the exemptions
provided by Rule 144 under the 1933 Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the Commission.
Upon the request of Merck, ImClone shall deliver to Merck a written statement as
to whether it has complied with such requirements.
(b) Other Registration Rights. Except as provided hereunder, for a period
of six months from and after the date of the Agreement, ImClone shall not grant
to any other Person the right to request ImClone to register securities of
ImClone without the prior written consent of Merck, which consent shall not be
unreasonably withheld.
(c) Assignability of Registration Rights. The registration rights afforded
Merck and its Affiliates herein shall be assignable to a transferee of
Registrable Securities from Merck or any of its Affiliates so long as (i) such
transferee has acquired no fewer than 800,000 shares of Registrable Securities
(as adjusted from time to time to reflect stock splits, stock dividends and
similar changes in the capitalization of ImClone) from Merck or any of its
Affiliates, (ii) such transferee has agreed with ImClone in writing to comply
with all applicable provisions hereof and (iii) Merck has otherwise complied
with all provisions hereof that affect its right to sell, transfer or otherwise
dispose of shares of Registrable Securities; provided, however, that ImClone
shall not be required to effect more than one registration of Registrable
Securities in any 12-month period or more than a total of four Demand
Registrations under this Schedule G. For a transfer of registration rights to be
effective, Merck shall give ImClone written notice at the time of such transfer
stating the name and address of the transferee and identifying the shares with
respect to which the rights under this Section 5(c) are being assigned.
(d) This Schedule G shall supercede Sections 7, 8, 9, 10 and 11of the
Preferred Stock Purchase Agreement, which Sections 7, 8, 9, 10 and 11 shall be
of no further effect.
6. Definitions.
As used in this Schedule G:
(a) The term "Commission" shall mean the U.S. Securities and Exchange
Commission or any other federal agency at the time administering the 1933 Act or
the 1934 Act.
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(b) The term "Person" shall mean an individual, partnership, corporation,
limited liability company, trust, unincorporated organization or government or
political department or agency thereof or other entity.
(c) The term "Prospectus" shall mean the prospectus included in any
Registration Statement (including, without limitation, a prospectus that
discloses information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A under the 1933 Act),
as amended or supplemented by any prospectus supplement, with respect to the
terms of the offering of any portion of Registrable Securities, covered by such
Registration Statement, and all amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
(d) The term "Registrable Securities" shall mean any and all Acquired
Voting Shares, Milestone Conversion Shares, and "Conversion Shares" (as such
term is defined in Section 1 of the Preferred Stock Purchase Agreement). As to
any Registrable Securities, such securities shall cease to be Registrable
Securities when (i) a registration statement with respect to the sale of such
securities shall have become effective under the 1933 Act and such securities
shall have been disposed of pursuant to such effective registration statement,
(ii) such securities shall have been distributed pursuant to Rule 144, Rule
144A, or any similar provision then in force, under the 1933 Act, (iii) such
securities shall have been otherwise transferred, new certificates or other
evidences of ownership for them not bearing a legend restricting further
transfer and not subject to any stop transfer order or other restrictions on
transfer shall have been delivered by ImClone and subsequent disposition of such
securities shall not require registration or qualification of such securities
under the 1933 Act or any state securities laws then in force or (iv) the sale
of such securities by Merck or its Affiliates shall no longer require
registration under the 1933 Act or such securities shall cease to be
outstanding.
(e) The terms "register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the 1933 Act and the applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
(f) The term "Registration Expenses" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for ImClone, blue sky fees and
expenses and expenses of any regular or special audits incident to or required
by any such registration, but shall not include Selling Expenses.
(g) The term "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of the Registrable Securities and
fees and disbursements of counsel for Merck (other than the fees and
disbursements of counsel constituting a part of blue sky fees and expenses and
included in Registration Expenses).
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SCHEDULE H
FORM OF OPINIONS OF COUNSEL
1. Upon the execution of the Agreement, an opinion letter of the general counsel
of ImClone, in form and content satisfactory to Merck, shall be addressed to and
delivered to Merck and dated as of the execution date, which letter shall
provide substantially as follows:
(a) ImClone is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware.
(b) The execution, delivery and performance by ImClone of the Agreement
are within ImClone's corporate powers and have been duly authorized by all
necessary corporate action on the part of ImClone. The Agreement constitutes a
valid and binding agreement of ImClone, enforceable in accordance with its
terms, subject to (i) bankruptcy, insolvency or similar laws affecting
creditors' rights generally, (ii) general equitable principles and (iii) the
Exon-Florio Act, Section 721 of Title VII of the Defense Production Act of 1950,
as amended, and the rules and regulations promulgated thereunder.
(c) The execution, delivery and performance by ImClone of the Agreement
require no action by or in respect of, or declaration to or filing with, any
governmental body, agency, official or authority other than compliance with (i)
any applicable requirements of the Securities Exchange Act of 1934, as amended
(the "1934 Act") and state securities or "blue sky" laws, (ii) any applicable
requirements of Delaware law, (iii) the rules and regulations of the National
Association of Securities Dealers and the Nasdaq Stock Market, and (iv) any
applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder (the "HSR
Act").
(d) The execution, delivery and performance by ImClone of the Agreement do
not and will not (i) contravene or conflict with the certificate of
incorporation or bylaws of ImClone; (ii) 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 ImClone; (iii)
contravene, conflict with, constitute a breach of or default under, or give rise
to any right of termination, cancellation or acceleration of any right or
obligation of ImClone under, any provision of any agreement, contract or other
instrument binding upon ImClone or any of its properties or (iv) result in the
creation or imposition of any lien, encumbrance of claim of ownership of any
kind by any third party on any asset, whether tangible or intangible, of
ImClone.
2. With respect to each delivery of Acquired Voting Shares, Acquired Non-Voting
Shares or Milestone Conversion Shares to Merck, as the case may be, an opinion
letter of the general counsel of ImClone, in form and content satisfactory to
Merck, shall be addressed to and delivered to Merck and dated as of such
delivery date, which letter shall provide substantially as follows:
(a) ImClone is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware.
(b) The execution, delivery and performance by ImClone of the Agreement
are within ImClone's corporate powers and have been duly authorized by all
necessary corporate action on the part of ImClone. The Agreement constitutes a
valid and binding agreement of ImClone, enforceable in accordance with its
terms, subject to (i) bankruptcy, insolvency or similar laws affecting
creditors' rights
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generally, (ii) general equitable principles and (iii) the Exon-Florio Act,
Section 721 of Title VII of the Defense Production Act of 1950, as amended, and
the rules and regulations promulgated thereunder.
(c) The [Acquired Voting Shares] [Acquired Non-Voting Shares] [Milestone
Conversion Shares] are validly issued, fully paid and non-assessable and free
and clear of any and all liens, encumbrances and claims of ownership of any kind
of any third party and free of preemptive or similar rights. Based only on the
market price of the Common Stock as of the date of the Agreement, a sufficient
number of shares of Common Stock has been authorized and reserved for Merck's
acquisition of Acquired Voting Shares and Milestone Conversion Shares pursuant
to the Agreement.
(d) The execution, delivery and performance by ImClone of the Agreement
require no action by or in respect of, or declaration to or filing with, any
governmental body, agency, official or authority other than compliance with (i)
any applicable requirements of the 1934 Act and state securities or "blue sky"
laws, (ii) any applicable requirements of Delaware law, (iii) the rules and
regulations of the National Association of Securities Dealers and the Nasdaq
Stock Market, and (iv) any applicable requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act").
(e) The execution, delivery and performance by ImClone of the Agreement do
not and will not (i) contravene or conflict with the certificate of
incorporation or bylaws of ImClone; (ii) 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 ImClone; (iii)
contravene, conflict with, constitute a breach of or default under, or give rise
to any right of termination, cancellation or acceleration of any right or
obligation of ImClone under, any provision of any agreement, contract or other
instrument binding upon ImClone or any of its properties or (iv) result in the
creation or imposition of any lien, encumbrance of claim of ownership of any
kind by any third party on any asset, whether tangible or intangible, of
ImClone.
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Exhibit 23.1
Accountants' Consent
The Board of Directors
Imclone Systems Incorporated:
We consent to the use of our report incorporated herein by reference.
Princeton, New Jersey
January 8, 1999
/s/ KPMG LLP
