UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-19612
IMCLONE SYSTEMS INCORPORATED
----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 04-2834797
- -------------------------------- ------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
180 VARICK STREET, NEW YORK, NY 10014
- --------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(212) 645-1405
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Registrant's telephone number, including area code
Not Applicable
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Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X_ No ___
Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding as of August 13, 1999
----------------------------- ---------------------------------
Common Stock, par value $.001 25,540,495 Shares
<PAGE>
IMCLONE SYSTEMS INCORPORATED
INDEX
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Page No.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1999 (unaudited)
and December 31, 1998 1
Unaudited Consolidated Statements of Operations - Three
and six months ended June 30, 1999 and 1998 2
Unaudited Consolidated Statements of Cash Flows - Six
months ended June 30, 1999 and 1998 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 13
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 15
<PAGE>
Part 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements
IMCLONE SYSTEMS INCORPORATED
Consolidated Balance Sheets
(in thousands, except per share and share data)
June 30, December 31,
Assets 1999 1998
---------- ------------
(unaudited)
Current assets:
Cash and cash equivalents ......................... $ 2,672 $ 3,888
Securities available for sale ..................... 38,006 42,851
Prepaid expenses .................................. 434 470
Other current assets .............................. 1,378 1,196
--------- ---------
Total current assets ................... 42,490 48,405
--------- ---------
Property and equipment:
Land .............................................. 340 340
Building and building improvements ................ 10,690 10,519
Leasehold improvements ............................ 4,878 4,846
Machinery and equipment ........................... 8,427 7,834
Furniture and fixtures ............................ 641 640
Construction in progress .......................... 1,860 115
--------- ---------
Total cost ............................. 26,836 24,294
Less accumulated depreciation
and amortization ............................. (13,742) (12,877)
--------- ---------
Property and equipment, net ............ 13,094 11,417
--------- ---------
Patent costs, net ...................................... 892 860
Deferred financing costs, net .......................... 41 46
Other assets ........................................... 1,581 1,524
--------- ---------
$ 58,098 $ 62,252
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable ................................... $ 944 $ 1,109
Accrued expenses and other ......................... 3,568 4,847
Interest payable ................................... 43 45
Deferred revenue ................................... -- 75
Fee potentially refundable from corporate partner .. 12,000 4,000
Current portion of long-term liabilities ........... 919 744
Preferred stock dividends payable .................. 3,702 2,512
--------- ---------
Total current liabilities .............. 21,176 13,332
--------- ---------
Long-term debt ......................................... 2,200 2,200
Other long-term liabilities, less current portion ...... 1,586 1,546
--------- ---------
Total liabilities ...................... 24,962 17,078
--------- ---------
Commitments and contingencies
Stockholders' equity :
Preferred stock, $1.00 par value; authorized
4,000,000 shares; issued and outstanding
Series A Convertible: 400,000 at June 30,
1999 and December 31, 1998 (preference
in liquidation $43,702 and $42,512,
respectively) ................................. 400 400
Common stock, $.001 par value; authorized
60,000,000 shares; issued 25,397,474 and
24,567,312 at June 30, 1999 and December 31,
1998, respectively; outstanding 25,346,657,
and 24,516,495 at June 30, 1999 and December
31, 1998, respectively ........................ 25 25
Additional paid-in capital ......................... 188,118 184,853
Accumulated deficit ................................ (155,055) (138,846)
Treasury stock, at cost; 50,817 shares
at June 30, 1999 and
December 31, 1998 ............................. (492) (492)
Note receivable - officer and stockholder .......... (137) (142)
Accumulated other comprehensive income (loss):
Unrealized gain (loss) on securities
available for sale, net .................. 277 (624)
--------- ---------
Total stockholders' equity ............ 33,136 45,174
--------- ---------
$ 58,098 $ 62,252
========= =========
See accompanying notes to consolidated financial statements.
Page 1
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IMCLONE SYSTEMS INCORPORATED
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Product development milestone revenues .... $ -- $ -- $ -- $ 1,000
Research and development funding from third
parties and other .................... 254 765 883 1,615
-------- -------- -------- --------
Total revenues .............. 254 765 883 2,615
-------- -------- -------- --------
Operating expenses:
Research and development .................. 7,151 4,675 13,505 8,846
General and administrative ................ 1,675 1,546 3,677 2,959
-------- -------- -------- --------
Total operating expenses ..... 8,826 6,221 17,182 11,805
-------- -------- -------- --------
Operating loss ................................. (8,572) (5,456) (16,299) (9,190)
-------- -------- -------- --------
Other:
Interest income ........................... (564) (777) (1,168) (1,607)
Interest expense .......................... 123 110 246 200
Loss (gain) on securities available
for sale ............................... -- (1) 832 (2)
-------- -------- -------- --------
Net interest and other income .. (441) (668) (90) (1,409)
-------- -------- -------- --------
Net loss ....................................... (8,131) (4,788) (16,209) (7,781)
Preferred dividends (including assumed
incremental yield attributable to
beneficial conversion feature of $336
and $317 for the three months ended
June 30, 1999 and 1998, respectively
and $672 and $635 for the six months
ended June 30, 1999 and 1998,
respectively) ............................. 934 967 1,862 1,825
-------- -------- -------- --------
Net loss to common stockholders ................ $ (9,065) $ (5,755) $(18,071) $ (9,606)
======== ======== ======== ========
Basic and diluted net loss per common share .... $ (0.36) $ (0.24) $ (0.73) $ (0.40)
======== ======== ======== ========
Weighted average shares outstanding ............ 24,986 24,273 24,718 24,251
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 2
<PAGE>
IMCLONE SYSTEMS INCORPORATED
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six Months Ended
June 30,
--------------------
1999 1998
--------- --------
Cash flows from operating activities:
Net loss ................................................ $(16,209) $ (7,781)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization ........................ 925 883
Expense associated with issuance
of options and warrants .......................... 1,064 310
Loss (gain) on securities available for sale ......... 832 (2)
Changes in:
Prepaid expenses .................................. 138 20
Other current assets .............................. (284) (49)
Other assets ...................................... (135) (35)
Interest payable .................................. (2) (25)
Accounts payable .................................. (165) (151)
Accrued expenses and other ........................ (1,279) (744)
Deferred revenue .................................. (75) 75
Fee potentially refundable from corporate partner . 8,000 --
-------- --------
Net cash used in operating activities ...... (7,190) (7,499)
-------- --------
Cash flows from investing activities:
Acquisitions of property and equipment ............... (2,010) (570)
Purchases of securities available for sale ........... (18,508) (28,760)
Sales and maturities of securities available for sale 23,500 37,997
Additions to patents ................................. (87) (81)
-------- --------
Net cash provided by investing activities . 2,895 8,586
-------- --------
Cash flows from financing activities:
Proceeds from exercise of stock options and warrants . 3,335 150
Proceeds from issuance of common stock under the
employee stock purchase plan ..................... 50 --
Proceeds from equipment and building improvement
financings ....................................... 94 593
Payments of other liabilities ........................ (411) (514)
Interest received on note receivable - officer
and stockholder .................................. 11 --
-------- --------
Net cash provided by financing activities .. 3,079 229
-------- --------
Net (decrease) increase in cash and cash equivalents ..... (1,216) 1,316
Cash and cash equivalents at beginning of period ......... 3,888 2,558
-------- --------
Cash and cash equivalents at end of period ............... $ 2,672 $ 3,874
======== ========
See accompanying notes to consolidated financial statements.
Page 3
<PAGE>
IMCLONE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(1) Basis of Presentation
The consolidated financial statements of ImClone Systems Incorporated ("ImClone"
or the "Company") as of June 30, 1999 and for the three and six months ended
June 30, 1999 and 1998 are unaudited. In the opinion of management, these
unaudited financial statements include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation. These financial
statements should be read in conjunction with the audited financial statements
and notes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1998, as filed with the Securities and Exchange
Commission.
Results for the interim periods are not necessarily indicative of results for
the full years.
(2) Commitments
The Company signed a definitive agreement in April 1999 with Boehringer
Ingelheim Pharmaceuticals KG ("BI Pharmaceuticals") for the further development,
production scale-up and manufacture of the Company's lead therapeutic product
candidate, C225, for use in human clinical trials. Services pursuant to this
agreement commenced in April 1998 pursuant to an agreement in principle. The
Company estimates that the total cost under the agreement, including the cost of
additional amounts of material the Company has the right to request, will be
DM12,100,000 or $6,392,000. As of June 30, 1999, the Company has incurred
approximately DM3,940,000, of which DM3,130,000 has been paid, for services
provided under this agreement.
(3) Related Party Transactions
In January 1998, the Company accepted a promissory note totaling approximately
$131,000 from its President and CEO in connection with the exercise of a warrant
to purchase 87,305 shares of the Company's common stock, $.001 par value (the
"Common Stock"). The note is due no later than two years from issuance and is
full recourse. Interest was paid on the first anniversary date of the promissory
note at an annual rate of 8.5% and is payable on the stated maturity or any
accelerated maturity. At June 30, 1999, the total amount due the Company,
including interest, was approximately $137,000 and is classified in the
stockholders' equity section of the balance sheet as a note receivable from
officer and stockholder.
In October 1998, the Company accepted an unsecured promissory note totaling
$100,000 from its Executive Vice President and COO. The note was payable on
demand including interest at the annual rate of 8.25% for the period that the
loan is outstanding. In April 1999, the note, including all interest, was paid
in full.
In January 1999, the Company accepted an unsecured promissory note totaling
$60,000 from its Vice President, Product and Process Development. The note was
payable upon the earlier of on the Company's demand or July 28, 1999 including
interest at an annual rate of 8.75% for the period that the loan was
outstanding. The loan was made in connection with the acceptance of employment
and the corresponding relocation of the officer. At June 30, 1999, the total
amount due the Company, including interest, was approximately $62,000 and is
included as a component of other current assets. In July 1999, the note,
including all interest, was paid in full.
(4) Earnings Per Share
Basic and diluted Earnings Per Share ("EPS") are computed based on the net loss
for the relevant period, adjusted for cumulative Series A Convertible Preferred
Stock (the "Series A Preferred Stock" or "Series A Preferred Shares") dividends
and the assumed incremental yield attributable to the beneficial conversion
feature in the preferred stock, divided by the weighted average number of shares
outstanding during the period. Potentially dilutive securities, including
convertible preferred stock, options and warrants, have not been included in the
diluted EPS computation because they are anti-dilutive.
Page 4
<PAGE>
(5) Comprehensive Income (Loss)
The following table reconciles net loss to comprehensive loss:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
1999 1998 1999 1998
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net loss ................................... $ (8,131,000) $ (4,788,000) $(16,209,000) $ (7,781,000)
Other comprehensive income:
Unrealized holding gain arising
during the period ....................... 56,000 135,000 69,000 204,000
Less: Reclassification adjustment for
realized gain (loss) included
in net loss ................... -- -- (832,000) 2,000
------------ ------------ ------------ ------------
Total other comprehensive income ..... 56,000 135,000 901,000 202,000
------------ ------------ ------------ ------------
Total comprehensive loss ................... $ (8,075,000) $ (4,653,000) $(15,308,000) $ (7,579,000)
============ ============ ============ ============
</TABLE>
(6) Loss on Securities Available for Sale
In October 1997, the Company entered into a Collaborative Research and License
Agreement with CombiChem Inc. ("CombiChem"). Concurrent with this agreement, the
Company entered into a Stock Purchase Agreement pursuant to which the Company
purchased 312,500 shares of common stock of CombiChem, as adjusted, for a total
purchase price of $2,000,000. The investment has been classified as available
for sale and a long-term asset. The market value of the investment in CombiChem
has declined substantially from the date of original investment and the Company
has deemed this decline in market value to be other than temporary. Accordingly,
the cost basis in the investment in CombiChem has been adjusted and a loss on
securities available for sale of $828,000 was recorded in March 1999. These
securities have not been sold by the Company.
(7) Common Stock
On May 24, 1999, the date of the annual shareholders meeting, the stockholders
approved the amendment of the Company's certificate of incorporation to increase
the total number of shares of Common Stock the Company is authorized to issue
from 45,000,000 shares to 60,000,000 shares.
(8) Stock Options and Warrants
On May 24, 1999, the date of the annual shareholders meeting, the stockholders
approved an amendment to the Company's 1996 Incentive Stock Option Plan (the
"1996 ISO Plan") to increase the total number of shares of Common Stock which
may be issued pursuant to options which may be granted under the 1996 ISO Plan
from 3,000,000 to 4,000,000, which number shall be reduced by the number of
shares of Common Stock which have been or may be issued pursuant to options
granted under the Company's 1996 Non-Qualified Stock Option Plan (the "1996
Non-Qualified Plan").
The stockholders also approved amendments to the Company's 1996 Non-Qualified
Plan to (i) increase the total number of shares of Common Stock which may be
issued pursuant to options which may be granted under the 1996 Non-Qualified
Plan from 3,000,000 to 4,000,000, which number shall be reduced by the number of
shares of common stock which have been or may be issued pursuant to options
granted under the Company's 1996 ISO Plan, and (ii) increase the annual option
grant made to members of the Board of Directors and the Chairman who are not
full-time employees of the Company under the 1996 Non-Qualified Plan. The annual
option grant to non-employee members of the Board of Directors increased from
2,500 to 15,000 and the annual option grant to the Chairman increased from 2,500
to 30,000.
Page 5
<PAGE>
The stockholders approved the grant of an option to the Company's President and
Chief Executive Officer to purchase 1,000,000 shares of Common Stock at a per
share exercise price equal to $18.25, the last reported sale price of the Common
Stock on the date shareholder approval was obtained at the annual shareholders
meeting. The option will vest no later than six years from the grant date and
specified amounts are subject to earlier vesting if specified Company Common
Stock price thresholds are met.
The stockholders approved the grant of an option to the Company's Executive Vice
President and Chief Operating Officer to purchase 650,000 shares of Common Stock
at a per share exercise price equal to $18.25, the last reported sale price of
the Common Stock on the date shareholder approval was obtained at the annual
shareholders meeting. The option will vest no later than six years from the
grant date and specified amounts are subject to earlier vesting if specified
Company Common Stock price thresholds are met.
(9) Reclassification
Certain amounts previously reported have been reclassified to conform to the
current year's presentation.
(10) Collaborative Agreements
The Company has a development and license agreement with Merck KGaA ("Merck")
with respect to C225, its lead interventional therapeutic product for the
treatment of cancer. In exchange for certain marketing and development rights,
the Company can receive up to $60,000,000 in milestone payments ($30,000,000 of
which are equity based) assuming the achievement of certain milestones and a
$30,000,000 secured line of credit or guaranty for the build-out of a
manufacturing facility for the commercial production of C225. The agreement
provides that among other reasons, it may be terminated by either party if the
Company and Merck failed to agree on a production concept for the manufacturing
facility or if Merck had not provided the Company with the credit facility or
guaranty by April 15, 1999, in which case Merck is entitled to receive back all
milestone payments made to date. Additionally, the Company must timely obtain
certain collateral license agreements, and the failure to do so will entitle
Merck to receive back all milestone payments made to date. In April 1999 the
parties agreed on the production concept for the manufacturing facility and are
currently working toward securing the credit facility or guaranty. As of June
30, 1999, the Company has received $12,000,000 in milestone payments. These
payments have been recorded as fees potentially refundable from corporate
partner and will be recognized as revenue upon Merck's providing the credit
facility or guaranty and the Company's obtaining the defined collateral license
agreements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion and analysis by our management is provided to identify
certain significant factors which affected our financial position and operating
results during the periods included in the accompanying financial statements.
RESULTS OF OPERATIONS
Six Months Ended June 30, 1999 and 1998
Revenues.
Revenues for the six months ended June 30, 1999 and 1998 were $883,000 and
$2,615,000, respectively, a decrease of $1,732,000, or 66%. Revenues for the six
months ended June 30, 1999 primarily consisted of (i) $150,000 in research
support from our partnership with American Home Products Corporation ("American
Home") in infectious disease vaccines, (ii) $533,000 in research and support
payments from our research and license agreement with Merck for our principal
cancer vaccine product candidate, BEC2, and (iii) $195,000 in royalty revenue
from our strategic alliance with Abbott Laboratories ("Abbott") in diagnostics.
Revenues for the six months ended June 30, 1998 consisted of (i) $150,000 in
research support from our partnership with American Home in infectious disease
vaccines, (ii) $1,000,000 in milestone revenue and $1,250,000 in research and
support payments from our research and license agreement with Merck for BEC2
(iii) $117,000 in royalty revenue from our strategic alliance with Abbott in
Page 6
<PAGE>
diagnostics and (iv) $98,000 from a Phase I Small Business Innovation Research
grant from the National Cancer Institute for a program in cancer-related
angiogenesis. The decrease in revenues for the six months ended June 30, 1999
was primarily attributable to (i) the decrease in research and support revenue
as a result of the completion of all research and support payments due from our
research and license agreement with Merck for BEC2 and (ii) a decrease in
milestone revenue which can vary widely from period to period depending upon the
timing of the achievement of various research and development milestones for
products under development.
Operating; Research and Development Expenses.
Total operating expenses for the six months ended June 30, 1999 and 1998 were
$17,182,000 and $11,805,000, respectively, an increase of $5,377,000, or 46%.
Research and development expenses for the six months ended June 30, 1999 and
1998 were $13,505,000 and $8,846,000, respectively, an increase of $4,659,000 or
53%. Such amounts for the six months ended June 30, 1999 and 1998 represented
79% and 75%, respectively, of total operating expenses. The increase in research
and development expenses for the six months ended June 30, 1999 was primarily
attributable to (i) the costs associated with an agreement for the supplemental
further development and manufacture of clinical grade C225, our lead
interventional therapeutic product candidate for cancer, to support ongoing and
future human clinical trials, (ii) the costs associated with the initiation of
Phase III clinical studies of C225, (iii) expenditures in the functional areas
of product development, manufacturing, clinical and regulatory affairs
associated with C225 and (iv) expenditures associated with additional staffing
in the area of discovery research.
General and Administrative Expenses.
General and administrative expenses include administrative personnel costs,
costs incurred in connection with pursuing arrangements with corporate partners
and technology licensors, and expenses associated with applying for patent
protection for our technology and products. Such expenses for the six months
ended June 30, 1999 and 1998 were $3,677,000 and $2,959,000, respectively, an
increase of $718,000, or 24%. The increase in general and administrative
expenses primarily reflected (i) additional support staffing for the expanding
research, development, clinical manufacturing and marketing efforts of the
Company, particularly with respect to C225 and (ii) expenses associated with the
pursuit of strategic corporate alliances and other corporate development
expenses. We expect general and administrative expenses to increase in future
periods to support our planned increases in research, development, clinical and
manufacturing efforts.
Interest and Other Income or Loss and Interest Expense.
Interest income was $1,168,000 for the six months ended June 30, 1999 compared
to $1,607,000 for the six months ended June 30, 1998, a decrease of $439,000, or
27%. The decrease was primarily attributable to the decrease in our investment
portfolio as a result of funding our operations. Interest expense was $246,000
and $200,000 for the six months ended June 30, 1999 and 1998, respectively, an
increase of $46,000 or 23%. Interest expense for both periods primarily included
(i) interest on an outstanding Industrial Development Revenue Bond issued in
1990 (the "1990 IDA Bond") with a principal amount of $2,200,000 and (ii)
interest recorded on various capital lease obligations under a December 1996
Financing Agreement (the "1996 Financing Agreement") and an April 1998 Financing
Agreement (the "1998 Financing Agreement") with Finova Technology Finance, Inc.
("Finova"). The increase was primarily attributable to entering into additional
capital leases. We recorded losses on securities available for sale for the six
months ended June 30, 1999 in the amount of $832,000 as compared to gains of
$2,000 for the six months ended June 30, 1998. The loss for the six months ended
June 30, 1999 is primarily attributable to the $828,000 write-down of our
investment in CombiChem Inc. ("CombiChem") as a result of other an than
temporary decline. See "Liquidity and Capital Resources".
Net Losses.
We had net losses to common stockholders of $18,071,000 or $0.73 per share for
the six months ended June 30, 1999 compared with $9,606,000 or $0.40 per share
for the six months ended June 30, 1998. The increase in the net losses and per
share net loss to common stockholders was due primarily to the factors noted
above.
Page 7
<PAGE>
Three Months Ended June 30, 1999 and 1998
Revenues.
Revenues for the three months ended June 30, 1999 and 1998 were $254,000 and
$765,000, respectively, a decrease of $511,000, or 67%. Revenues for the three
months ended June 30, 1999 consisted of (i) $75,000 in research support from our
partnership with American Home in infectious disease vaccines, (ii) $108,000 in
research and support payments from our research and license agreement with Merck
for BEC2, and (iii) $71,000 in royalty revenue from our strategic alliance with
Abbott in diagnostics. Revenues for the three months ended June 30, 1998
consisted of (i) $75,000 in research support from our partnership with American
Home in infectious disease vaccines, (ii) $625,000 in research and support
payments from our research and license agreement with Merck for BEC2 (iii)
$65,000 in royalty revenue from our strategic alliance with Abbott in
diagnostics. The decrease in revenues for the three months ended June 30, 1999
was primarily attributable to the decrease in research and support revenue as a
result of the completion of all research and support payments due from our
research and license agreement with Merck for BEC2.
Operating; Research and Development Expenses.
Total operating expenses for the three months ended June 30, 1999 and 1998 were
$8,826,000 and $6,221,000, respectively, an increase of $2,605,000, or 42%.
Research and development expenses for the three months ended June 30, 1999 and
1998 were $7,151,000 and $4,675,000, respectively, an increase of $2,476,000 or
53%. Such amounts for the three months ended June 30, 1999 and 1998 represented
81% and 75%, respectively, of total operating expenses. The increase in research
and development expenses for the three months ended June 30, 1999 was primarily
attributable to (i) the costs associated with an agreement for the supplemental
further development and manufacture of clinical grade C225 to support ongoing
and future human clinical trials, (ii) the costs associated with the initiation
of Phase III clinical studies of C225, (iii) expenditures in the functional
areas of product development, manufacturing, clinical and regulatory affairs
associated with C225 and (iv) expenditures associated with additional staffing
in the area of discovery research.
General and Administrative Expenses.
General and administrative expenses include administrative personnel costs,
costs incurred in connection with pursuing arrangements with corporate partners
and technology licensors, and expenses associated with applying for patent
protection for our technology and products. Such expenses for the three months
ended June 30, 1999 and 1998 were $1,675,000 and $1,546,000, respectively, an
increase of $129,000, or 8%. The increase in general and administrative expenses
primarily reflected (i) additional support staffing for the expanding research,
development, clinical manufacturing and marketing efforts of the Company,
particularly with respect to C225 and (ii) expenses associated with the pursuit
of strategic corporate alliances and other corporate development expenses. We
expect general and administrative expenses to increase in future periods to
support our planned increases in research, development, clinical and
manufacturing efforts.
Interest and Other Income and Interest Expense.
Interest income was $564,000 for the three months ended June 30, 1999 compared
to $777,000 for the three months ended June 30, 1998, a decrease of $213,000, or
27%. The decrease was primarily attributable to the decrease in our investment
portfolio as a result of funding our operations. Interest expense was $123,000
and $110,000 for the three months ended June 30, 1999 and 1998, respectively, an
increase of $13,000 or 12%. Interest expense for both periods primarily included
(i) interest on an outstanding 1990 IDA Bond with a principal amount of
$2,200,000 and (ii) interest recorded on various capital lease obligations under
the 1996 Financing Agreement and the 1998 Financing Agreement with Finova. The
increase was primarily attributable to entering into additional capital leases.
Page 8
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Net Losses.
We had net losses to common stockholders of $9,065,000 or $0.36 per share for
the three months ended June 30, 1999 compared with $5,755,000 or $0.24 per share
for the three months ended June 30, 1998. The increase in the net losses and per
share net loss to common stockholders was due primarily to the factors noted
above.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, our principal sources of liquidity consisted of cash and cash
equivalents and short-term securities available for sale of approximately
$40,678,000. We have financed our operations since inception primarily through:
o the proceeds from the public and private sales of our equity securities.
o license fees.
o contract research and development fees.
o royalties received under agreements with collaborative partners.
o interest earned on these funds.
o the sale of three issues of Industrial Development Revenue Bonds (the "IDA
Bonds") through the New York Industrial Development Agency (the "NYIDA").
Since inception:
o public and private sales of equity securities in financing transactions
have raised approximately $163,799,000 in net proceeds.
o we have earned approximately $33,738,000 from license fees, contract
research and development fees and royalties from collaborative partners,
including approximately $883,000 earned during the six months ended June
30, 1999. Additionally, we have received $12,000,000 in potentially
refundable milestone fees from our C225 development and license agreement
with Merck. These amounts have yet to be recognized as revenue. See
Footnote 8, "Collaborative Agreements", of the Notes to Consolidated
Financial Statements.
o we have earned approximately $9,631,000 in interest income, including
approximately $1,168,000 earned during the six months ended June 30,1999.
o the sale of the IDA Bonds in each of 1985, 1986 and 1990 raised an
aggregate of $6,313,000, the proceeds of which have been used for the
acquisition, construction and installation of our research and development
facility in New York City, and of which $2,200,000 is currently
outstanding.
We signed a definitive agreement in April 1999 with Boehringer Ingelheim
Pharmaceuticals KG ("BI Pharmaceuticals") for the further development,
production scale-up and manufacture of the Company's lead therapeutic product
candidate, C225, for use in human clinical trials. Services pursuant to this
agreement commenced in April 1998 pursuant to an agreement in principle. We
estimate that the total cost under the agreement, including the cost of
additional amounts of material we have the right to request, will be
DM12,100,000 or $6,392,000. As of June 30, 1999, we have incurred approximately
DM3,940,000, of which DM3,130,000 has been paid, for services provided under
this agreement.
In October 1997, we entered into a Collaborative Research and License Agreement
with CombiChem to discover and develop novel small molecules against selected
targets for the treatment of cancer. At the same time as we entered into this
agreement, we entered into a Stock Purchase Agreement pursuant to which we
purchased 312,500 shares of common stock of CombiChem, as adjusted, for a total
purchase price of $2,000,000. The investment has been classified as a long-term
asset. The market value of our investment in CombiChem had declined
substantially from the date of our investment. In March 1999, we deemed this
decline in market value to be other than temporary. Accordingly, we have
adjusted our cost basis in the investment and recorded a loss on securities
available for sale of $828,000 in the first quarter of 1999. These securities
have not been sold and we will continue to monitor our cost investment in
CombiChem.
Page 9
<PAGE>
We have obligations under various capital leases for certain laboratory, office
and computer equipment and also certain building improvements primarily under
the 1996 Financing Agreement and the 1998 Financing Agreement with Finova. The
1996 Financing Agreement allowed us to finance the lease of equipment and make
certain building and leasehold improvements to existing facilities involving
amounts totaling approximately $2,500,000. Each lease has a fair market value
purchase option at the expiration of a 42-month term. Pursuant to the 1996
Financing Agreement, we issued to Finova a warrant expiring December 31, 1999 to
purchase 23,220 shares of our common stock at an exercise price of $9.69 per
share. We recorded a non-cash debt discount of approximately $125,000 in
connection with this financing, which discount is being amortized over the
42-month term of the first lease. The 1996 Financing Agreement with Finova
expired in December 1997 and we utilized only $1,745,000 of the full $2,500,000
under the agreement. In April 1998, we entered into the 1998 Financing Agreement
with Finova totaling approximately $2,000,000. The terms of the 1998 Financing
Agreement are substantially similar to the now expired 1996 Financing Agreement
except that each lease has a 48-month term. As of June 30, 1999, we had entered
into twelve individual leases under both the 1996 Financing Agreement and the
1998 Financing Agreement aggregating a total cost of $3,695,000. The 1998
Financing Agreement expired in May 1999.
We have spent and will continue to spend in the future substantial funds to
continue the research and development of our products, conduct pre-clinical and
clinical trials, establish clinical-scale and commercial-scale manufacturing in
our own facilities or in the facilities of others, and market our products. We
have continued to engage in discussions with major pharmaceutical and
biopharmaceutical companies regarding various alternatives concerning the
funding of research and development for certain of our products. No assurance
can be given that we will be successful in consummating any such alternatives.
Such strategic alliances could include up-front license fees plus milestone fees
and revenue sharing. There can be no assurance that we will be successful in
achieving such alliances, nor can we predict the amount of funds which might be
available to us if we entered into such alliances or the time at which such
funds would be made available or the other terms of any such alliances.
In January 1998, we completed the construction and commissioning of a new 1,750
square foot process development center at our Somerville, New Jersey facility at
a cost of approximately $1,650,000.
Under our agreement with Merck for C225, we developed, in consultation with
Merck, a production concept for a new manufacturing facility for the commercial
production of C225. Merck is to provide us, subject to certain conditons, with a
$30 million secured line of credit or guaranty for the build-out of this
facility. We have determined to erect this facility adjacent to our current
manufacturing facility in New Jersey which supplies C225 to support our clinical
trials.
We rent our New York City facility under a lease which was scheduled to expire
in March 1999. We renewed the entire lease for a term commencing as of January
1, 1999 through December 2004 and have begun to retrofit the facility to better
suit our needs at an expected cost of approximately $2,000,000.
The 1990 IDA Bond in the outstanding principal amount of $2,200,000 becomes due
in 2004. We will incur annual interest on the 1990 IDA Bond aggregating
approximately $250,000. In order to secure our obligations to the NYIDA under
the 1990 IDA Bond, we have granted the NYIDA a security interest in facility
equipment purchased with the bond proceeds.
The holders of the 400,000 shares of Series A Convertible Preferred Stock are
entitled to receive cumulative dividends at an annual rate of $6.00 per share.
Dividends accrue as of the issuance date of the Series A Preferred Shares and
are payable on the outstanding Series A Preferred Shares in cash on December 31
of each year beginning December 31, 1999 or at the time of conversion or
redemption of the Series A Preferred Shares on which the dividend is to be paid,
whichever is sooner. Accrued dividends were $3,702,000 at June 30, 1999.
Total capital expenditures made during the six months ended June 30, 1999 were
$2,542,000, of which $532,000 have been reimbursed in accordance with the terms
of the 1998 Financing Agreement with Finova. Of the total capital expenditures
made during the six-months ended June 30, 1999, $1,392,000 related to the
purchase of equipment for and costs associated with the retrofit of our
corporate office and research laboratories in New York. The balance of capital
additions include $933,000 associated with the build-out of the commercial
manufacturing facility to be erected adjacent to our current
Page 10
<PAGE>
manufacturing facility in New Jersey. The remaining $217,000 related to
improving and equipping our existing manufacturing facility.
We expect that our existing capital resources and expected future cash flows
should enable us to maintain our current and planned operations through June
2001. Certain milestone payments, including $18,000,000 in cash based milestone
payments and $30,000,000 in equity based milestone payments from our C225
development and license agreement with Merck, are to be paid subject to our
attaining research and development milestones. There can be no assurance that we
will achieve these milestones. Additionally, the termination of the agreement
due to Merck's failure to provide the credit facility or guaranty or our failure
to obtain the necessary collateral license agreements would require us to return
all milestone payments made to date. Our future working capital and capital
requirements will depend upon numerous factors, including, but not limited to:
o progress of our research and development programs, pre-clinical testing
and clinical trials.
o our corporate partners fulfilling their obligations to us.
o timing and cost of seeking and obtaining regulatory approvals.
o timing and cost of manufacturing scale-up and effective commercialization
activities and arrangements.
o level of resources that we devote to the development of marketing and
sales capabilities.
o costs involved in filing, prosecuting and enforcing patent claims.
o technological advances.
o status of competitors.
o our ability to maintain existing and establish new collaborative
arrangements with other companies to provide funding to support these
activities.
o costs of establishing both clinical scale and commercial scale
manufacturing capacity in our facility and those of others.
In order to fund our capital needs after June 2001, we will require significant
levels of additional capital and we intend to raise the capital through
additional arrangements with corporate partners, equity or debt financings, or
from other sources including the proceeds of product sales, if any. There is no
assurance that we will be successful in consummating any such arrangements. If
adequate funds are not available, we may be required to significantly curtail
our planned operations.
Uncertainties associated with the length and expense of pre-clinical and
clinical testing of any of our product candidates could greatly increase the
cost of development of such products and affect the timing of any anticipated
revenues from product sales. Our failure to obtain regulatory approval for any
product will preclude its commercialization. In addition, our failure to obtain
sufficient patent protection for our products may make certain of our products
commercially unattractive.
At December 31, 1998, we had net operating loss carryforwards for federal income
tax purposes of approximately $129,485,000 which expire at various dates from
2000 through 2018. At December 31, 1998 we had research credit carryforwards of
approximately $3,642,000 which expire at various dates between years 2009 and
2018. Pursuant to Section 382 of the Internal Revenue Code of 1986, as amended,
the annual utilization of a company's net operating loss and research credit
carryforwards may be limited if the company experiences a change in ownership of
more than 50 percentage points within a three-year period. Since 1986, we
experienced two such ownership changes. Accordingly, our net operating loss
carryforwards available to offset future federal taxable income arising before
such ownership changes are limited to $5,159,000 annually. Similarly, we are
restricted in using our research credit carryforwards arising before such
ownership changes to offset future federal income tax expense.
Year 2000
The "Year 2000 problem" involves mainly the inability of certain computer
programs and microprocessing devices to differentiate between the year 1900 and
the year 2000 because two-digit rather than four-digit fields were used to
identify the year. There are a variety of related "date" problems, including the
use by older programs and devices of algorithms that will fail to correctly
identify the year 2000 and certain other years in the twenty-first century as
leap years. A Year 2000 problem could cause a computer system or microprocessor
that is date sensitive to malfunction, resulting in system failures. Such
failures could cause disruptions of our operations, including, without
limitation, the systems in place at our Branchburg clinical-scale manufacturing
facility, computers, communication devices and laboratory instrumentation
Page 11
<PAGE>
and systems which use dated information in our research and development and
scientific testing or, possibly, in our pre-clinical or clinical trials.
To deal with the Year 2000 problem we have developed a year 2000 program that
has three main phases: (i) review of information technology ("IT") and non-IT
systems for the purposes of assessing the potential impact of Year 2000 on our
business and identifying non-Year 2000 compliant systems; (ii) remediation and
development of contingency plans; and (iii) testing. These phases are not
necessarily sequential. We have a Year 2000 team to coordinate and carry out the
various phases and Reporting Responsible Persons in each critical area,
including computer hardware, software, other hardware, laboratory equipment,
collaborators and process/clinical development. While we believe that our
program is and will be adequate to address Year 2000 problems, there can be no
assurance that our operations will not be adversely affected. While we have
devoted significant resources to dealing with the Year 2000 problem, our efforts
to date have not caused the deferral of any other significant IT projects.
We have reviewed the potential impact of the "Y2K" bug on our research and
development, product development, manufacturing, financial, communication and
administrative operations. We determined which systems are critical to our
business. We also determined which systems were non-year 2000 compliant.
We are in the process of remediating through corrective programming
modifications or system replacement all mission critical systems that we
identified as non-compliant. We estimate that this process is substantially
completed and that it will be finished by September 30, 1999. In addition, for
systems that we have identified as non-mission critical, we also intend to
either correct them through programming changes or replace them with compliant
software and any necessary hardware or, possibly, simply discontinue using the
system.
We have already developed testing protocols and have begun testing for all
mission-critical systems. We have substantially completed these testing
protocols and expect to be finished no later than September 30, 1999. We are
also in the process of testing other systems, and expect to have completed that
process no later than September 30, 1999.
We have incurred approximately $350,000 on our Year 2000 program through June
30, 1999. This includes the purchase of third-party software and required
hardware to run such software as well as the cost of modifying software. We
estimate that any additional costs incurred to complete the second phase will
not be material.
In addition to the review of internal systems, we have identified and begun to
make inquiries of our critical suppliers, corporate partners, manufacturers,
clinical study sites, service suppliers, communications providers, lessors,
utilities, and banks whose system failures or non-compliant products could have
an adverse impact on our operations. We expect to complete the identification
and assessment process for such entities prior to September 30, 1999. While we
are not currently aware of any material Year 2000 problems involving such
entities that are likely to adversely affect us, there can be no assurance that
there will not be such problems or that, if discovered, they will be timely
remediated.
We are in the process of developing contingency plans to deal with possible
disruptions of important operations such as discovery research, product
development, manufacturing and ongoing clinical trials. Such disruptions 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. These contingency plans may need to be refined as more
information becomes available.
Certain Factors Affecting Forward-Looking Statements--Safe Harbor Statement
Those statements contained herein that do not relate to historical
information are forward-looking statements. There can be no assurance that the
future results covered by such forward-looking statements will be achieved.
Actual results may differ materially due to the risks and uncertainties inherent
in the Company's business, including without limitation, the risks and
uncertainties associated with completing pre-clinical and clinical trials of the
Company's compounds that demonstrate such compounds' safety and effectiveness;
obtaining additional financing to support the Company's operations; obtaining
and maintaining regulatory approval for such compounds and complying with other
governmental
Page 12
<PAGE>
regulations applicable to the Company's business; obtaining the raw materials
necessary in the development of such compounds; consummating collaborative
arrangements with corporate partners for product development; achieving
milestones under collaborative arrangements with corporate partners; developing
the capacity and ability to manufacture, as well as market and sell the
Company's products, either directly or with collaborative partners; developing
market demand for and acceptance of such products; competing effectively with
other pharmaceutical and biotechnological products; obtaining adequate
reimbursement from third party payors; attracting and retaining key personnel;
protecting proprietary rights; failing to remedy Year 2000 problems by the
Company or the failure by those entities associated with the Company; and those
other factors set forth in "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview and Risk Factors," in the
Company's most recent Annual Report on Form 10-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Our holdings of financial instruments are comprised of a mix of any of U.S.
corporate debt, foreign corporate debt, U.S. government debt, foreign
government/agency guaranteed debt and commercial paper. All such instruments are
classified as securities available for sale. Generally, we do not invest in
portfolio equity securities or commodities or use financial derivatives for
trading purposes. Our debt security portfolio represents funds held temporarily
pending use in our business and operations. We manage these funds accordingly.
We seek reasonable assuredness of the safety of principal and market liquidity
by investing in rated fixed income securities while at the same time seeking to
achieve a favorable rate of return. Our market risk exposure consists
principally of exposure to changes in interest rates. Our holdings are also
exposed to the risks of changes in the credit quality of issuers. We typically
invest in the shorter-end of the maturity spectrum, or if longer, in highly
liquid debt instruments with periodic interest rate adjustments. We also have
certain foreign exchange currency risk, see footnote 2. We do not consider it
necessary to implement a currency hedging program since currently, we do not
generally enter into contracts denominated in foreign currencies.
The table below presents the principal amounts and related weighted average
interest rates by year of maturity for our investment portfolio as of June 30,
1999:
<TABLE>
<CAPTION>
2004 and
1999 2000 2001 2002 2003 Thereafter Total Fair Value
--------- ---------- --------- ------ ------ ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate - $2,739,000 - - - - $2,739,000 $2,744,000
Average
Interest Rate - 5.10% - - - - 5.20% -
Variable Rate - - $1,136,000(1) - - $33,952,000(1) $35,088,000 $35,262,000
Average
Interest Rate - - 5.43% - - 5.17% 5.18% -
-------- ---------- ------------ ------ ------ ------------- ----------- -----------
- $2,739,000 $1,136,000(1) - - $33,952,000(1) $37,827,000 $38,006,000
======== ========== ============ ====== ====== ============= =========== ===========
</TABLE>
(1) These holdings consist of U.S. corporate and foreign corporate floating rate
notes. Interest on the securities are adjusted at fixed dates using prevailing
interest rates. These holdings are highly liquid and we consider the potential
for loss of principal to be minimal.
Page 13
<PAGE>
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
(a) An annual meeting of stockholders was held on May 24, 1999 (the
"Annual Meeting").
(b) The directors elected at the Annual Meeting were Richard Barth, Jean
Carvais, Vincent T. DeVita, Jr., Robert F. Goldhammer, David M. Kies, Paul B.
Kopperl, John Mendelsohn, William R. Miller, Harlan W. Waksal and Samuel D.
Waksal. Such persons are all of the directors of the Company whose term of
office as a director continued after the Annual Meeting.
(c) The matters voted upon at the Annual Meeting and the results of the
voting, including broker non-votes, where applicable, are set forth below.
(i) Election of directors
Broker
Name In Favor Withheld Non-Votes
---- -------- -------- ---------
Richard Barth 21,134,026 602,958 N/A
Jean Carvais 21,134,026 602,958 N/A
Vincent T. DeVita, Jr. 21,134,026 602,958 N/A
Robert F. Goldhammer 21,134,026 602,958 N/A
David M. Kies 21,134,026 602,958 N/A
Paul B. Kopperl 21,134,026 602,958 N/A
John Mendelsohn 21,134,026 602,958 N/A
William R. Miller 21,134,026 602,958 N/A
Harlan W. Waksal 21,134,026 602,958 N/A
Samuel D. Waksal 21,134,026 602,958 N/A
(ii) The stockholders approved an amendment to the Company's 1996
Incentive Stock Option Plan (the "1996 ISO Plan") to increase the
total number of shares of Common Stock which may be issued pursuant
to options which may be granted under the 1996 ISO Plan from
3,000,000 to 4,000,000, which number shall be reduced by the number
of shares of Common Stock which have been or may be issued pursuant
to options granted under the Company's 1996 Non-Qualified Stock
Option Plan (the "1996 Non-Qualified Plan"). The stockholders voted
7,365,864 shares in favor, 2,431,698 shares against, 74,069 shares
abstained from voting and there were 11,865,353 broker non-votes.
(iii) The stockholders approved amendments to the Company's 1996
Non-Qualified Plan to (i) increase the total number of shares of
Common Stock which may be issued pursuant to options which may be
granted under the 1996 Non-Qualified Plan from 3,000,000 to
4,000,000, which number shall be reduced by the number of shares of
common stock which have been or may be issued pursuant to options
granted under the Company's 1996 ISO Plan, and (ii) increase the
annual option grant made to members of the Board of Directors and
the Chairman who are not full-time employees of the Company under
the 1996 Non-Qualified Plan. The stockholders voted 7,326,707 shares
in favor, 2,460,425 shares against, 84,499 shares abstained from
voting and there were 11,865,353 broker non-votes.
(iv) The stockholders approved a proposal to amend the Company's
certificate of incorporation to increase the total number of shares
of Common Stock the Company is authorized to issue from 45,000,000
shares to 60,000,000 shares. The stockholders voted 21,245,136
shares in favor, 424,054 shares against and 67,794 shares abstained
from voting. Broker non-votes were not applicable.
Page 14
<PAGE>
(v) The stockholders approved the grant of an option to the Company's
President and Chief Executive Officer to purchase 1,000,000 shares
of common stock pursuant to a specified vesting schedule. The
stockholders voted 7,512,857 shares in favor, 2,322,720 shares
against, 131,454 shares abstained from voting and there were
11,769,953 broker non-votes.
(vi) The stockholders approved the grant of an option to the Company's
Executive Vice President and Chief Operating Officer to purchase
650,000 shares of common stock pursuant to a specified vesting
schedule. The stockholders voted 7,364,733 shares in favor,
2,372,994 shares against, 133,904 shares abstained from voting and
there were 11,865,353 broker non-votes.
(vii) The stockholders ratified the appointment by the Board of Directors
of KPMG LLP as the Company's independent certified public
accountants for the fiscal year ending December 31, 1999. The
stockholders voted 21,635,440 shares in favor, 50,475 shares against
and 51,069 shares abstained from voting. Broker non-votes were not
applicable.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
Exhibit No. Description
3.1A Amendment dated June 4, 1999 to the Company's
certificate of incorporation, as amended
10.72 Agreement for Supply of Material dated as of
January 1, 1997 between the Company,
Connaught Laboratories Limited, a
Pasteur Merieux Company, and Merck KGaA*
10.73 Development and Supply Agreement dated
as of April 30, 1999 between the Company
and Boehringer Ingelheim Pharma KG*
27.1 Financial Data Schedule
99.6 1996 Non-Qualified Stock Option Plan, as amended.
99.7 1996 Incentive Stock Option Plan, as amended.
* Confidential treatment has been requested for a portion of this
exhibit.
(b) Reports on Form 8-K
None.
Page 15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IMCLONE SYSTEMS INCORPORATED
(Registrant)
Date: August 16, 1999 By /s/ Samuel D. Waksal
----------------------------------------
Samuel D. Waksal
President and Chief Executive Officer
Date: August 16, 1999 By /s/ Carl S. Goldfischer
----------------------------------------
Carl S. Goldfischer
Vice President, Finance and Chief
Financial Officer
Page 16
Exhibit 3.1A
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
IMCLONE SYSTEMS INCORPORATED
Under Section 242 of the General Corporation Law
of the State of Delaware
The undersigned, being the Executive Vice President of IMCLONE SYSTEMS
INCORPORATED, a Delaware corporation (the "Corporation") DOES HEREBY CERTIFY as
follows:
FIRST: The Certificate of Incorporation of the Corporation is hereby
amended so that Article FOURTH (a) shall read in its entirety as follows:
"FOURTH: (a) The total number of shares of capital stock which the
Corporation shall have the authority to issue is sixty million
(60,000,000) shares of Common Stock with a par value of one tenth of one
cent ($.001) per share and four million (4,000,000) shares of Preferred
Stock with a par value of one dollar ($1.00) per share."
SECOND: That such amendment was duly adopted by the Board of Directors of
the Corporation and by the Stockholders of the Corporation in accordance with
Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, this Certificate of Amendment to the Certificate of
Incorporation of the Corporation has been signed, and the statements made herein
affirmed as true under the penalties of perjury, this 2nd day of June 1999.
/s/Harlan W. Waksal
------------------------
Harlan W. Waksal,
Executive Vice President
Attest:/s/ John B. Landes
-------------------------
John B. Landes, Secretary
Exhibit 10.72
CONFIDENTIAL TREATMENT REQUESTED
AGREEMENT FOR SUPPLY OF MATERIAL
This AGREEMENT FOR SUPPLY OF MATERIAL (the "Agreement"), among
Connaught Laboratories Limited, a Pasteur Merieux Connaught company,
incorporated under the laws of Ontario, Canada with offices at 1755
Steeles Avenue West, Toronto, Ontario, Canada M2R 3T4, ("PMC")
and
ImClone Systems Incorporated, a company existing and organized under
the laws of Delaware, USA with offices at 180 Varick Street, New York,
NY, USA 10014, ("ImClone")
and
Merck KGaA, a company incorporated under the laws of Germany with
offices at Frankfurter Strasse 250, 64271 Darmstadt, Germany, ("Merck")
is effective as of this 1st day of January, 1997 ("Effective Date"), with
respect to the following facts and circumstances:
WHEREAS PMC has a proprietary interest in and manufactures and sells a
product known as BCG vaccine, consisting of BCG in vaccine formulation with its
accompanying diluent in a 10-dose vial presentation (hereinafter the "BCG
Material"); and
WHEREAS ImClone and Merck severally have a proprietary interest in a
monoclonal anti-idiotypic antibody known as BEC2 (hereinafter "BEC2") and
jointly are performing clinical and pre-clinical research relating to the
treatment and/or prophylaxis of certain human cancers by administration of the
BEC2; and
WHEREAS ImClone and Merck intend to administer a combination therapy of
BEC2 and BCG Material to certain patients with small cell lung carcinoma
("SCLC") in a multi-national Phase III clinical trial being conducted in Europe,
Australia and the United States (hereinafter the "SILVA Trial") pursuant to the
protocol(s) and investigators' brochure(s) (hereinafter the "Clinical Trial
Protocol") attached hereto as Exhibit "A"; and
WHEREAS, ImClone and Merck may administer a combination therapy of BEC2
and BCG Material to other patients in such additional clinical trials that are
necessary or advisable in the sole discretion of ImClone and Merck in connection
with or in furtherance of the SILVA Trial (the "Additional Clinical Trials");
and
*** Confidential Treatment Requested
<PAGE>
-2-
WHEREAS ImClone and Merck are interested in securing a supply of the
BCG Material to be administered with BEC2 in the SILVA Trial and any such
Additional Clinical Trials, and PMC is willing to supply the BCG Material to
ImClone and Merck on the terms set forth herein.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:
1. Trials to be Conducted; Status of Recipient
ImClone and Merck are conducting the SILVA Trial and any Additional
Clinical Trials together, and will receive supplies of the BCG Material together
or independently for the sole purpose of conducting the SILVA Trial and the
Additional Clinical Trials (the SILVA Trial and the Additional Clinical Trials
are collectively referred to herein as the "Clinical Trials"). ImClone and Merck
shall be referred to for the purposes herein as the "Recipient" and the term so
used shall mean ImClone and Merck together or either of them. ImClone and Merck
shall be jointly and severally liable in respect of the obligations set forth in
this Agreement, except as specifically noted hereinbelow.
2. Supply and Acceptance of Delivery
2(a). Quantities of the BCG Material
Subject to the terms of this Agreement and during the [ *** ] following
the Effective Date (hereinafter the "Supply Period"), PMC shall supply to the
Recipient, and the Recipient shall accept delivery from PMC of, the BCG Material
for use in and during the Clinical Trials on the following dates, in the
following quantities and with the following expiry dating:
(i) [ *** ]
(ii) [ *** ]
(iii) [ *** ]
(iv) [ *** ]
(A) [ *** ]
(B) [ *** ]
(C) [ *** ]
(D) [ *** ]
*** Confidential Treatment Requested
<PAGE>
-3-
[ *** ]
2(b). Cost of Supply
[ ***]
2(c). Delivery; Risk of Loss
At Recipient's cost, PMC shall deliver or arrange for the
delivery of the BCG Material to Recipient, FOB at a point or points of
destination selected by Recipient, to a reputable carrier. Prior to any
delivery, Recipient shall forward import permits or other documents, as required
for shipment, to PMC to the attention of Ms. Joy Rennick, Logistics Coordinator,
(facsimile: 416-667-2275). Upon delivery of the BCG Material, Recipient shall
assume all risk of loss or damage for the BCG Material so delivered. All
temperature monitoring devices shall be returned by Recipient to PMC to the
attention of Ms. Rennick.
2(d). Technical Services Assistance
Upon the reasonable request by Recipient, and in consideration
of payment by ImClone of PMC's costs and services fees at a rate of [ *** ] for
regulatory/logistics personnel, PMC shall make, and has made, available its
clinical/medical and regulatory/logistics personnel (at their usual place of
employment or by telephone) to provide reasonable levels of technical assistance
to the Recipient in connection with PMC's Regulatory Manufacturing Documentation
for the BCG Material or in connection with the Recipient's Regulatory Filings
required for the Clinical Trials. ImClone shall pay PMC, by no later than July
15, 1998, the amount of [ *** ], representing the sum of:
(i) [ *** ]
(ii) [ *** ]
(iii) [ *** ]
(iv) [ *** ]
ImClone agrees to pay for any further technical services
provided by PMC and tests conducted by or on behalf of PMC, in connection with
this Agreement or the Clinical Trials, at the hourly rates agreed to herein and
the costs to PMC of any such tests. The parties agree that the currency for
payment shall be Canadian dollars.
2(e). Negotiations for Future Commercial Supply
In the event that the Recipient wishes to seek registration
for the combination therapy of BEC2 and BCG Material, Recipient shall notify PMC
in writing. PMC and the Recipient agree that within sixty (60) days of said
written notice from the Recipient, the parties
*** Confidential Treatment Requested
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shall initiate good faith negotiations toward the securing of a commercial
supply agreement for the purchase by Recipient of BCG Material with terms
satisfactory to both parties, including without limitation, purchase price.
Failure to reach such agreement during the Term within twelve months (12) of
initiation of negotiations, or as of such earlier time when it is clear that the
parties cannot reach such agreement, shall be grounds for termination of this
Agreement by either PMC or Recipient, upon thirty (30) days written notice to
the other.
3. Preparation and Conduct of the SILVA Trial
3(a). Regulatory Filings; Manufacturing Regulatory Documentation
At Recipient's sole cost, Recipient shall file and be the
owner of record for all Regulatory Filings developed by the Recipient relating
to the Clinical Trials. "Regulatory Filing" shall mean a filing with a
regulatory agency, for example, the US Food and Drug Administration ("FDA"),
that concerns the Clinical Trials. Recipient owns and shall retain all right,
title and interest in and to BEC2 (and any improvements, progeny, derivatives or
related materials thereof) and the Regulatory Filings. PMC shall permit the
Recipient to cross-reference PMC's Product License Application Supplement and
Drug Master File for BCG Material and/or otherwise excerpt portions of or
describe PMC's Product License Application Supplement and Drug Master File in
the Regulatory Filings, to enable the Recipient to complete Regulatory Filings
required for the Clinical Trials. Notwithstanding the foregoing, the parties
agree that despite Recipient's cross-referencing PMC's Product License
Application Supplement and Drug Master File for BCG Material and/or otherwise
excerpting portions of or describing PMC's Product License Application
Supplement and Drug Master File in the Regulatory Filings, PMC owns, and shall
retain all right, title and interest in and to the BCG Material (and any
improvements, progeny, derivatives or related materials thereof) and the
Manufacturing Regulatory Documentation. "Manufacturing Regulatory Documentation"
shall mean a Product License Application, Drug Master File or any other
regulatory filing or documentation owned, developed, submitted or prepared by or
on behalf of PMC and filed with appropriate regulatory authorities that contains
information concerning the BCG Material, including but not limited to
information concerning the BCG Material contained in the Regulatory Filings
which is excerpted from or describes PMC's Product License Application or Drug
Master File or other regulatory filing by or on behalf of PMC which concerns the
BCG Material, which information, Recipient agrees and undertakes, shall be
deemed and treated as Confidential Information. All non-public information
provided by one party to the other in preparing Regulatory Filings and the
Manufacturing Regulatory Documentation shall be deemed to be Confidential
Information of the disclosing party for the purposes of this Agreement.
3(b). Protocols for Clinical Trials; Results
At Recipient's sole cost, Recipient shall be responsible for
the design, implementation, and evaluation of any human clinical studies used to
obtain clinical data for use in preparing Regulatory Filings related to the
Clinical Trials. Recipient shall conduct the Clinical Trials in compliance with
current Good Clinical Practices ("cGCP") pursuant to FDA regulations. Recipient,
at its sole cost, shall provide PMC with a complete copy of the protocols
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and investigators' brochures for the Clinical Trials, as well as copies of all
reports, abstracts and publications (subject to Section 5(c) herein) concerning
the data and results of the Clinical Trials. All right, title and interest in
and to the data and results of the Clinical Trials shall vest in Recipient;
provided that any information relating to the BCG Material shall remain the sole
property of PMC.
3(c). Adverse Reaction Reporting
Recipient shall promptly notify PMC of any serious adverse
reactions which result from the conduct of the Clinical Trials on the same basis
that such reporting is made to the appropriate regulatory authorities. Such
notices shall be sent by Recipient to PMC to the attention of Mrs. Doris
Rudert-Dolby, Supervisor, Regulatory Affairs (facsimile: 416-667-2912). For this
purpose, it is understood that an adverse reaction is subject to expedited
reporting to appropriate regulatory authorities if such adverse reaction
constitutes an "unexpected adverse reaction" and if the minimum criteria for
expedited reporting are met (as such criteria are set forth in the ICH Topic
E2A: Clinical Safety Data Management - Definitions and Standards for Expedited
Reporting, June 1, 1995). An "unexpected adverse reaction" is one the nature or
severity of which is not consistent with the information in the relevant source
document (i.e., the most recent version of the investigators' brochure). It is
further understood that "SCLC-related Deaths" are the end-points of the SILVA
Trial and are, therefore, not subject to expedited reporting.
3(d). PMC's Notice in Connection With Actions by Regulatory Authorities
PMC shall promptly notify Recipient of any threatened or
pending actions by regulatory authorities which may reasonably be believed to
affect the safety or efficacy claims of the BCG Material or to affect the supply
commitment contained in this Agreement. Any form of such notice that is not in
writing shall be promptly followed by notice in writing.
3(e). Recipient's Notice in Connection With Actions by Regulatory
Authorities
Recipient shall promptly notify PMC of any threatened or
pending actions by regulatory authorities which may reasonably be believed to
affect the safety or efficacy claims of BEC2 or of the combination therapy of
BEC2 and BCG Material or to affect the Clinical Trials. Any form of such notice
that is not in writing shall be promptly followed by notice in writing.
3(f). Recipient's Provision of Updated Investigators' Brochure
For the purpose of keeping PMC apprised of the status of the
Clinical Trials, Recipient shall provide to PMC a copy of all updated
investigators' brochures which Recipient is required to file with the FDA or
other regulatory agency anywhere.
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4. Availability and Manufacture of BCG Material and of BEC2
4(a). BCG Material for Clinical Trials
During the Supply Period, PMC shall supply the BCG Material in
the quantities and according to the terms set forth in Sections 2(a)(i), (ii),
(iii) and (iv); provided, however, that with respect to the quantities and terms
set forth in Section 2(a)(iii) and (iv), PMC shall only be required to use
reasonable commercial efforts to make available to Recipient such BCG Material
as may be requested for the Additional Clinical Trials. With respect to the BCG
Material requested pursuant to Sections 2(a)(iii) and 2(a)(iv), in the event of
Force Majeure or of supply shortage or production constraint, PMC shall allocate
the available quantities of BCG Material among PMC, its affiliates, customers
and distributors, including Recipient, in a commercially reasonable manner. Each
lot of BCG Material released to the Recipient for the Clinical Trials shall be
manufactured in compliance with current Good Manufacturing Practices ("cGMP")
pursuant to FDA regulations and according to manufacturing information in the
Manufacturing Regulatory Documentation. PMC shall, or shall cause a third party
to, perform quality control testing of the BCG Material released to the
Recipient to establish compliance with any release specifications required by
the Manufacturing Regulatory Documentation.
4(b). BEC2 for Clinical Trials
During the Term, Recipient shall use reasonable commercial
efforts to have sufficient quantities of BEC2 for use in the Clinical Trials. In
the event of Force Majeure or of supply shortage or production constraint,
Recipient shall notify PMC as soon as possible so as to permit PMC to allocate
the above-noted quantities of BCG Material among PMC, its affiliates, customers
and distributors at PMC's sole discretion. Each lot of BEC2 released by
Recipient for the Clinical Trials shall be manufactured in compliance with cGMP
pursuant to FDA regulations and according to manufacturing information in the
Regulatory Filings. Recipient shall, or shall cause a third party to, perform
quality control testing of BEC2 to establish compliance with any release
specifications required by the Regulatory Filings.
4(c). BCG Material Specifications
PMC shall provide BCG Material to the Recipient in the
available vialed formulations and vial sizes specified in the then current
Manufacturing Regulatory Documentation. PMC shall have no obligation under this
Agreement to develop any other vial sizes or formulations of BCG Material for
the Recipient. PMC shall use reasonable commercial efforts to maintain the
integrity and consistency of all specifications applicable to BCG. In the event
that PMC deems it necessary to revise any specifications, procedures or
Manufacturing Regulatory Documentation applicable to BCG Material, PMC shall
provide reasonable advance notice of any such revision to the Recipient for the
sole purpose of permitting Recipient to revise the Clinical Trial Protocol or
Regulatory Filings, as required. All specification changes that result in
procedures or limits that exceed or differ from those set forth in the
Manufacturing Regulatory Documentation shall be submitted to the FDA before
being implemented to the extent the FDA so requires such submission.
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4(d). Documentation
Upon acceptance by Recipient of delivery of the BCG Material,
PMC shall provide the Recipient with a Certificate of Analysis applicable to
each lot of BCG Material delivered to the Recipient. Complete batch records and
sufficient retention samples for the BCG Material delivered to the Recipient
shall be maintained at PMC for inspection at any time by the Recipient at PMC's
place of business upon reasonable prior written notice to PMC. Any confidential
or proprietary information of PMC or of its affiliates contained in such records
or samples shall be deemed to be Confidential Information of PMC.
4(e). PMC Facility Audits
Upon reasonable prior written notice to PMC, the Recipient may
(but shall not be required to) have its representatives, acting reasonably,
audit PMC's production of the BCG Material to be used in the Clinical Trials for
compliance with cGMP; provided however that such representatives shall have
first signed a confidentiality agreement with PMC. Recipient and its
representatives shall comply with all applicable health, safety, environmental
and security laws and with PMC's policies and procedures while present at PMC's
facilities.
4(f). Recall or Withdrawals
In the event that a party is notified of a recall or
withdrawal of BEC2 or of the BCG Material in any country, or believes such
recall or withdrawal is necessary, it shall immediately notify the other
parties. The parties will consult on the necessity of, and appropriate actions
and mutually acceptable procedures to be taken in connection with, a recall or
withdrawal. If such recall or withdrawal is undertaken, the parties shall
cooperate in taking all reasonable and appropriate action necessary to complete
such recall or withdrawal in a timely fashion.
5. Confidentiality and Disclosure
5(a). General Obligations of Confidentiality
For a period of ten (10) years following any disclosure of
Confidential Information hereunder, the Recipient and PMC shall maintain in
confidence the respective Confidential Information received or obtained from the
other, and use such Confidential Information solely for the purposes
contemplated and permitted by this Agreement. Each party shall maintain
communications to the other parties in confidence. Each party acknowledges that
all Confidential Information exchanged or developed hereunder shall be owned by
the transferor and shall continue to be owned by the transferor following
transfer. "Confidential Information" shall mean any and all confidential or
proprietary information owned by PMC (or its affiliates) or by the Recipient or
either of ImClone or Merck (or their affiliates) that is provided to the other
parties. Confidential Information shall not be deemed to include information
that:
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(i) is or becomes known publicly through no fault of the
receiving party;
(ii) is learned by the receiving party from a third party
entitled to disclose it;
(iii) is developed by the receiving party independently of
information obtained from the disclosing party as shown by the receiving party's
written records;
(iv) is already known to the receiving party before receipt
from the disclosing party, as shown by prior written records; or
(v) is released with the prior written consent of the
disclosing party.
5(b). Permitted Disclosures
Notwithstanding Section 5(a) hereof, PMC and the Recipient
shall, upon prior written notice to the other parties and only to the extent
necessary, have the right to disclose the other parties' Confidential
Information to regulatory or government agencies for the purposes of preparing
or supplementing any Regulatory Filing or Manufacturing Regulatory
Documentation, as applicable, or of otherwise assisting in securing
institutional or government approval to clinical test the BCG Material, or as
required by law within each country where the Clinical Trials are being
conducted.
5(c). Publications
The parties acknowledge that the data and results arising from
the Clinical Trials should be published and presented except to the extent where
such publication or presentation would be reasonably expected to materially
diminish the commercial value of the BCG Material, or to affect the
patentability of the BCG Material or any improvements thereof. The parties
further acknowledge that the Clinical Trials are multi-centre studies. Recipient
undertakes and shall ensure that the data and results arising from the Clinical
Trials shall not be published or presented by Recipient, by the coordinating
investigators or by other participating individuals or entities, until such time
as the Clinical Trials are completed and the data and results are analyzed
thereafter. Upon completion of the SILVA Trial, Recipient shall ensure that a
cooperative clinical administrative body, comprising the coordinating
investigators, shall prepare a report which will include a statistical analysis
and an appraisal of the final data and results from a medical viewpoint. Interim
publication or presentation of the Clinical Trials would include only
demographic data, for publicity purposes. Any publication, abstract or
presentation, whether verbal or written, of such data, results or report, or
excerpts or interpretations thereof, shall be submitted by Recipient to PMC for
review, pursuant to the following conditions:
(i) Recipient shall ensure that any article, paper,
manuscript, report, data, results, abstract, poster or notes shall not be
published or presented until the completion of the SILVA Trial and after
analysis of the final results of the SILVA Trial;
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(ii) Recipient shall ensure that any such publication or
presentation acknowledges the contribution of the parties and their employees,
representatives or consultants as co-authors or as otherwise appropriate; and
(iii) Recipient shall ensure that the publishing party deliver
to PMC, at least sixty (60) days in advance of any such publication or
presentation, any article, paper, manuscript, report, data, results, abstract,
poster or notes proposed to be published or presented, in order to permit PMC,
acting reasonably:
(A) to apply for patents or make such other filings or
registrations as deemed advisable,
(B) to object to any part of such proposed publication
or presentation on the basis that it would be reasonably
expected to materially diminish the value of the BCG
Material and information related thereto,
(C) to require that any Confidential Information be
deleted from any such proposed publication or presentation,
or
(D) to revise such proposed publication or
presentation accordingly.
Recipient undertakes and shall ensure that similar publication and presentation
procedures will be established for any Additional Clinical Trials.
5(d). Use of Names or Trademarks
The parties shall not originate any press release concerning
the entering into of this Agreement or the subject matter hereof without the
prior written approval of the other parties, which approval shall not be
unreasonably withheld. The parties shall not have the right to use the name or
any trade name or trademark of the other parties without prior written approval.
Reference to the existence of this Agreement may be made in the regular course
of business of the parties in informational disclosures describing the business
of the parties, upon prior written notice to the other parties.
6. Warranties and Representations
6(a). Warranties and Representations of PMC.
Subject to Section 7(a), PMC represents and warrants to the
Recipient that:
(i) PMC is a corporation duly organized, validly existing and
in good standing and has all necessary corporate power to enter into and perform
its obligations under this Agreement;
(ii) the execution, delivery and performance of this Agreement
by PMC have been duly authorized and approved by all necessary corporate action,
and the Agreement is binding
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upon and enforceable against PMC in accordance with its terms (subject to
bankruptcy and similar laws affecting the rights of creditors generally);
(iii) each lot of the BCG Material delivered to the Recipient
for the Clinical Trials shall be manufactured, tested and released in compliance
with cGMP and the applicable Manufacturing Regulatory Documentation; and
(iv) any documentation provided to the Recipient by PMC
concerning the BCG Material or Manufacturing Regulatory Documentation shall be
accurate to the best of PMC's knowledge and ability.
6(b). Warranties and Representations of the Recipient
Recipient and each of ImClone and Merck represents and
warrants to PMC that:
(i) Recipient consist of corporations duly organized, validly
existing and in good standing and have all necessary corporate power to enter
into and perform their obligations under this Agreement;
(ii) the execution, delivery and performance of this Agreement
by the Recipient have been duly authorized and approved by all necessary
corporate action, and the Agreement is binding upon and enforceable against the
Recipient in accordance with its terms (subject to bankruptcy and similar laws
affecting the rights of creditors generally);
(iii) Recipient shall use BCG Material in compliance with all
applicable laws and regulations and shall conduct the Clinical Trials in
compliance with cGMP and cGCP;
(iv) Recipient is not aware of any special or unusual hazards
that would arise as a result of the combination of BEC2 and BCG Material for the
Clinical Trials to be conducted by Recipient;
(v) each lot of BEC2 for the Clinical Trials shall be
manufactured, tested and released in compliance with cGMP and the applicable
Regulatory Filings; provided that, in connection with such release only, each of
ImClone and Merck provides such warranty and representation with respect to the
territories in which they respectively are responsible for the conduct of the
Clinical Trials;
(vi) any documentation concerning the Clinical Trials, BEC2 or
Regulatory Filings shall be accurate to the best of Recipient's knowledge and
ability; and
(vii) Recipient does not guarantee any particular results from
the conduct of the Clinical Trials.
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7. Limitation of Liability; Indemnification
7(a). Limitation of Liability
PMC has limited knowledge or awareness of, and has no control
over, the manner in which the Recipient intends to use the BCG Material. PMC
shall not be liable for any losses, damages, costs or expenses of any nature
incurred or suffered by the Recipient or by a third party, arising out of any
dispute or other claims or proceedings (including, without limitation, product
liability claims and claims by a third party alleging infringement of its
intellectual property rights by the use or sale of BCG Material), made or
brought as a result of the Clinical Trials or against the Recipient, nor shall
PMC be responsible in any way for dealing with any such disputes, claims or
proceedings, except to the extent that any such dispute, claim or proceeding
arises from (a) a breach by PMC of any warranty set forth in Section 6(a)
hereof, or (b) any failure by PMC to manufacture, test, document or release the
BCG Material in compliance with cGMP and the applicable Manufacturing Regulatory
Documentation. PMC shall not be responsible for any interruption in supply that
is caused by Force Majeure. EXCEPT AS SET FORTH IN SECTION 6(a) HEREOF, PMC
MAKES NO WARRANTIES, EXPRESS OR IMPLIED, WRITTEN OR ORAL, INCLUDING WITHOUT
LIMITATION ANY WARRANTIES OF MERCHANTABILITY, OF FITNESS FOR A PARTICULAR
PURPOSE OR OF NON-INFRINGEMENT OF THIRD PARTY PATENTS. PMC SHALL NOT BE LIABLE
FOR ANY LOSS, CLAIM, DAMAGE, EXPENSE OR LIABILITY, OF ANY KIND OR NATURE, WHICH
MAY ARISE FROM OR IN CONNECTION WITH THIS AGREEMENT OR WITH THE CLINICAL TRIALS
OR FROM THE USE, HANDLING OR STORAGE OF BCG MATERIAL, BEC2 OR THEIR ANCILLARY
MATERIALS BY RECIPIENT OR BY ANY AFFILIATES, EMPLOYEES, AGENTS, CONTRACTORS,
INVESTIGATORS OR REPRESENTATIVES OF RECIPIENT. NO PARTY TO THIS AGREEMENT SHALL
BE ENTITLED TO RECOVER FROM THE OTHER PARTIES ANY SPECIAL, INCIDENTAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES.
7(b). Recipient's Right to Indemnification
PMC hereby agrees to indemnify, defend and hold harmless
Recipient and its affiliates, officers, directors, employees and representatives
(collectively, the "Recipient's Indemnitees") from and against any liabilities,
claims, damages, costs, expense (including reasonable attorneys' fees), and
actions (collectively, "Claims") arising out of or resulting from (i) the
failure by PMC to manufacture, test, document or release the BCG Material in
compliance with cGMP and the applicable Manufacturing Regulatory Documentation
or (ii) the breach by PMC or PMC's Indemnitees of any of its obligations or
warranties hereunder, except to the extent that any such Claims arise out of,
are based upon or result from the gross negligence or willful misconduct of
Recipient or Recipient's Indemnitees or a breach by Recipient or Recipient's
Indemnitees of any of Recipient's obligations or warranties under this Agreement
or under the Clinical Trial Protocol or Regulatory Filings. Recipient shall
promptly notify PMC of any Claims, upon becoming aware thereof, and permit PMC
at PMC's cost to defend against such Claims and shall cooperate with PMC in the
defense thereof. Recipient shall not enter into, or permit, any settlement of
any such Claims without the express written consent of PMC.
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Recipient may, at its option and expense, have its own counsel participate in
any proceeding that is under the direction of PMC and will cooperate with PMC or
its insurer in the disposition of any such matter.
7(c). PMC's Right to Indemnification
Recipient hereby agrees to indemnify, defend and hold harmless
PMC and its affiliates, officers, directors, employees and representatives
(collectively, "PMC's Indemnitees") from and against any liabilities, claims,
damages, costs, expense (including reasonable attorneys' fees), and actions
(collectively, "Claims") arising out of or resulting from (i) the Clinical
Trials, (ii) the failure by Recipient to manufacture, test, document or release
BEC2 in compliance with cGMP and the applicable Regulatory Filings, (iii) the
breach by Recipient or Recipient's Indemnitees of any of Recipient's obligations
or warranties under this Agreement or under the Clinical Trial Protocol or
Regulatory Filings, (iv) the possession, processing, shipment, storage,
handling, administration or disposal of any BCG Material supplied to Recipient
hereunder, or (v) the possession, manufacture, sale, use, distribution,
processing, shipment, storage, handling, administration or disposal of BEC2 by
Recipient whether or not any BCG Material is combined thereto, except to the
extent that any such Claims arise out of, are based upon or result from the
gross negligence or willful misconduct of PMC or PMC's Indemnitees or a breach
by PMC or PMC's Indemnitees of any of PMC's obligations or warranties under this
Agreement. PMC shall promptly notify Recipient of any Claims, upon becoming
aware thereof, and permit Recipient at Recipient 's cost to defend against such
Claims and shall cooperate with Recipient in the defense thereof. PMC shall not
enter into, or permit, any settlement of any such Claims without the express
written consent of Recipient. PMC may, at its option and expense, have its own
counsel participate in any proceeding that is under the direction of Recipient
and will cooperate with Recipient or its insurer in the disposition of any such
matter.
7(d). Recipient's Insurance
Each of ImClone and Merck shall obtain and maintain separate
product liability insurance and clinical trial liability insurance (naming PMC
either as an additional insured or policy beneficiary), with an acceptable
insurer, in the minimum amount of US$10,000,000 per occurrence. Such insurance
may not be cancelled or terminated except upon thirty (30) days' prior written
notice to PMC. Such insurance shall be obtained and maintained at the sole cost
and expense of ImClone and Merck. From time to time, at the request of PMC,
ImClone and Merck will cause certificates of such insurance to be provided to
PMC evidencing compliance with their respective obligations set forth herein.
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8. Term and Termination
8(a). Expiration
This Agreement shall commence on the Effective Date and shall
terminate six (6) months after the expiration of the Supply Period, unless
earlier terminated as provided in Sections 8(b), (c) and (d) hereof (the
"Term").
8(b). Termination by Any Party
Any party shall have the right to terminate this Agreement,
immediately upon written notice of termination to the other parties in the event
that:
(i) a party fails to perform or observe or otherwise breaches
any of its material obligations under this Agreement and such failure or breach
continues unremedied for a period of sixty (60) days after receipt by the
breaching party of a written notice thereof from the non-breaching party; and
(ii) a proceeding or case shall be commenced without the
application or consent of the other party and such proceeding or case shall
continue undismissed, or an order, judgment or decree approving or ordering any
of the following shall be entered and continue unstayed and in effect, for a
period of forty-five (45) days from and after the date service of process is
effected upon the other party, seeking (A) the other party's liquidation,
reorganization, dissolution or winding-up, or the composition or readjustment of
its debts, (B) the appointment of a trustee, receiver, custodian, liquidation or
the like of the other party or of all or any substantial portion of their
assets, or (C) similar relief in respect of the other party under any law
relating to bankruptcy, insolvency, reorganization, winding-up or the
composition or readjustment of debts.
8(c). Termination due to Cessation of Clinical Trials
In the event Recipient in its sole discretion ceases the
Clinical Trials, and so advises PMC in writing in advance, either Recipient or
PMC may terminate this Agreement upon thirty (30) days prior written notice to
the other parties.
8(d). Termination in Connection With Further Negotiation
This Agreement may be terminated by the Recipient or PMC in
connection with the failure, during the Term, to enter into a separate agreement
for future commercial supply of BCG Material, as further set forth in Section
2(e) hereof.
8(e). Effects of Termination
In the event of any termination of this Agreement, all amounts
previously invoiced and unpaid or owed to PMC shall be due and payable by
Recipient on the date of termination. Following termination of the Agreement,
the Recipient shall return to PMC or
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destroy, at PMC's option, any quantities of BCG Material. The parties agree
that: (i) the provisions of Section 2(e), Article 3 and Article 6 shall survive
the termination or expiration of this Agreement; (ii) the provisions of Article
5 hereof shall survive the termination or expiration of this Agreement for the
term specified in that Article; and (iii) the provisions of Article 7 hereof
shall survive termination or expiration of this Agreement only with respect to
Claims that arose from acts or circumstances that occurred prior to termination.
9. Miscellaneous
9(a). No Implied Waivers; Rights Cumulative
No failure on the part of PMC or the Recipient to exercise,
and no delay in exercising, any right, power, remedy or privilege under this
Agreement, or provided by statute or at law or in equity or otherwise,
including, without limitation, the right or power to terminate this Agreement,
shall impair, prejudice or constitute a waiver of any such right, power, remedy
or privilege or be construed as a waiver of any breach of this Agreement or as
an acquiescence therein, nor shall any single or partial exercise of any such
right, power, remedy or privilege preclude any other or further exercise thereof
or the exercise of any other right, power, remedy or privilege.
9(b). Notices
All notices, requests and other communications to PMC or the
Recipient hereunder shall be in writing (including telecopy or similar
electronic transmissions) and shall be personally delivered or sent by telecopy
(fax) or other electronic facsimile transmission or by registered mail, or
certified mail, return receipt requested, postage prepaid, or by other form of
courier requiring receipt in each case to the respective address specified below
(or to such address as may be specified in writing to the other party hereto)
and shall be effective upon receipt thereof:
Connaught Laboratories Limited
1755 Steeles Avenue West
Toronto, Ontario, CANADA
M2R 3T4
Attn: Vice President and General Counsel
Facsimile: (416) 667-2860
with a copy to: Senior Vice President, and General Manager,
Oncology Business Unit
Facsimile: (416) 667-2990
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Merck KGaA
Frankfurter Strasse 250
64271 Darmstadt, GERMANY
Attn: Dr. Dieter Orth, License Department
Facsimile: 61 51 72 3378
with a copies to: Dr. Jurgen Uhl, Project Manager, Facsimile: 61 51 72 7580, and
Lothar Finke, TATONZ, Facsimile: 61 51 72 6905
ImClone Systems Incorporated
180 Varick Street
New York NY 10014
U.S.A.
Attn: General Counsel
Facsimile: (212) 645-2054
9(c). Successors and Assigns
The terms and provisions of this Agreement shall inure to the
benefit of, and be binding upon, PMC, the Recipient, and their respective
successors and permitted assigns as provided in this Section. PMC and Recipient
shall have the right to assign or otherwise transfer any of its rights and
interests, or delegate any of its obligations, to an Affiliate of such party
provided that such Affiliate agrees in writing to carry out in full any
obligations that are assigned to it. PMC and Recipient shall have the right to
assign all of its rights and interests and delegate all of its obligations under
this Agreement to any entity that is the successor in interest to the assigning
party in any merger, consolidation or sale involving substantially all of the
business and assets of the assigning party. Any other assignment or delegation
shall only be valid and effective if the other parties have provided their
respective prior express written consent. Any attempt to assign or delegate any
portion of this Agreement in violation of this Section shall be null and void.
Subject to the foregoing, any reference to PMC or the Recipient hereunder shall
be deemed to include the successors thereto and permitted assigns thereof.
9(d). Force Majeure
No party shall be liable to the others, or be in default under
the terms of this Agreement, for its failure to fulfill its obligations
hereunder to the extent such failure arises for any reason or cause beyond its
control including, without limitation, strikes, lockouts, labor disputes, acts
of God, acts of nature, acts of governments or their agencies, fire, flood,
storm, power shortages or power failure, war, sabotage, inability to supply and
to obtain labor, raw materials, supplies, fuel or utilities, or inability to
obtain transportation, or any other circumstance or event beyond the reasonable
control of the party (each, "Force Majeure"), provided that the party relying on
the provisions of this Section 9(d) shall give notice to the other parties of
its inability to observe or perform the provisions of this Agreement. A party
shall notify the other parties if, at any time, it encounters a production or
manufacturing problem
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which in its reasonable opinion could reasonably be expected to adversely affect
its ability to supply BEC2 or BCG Material, as applicable, for the Clinical
Trials. Should such production or manufacturing be so reduced, the party relying
on these provisions shall have the right to allocate such supply for its own use
and among its affiliates, customers and distributors, in such manner and on such
basis as it may reasonably determine, without compensation or penalty to the
other parties.
9(e). Governing Law
This Agreement shall be governed by the laws of the Province of
Ontario. The parties specifically agree that the International Sale of Goods Act
does not apply hereto.
9(f). Entire Agreement
This Agreement, together with its Exhibits A, B and C,
constitutes, on and as of the Effective Date hereof, the entire agreement of and
among PMC, ImClone and Merck with respect to the subject matter hereof, and all
prior or contemporaneous understandings or agreements, whether written or oral,
between or among PMC, ImClone or Merck with respect to such subject matter are
hereby superseded, as of the Effective Date.
9(g) Relationship
Each of the parties is an independent contractor. No party is,
and nothing in this Agreement shall constitute any party as the employer,
employee, principal, agent or partner of, or joint venturer with, any other
party. No party has authority to enter into any agreement on behalf of the other
parties or to bind the other parties in any other manner, and no party shall act
or omit to act so as to suggest that it has such authority. No party shall incur
any obligations or liabilities, express or implied, by reason of, or with
respect to, the actions or omissions of the other parties or of persons for whom
they are responsible.
9(h) Counterparts
This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the Effective Date.
ImClone Systems Incorporated
By: /s/ John B. Landes
--------------------------
Name: John B. Landes
Title: VP Business Development
and General Counsel
Merck KGaA
By: /s/ Professor Schurr 18/8/98
------------------------------
Name: Professor Schurr
Title: Vice President Clin. R&D
By: /s/ Dr. Dieter Orth
---------------------------
Name: Dr. Dieter Orth
Title: Head of Corporate Licensing
Connaught Laboratories Limited
By: /s/ Dr. Pierre Meulien
----------------------
Name: Dr. Pierre Meulien
Title: Vice President
Research & Development
By: /s/ Wm. M.M. Thoms
-------------------
Name: Wm. M. Thoms
Title: VP & General Counsel
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Exhibit "A" (Protocols, Investigators' Brochures)
to Agreement among PMC, ImClone and Merck effective as of January 1, 1997
- --------------------------------------------------------------------------------
[ *** ]
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Exhibit "B" (Section 2(a), ImClone's labelling requirements)
to Agreement among PMC, ImClone and Merck effective as of January 1, 1997
- --------------------------------------------------------------------------------
BCG (lyophilized) 1.5 mg
(An Active Immunizing Agent)
For Intracutaneous Injection Only
Dose as per Clinical Protocol
Lot:
Exp:
For Investigational Use Only
MUST NOT BE ADMINSTERED AS A SINGLE AGENT
Mfg: Connaught Laboratories Limited
North York, ONT Canada
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Exhibit "C" (Section 2(a), Merck's labelling requirements)
to Agreement among PMC, ImClone and Merck effective as of January 1, 1997
- --------------------------------------------------------------------------------
BCG (lyophilized) 1.5 mg
(An Active Immunizing Agent)
For Intracutaneous Injection Only
Use according to study protocol EORTC 08971 only
Lot:
Exp:
For Clinical Trial Use Only
MUST NOT BE ADMINSTERED AS A SINGLE AGENT
Mfg: Connaught Laboratories Limited
North York, ONT Canada
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Exhibit 10.73
CONFIDENTIAL TREATMENT REQUESTED
April 30th, 1999
Table of Contents
1. Definitions
1.1 BI PHARMA KG
1.2 BI PHARMA KG Confidential Information
1.3 Cell Line
1.4 Certificate of Analysis
1.5 cGMP
1.6 C225
1.7 Effective Date
1.8 IMCLONE
1.9 IMCLONE Confidential Information
1.10 Master Cell Bank (MCB)
1.11 Manufacturer's Working Cell Bank (MWCB)
1.12 Phase I
1.13 Phase II
1.14 Phase III
1.15 Process
1.16 Product
1.17 Project
1.18 Project Fee
1.19 Project Manager
1.20 Project Team
1.21 Specifications
1.22 Start Date
2. Cooperation between the Parties in the Course of the Project
2.1 Designation of Project Manager
2.2 Project Team
2.3 Cooperation
2.4 Access to facilities
3. IMCLONE's Tasks and Responsibilities
3.1 License to Use of IMCLONE Cell Line and Intellectual Property
3.2 Materials and Information to be Provided
3.3 Activities to be Performed
December 28, 1998
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4. BI PHARMA KG's Tasks and Responsibilities
4.1 BI PHARMA KG's Tasks
4.2 Control of Cell Line
4.3 Quarantine and Testing
4.4 Phase I/II Development Program
4.5 Responsibility for Failed Fermentations and Downstream Operations
4.6 Materials and Information to be Delivered
4.7 Product to be Delivered
4.8 Prior Approval
4.9 Retention Samples
4.10 Additional Work
5. Phase I/II to be Conducted on Fixed-Fee Basis
6. Phase I/II Project Fee
7. Additional Work / Future Activities
7.1 Additional Work
7.2 Future Activities
7.3 Others
8. Ownership of Project Data
8.1 General
8.2 Intellectual Property Rights solely covering the Product
8.3 All other Intellectual Property Rights
9. Representations. Warranties and Indemnification
9.1 IMCLONE
9.2 BI PHARMA KG
10. Limitation of Liability
10.1 No Warranty of Merchantability of Fitness
10.2 Limitation of Liability
10.3 Maximum Amount
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11. Confidentiality
11.1 BI PHARMA KG
11.2 IMCLONE
11.3 Exceptions
11.4 Others
12. Term and Termination
12.1 Term
12.2 Right to Terminate
12.3 Effect of Termination
13. Miscellaneous
13.1 Force Majeure
13.2 Publicity
13.3 Notices
13.4 Applicable Law
13.5 Compliance with Laws
13.6 Independent Contractors
13.7 Waiver
13.8 Severability
13.9 Entirety
13.10 Assignment
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CONTRACT RESEARCH AND DEVELOPMENT AGREEMENT
(C225)
THIS CONTRACT RESEARCH AND DEVELOPMENT AGREEMENT ("Agreement") is made as of
April 30, 1999 by and among ImClone Systems Incorporated, ("IMCLONE"), having
its principal business offices at 180 Varick Street, New York, New York 10014,
U.S.A. and Boehringer Ingelheim Pharma KG ("BI PHARMA KG") a German corporation
having its principal place of business at Birkendorfer Strasse 65, 88397
Biberach an der Riss, Federal Republic of Germany.
BACKGROUND
IMCLONE is the proprietor of a hybridoma cell line [ *** ] which produces a
monoclonal antibody C225 directed against Epidermal Growth Factor Receptor
(EGFR) as a result of stable transfection with a C225 expression construct, as
well as methods for the purification and analysis of C225.
BI PHARMA KG owns specialized cell culture, processing, protein purification and
Iyophilization facilities that may be suitable for production of C225, and
employs personnel who have experience in production of proteins by cell culture
and purification processes as well as in registration of biopharmaceuticals.
IMCLONE desires to have BI PHARMA KG personnel evaluate, further develop, supply
and scale-up the production process for C225 in BI PHARMA KG's facilities.
IMCLONE and Dr. Karl Thomae GmbH (as of 01.01.1998 and in this Agreement
substituted by BI Pharma KG as the contractual assignee of all rights and
obligations thereunder) have previously entered into a Material Transfer
Agreement for Evaluation dated November 10/24, 1997 to evaluate potential
production and supply of C225.
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AGREEMENT
IN CONSIDERATION OF the mutual covenants set forth in this Agreement, BI PHARMA
KG and IMCLONE hereby agree as follows:
1. Definitions
1.1 "BI PHARMA KG"
shall mean Boehringer Ingelheim Pharma KG.
1.2 "BI PHARMA KG Confidential Information"
shall mean all technical and other information relating to BI PHARMA
KG's facilities and associated technologies that is disclosed or
supplied to, IMCLONE by BI PHARMA KG (except IMCLONE Confidential
Information) pursuant to this Agreement, whether patented or
unpatented, including, without limitation, trade secrets, know-how,
processes, concepts, experimental methods and results and business and
scientific plans.
1.3 "Cell Line"
shall mean the IMCLONE cell line [ *** ] that expresses the Product.
1.4 "Certificate of Analysis"
shall mean a document to be established by mutual agreement describing
testing methods and results.
1.5 "cGMP"
shall mean the regulatory requirements for current good manufacturing
practices promulgated by the FDA under the Federal Food, Drug and
Cosmetic Act, as amended, 21 C.F.R. ss. 210 et seq and 21 C.F.R. ss.
600-610, as applicable.
1.6 "C225"
shall mean a chimerized monoclonal antibody directed against EGFR
produced by the Cell Line.
1.7 "Effective Date"
shall mean the date first above written, which shall be the effective
date of this Agreement.
1.8 "IMCLONE"
shall mean ImClone Systems Incorporated or an affiliate of ImClone
Systems Incorporated.
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1.9 "IMCLONE Confidential Information"
shall mean the Cell Line, Process, Product and all technical,
scientific or business and other materials and information that are
disclosed or supplied to BI PHARMA KG by IMCLONE or developed on behalf
of IMCLONE by BI PHARMA KG (excluding BI PHARMA KG Confidential
Information) pursuant to this Agreement whether patented or unpatented,
including, without limitation, trade secrets, know-how, processes,
concepts, experimental methods and results and business and scientific
plans.
1.10 "Master Cell Bank (MCB)"
shall mean a cell bank established by BI PHARMA KG derived from a
suspension serum-free adapted cell line to be produced at BI PHARMA KG.
1.11 "Manufacturer's Working Cell Bank (MWCB)"
shall mean a cell bank established by BI PHARMA KG derived from the
MCB.
1.12 "Phase I"
shall refer to process transfer of the Process to a [ *** ] scale at BI
PHARMA KG, continued scale-up to a [ *** ] and [ *** ] pilot
fermentation scale and establishment of a downstream purification
process according to Appendix 1, all of which has been completed as of
the Effective Date.
1.13 "Phase II"
shall refer to demonstrating the process at small scale [ *** ],
performing Product equivalency testing and establishing a filling
process of the corresponding Product as well as the scale-up to [ *** ]
pilot scale and cGMP production of clinical grade material at that
scale to be undertaken by BI PHARMA KG pursuant to this Agreement and
according to the updated Master Projectplan (Appendix 1.1) dated
November 1998. The agreed upon process format for Phase II of the
project is given in Appendix 6. [ *** ].
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1.14 "Phase III"
shall refer to a second project, which may be implemented by separate
agreement between IMCLONE and BI PHARMA KG following completion of
Phase II activities, involving scaling the Process from the [ *** ]
fermentation scale implemented in Phase II to the [ *** ].
1.15 "Process"
shall refer to a proprietary IMCLONE process for using the Cell Line,
including defined procedures, equipment and analytical methodologies
for in-process control, release testing and Product characterization,
that has been used by IMCLONE to produce the Product at the laboratory
scale, which shall be disclosed by IMCLONE to BI PHARMA KG to enable BI
PHARMA KG to carry out the Project or, if and when applicable, the
modified process after further development and scale up by BI PHARMA KG
to the [ *** ] fermentation scale.
1.16 "Product"
shall mean the biologically active C225 produced by the Cell Line in
accordance with the Process.
1.17 "Project"
shall mean the Phase I and Phase II contract research program described
herein, in which IMCLONE shall transfer the Process to BI PHARMA KG to
be implemented, scaled-up and evaluated at the [ *** ] fermentation
scale in and by BI PHARMA KG's facility and equipment. The primary
objectives of the Project will be to transfer, establish and scale up
the Process in the BI PHARMA KG facility, successfully demonstrate that
Product can be reproducibly manufactured in BI PHARMA KG's facilities
at [ *** ] scale, and generate a report compiling a summary of data
generated in the Project. The proposed workscopes and timelines for the
Project are laid down in the Master Projectplans attached hereto as
Appendix 1 and Appendix 1.1. Phase I has been completed as of the date
of this Agreement.
1.18 "Project Fee"
shall have the meaning specified in Section 6 hereof.
1.19 "Project Manager"
shall have the meaning specified in Section 2.1 hereof.
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1.20 "Project Team"
shall have the meaning specified in Section 2.2 hereof.
1.21 "Specifications"
shall mean the specifications for the Product and the respective test
methods attached hereto as Appendix 5 on the basis of the
specifications provided by IMCLONE and as such specifications may be
amended from time to time by mutual agreement of IMCLONE and BI PHARMA
KG according to further development of the Process and Product.
1.22 "Start Date"
shall mean February 1, 1998 (according to the Master Projectplan
Appendix 1).
2. Cooperation between the Parties in the Course of the Project
2.1 Designation of Project Manager.
BI PHARMA KG and IMCLONE shall each identify a Project Manager, and if
they choose, the supervisor of the Project Manager. The Project Manager
or the Project Manager's supervisor will be exclusively responsible for
communicating all instructions and information concerning the Project
to the other party and shall be the person or people to whom such
instructions and information are communicated by the other party. Each
Project Manager or the Project Manager's supervisor will be available
on a weekly basis for consultation at prearranged times during the
course of the Project or as may otherwise be reasonably required or
advisable. In the absence of the Project Manager or the Project
Manager's supervisor, a substitute shall be appointed. Additional modes
or methods of communication and decision making may be implemented with
the mutual consent of each party.
2.2 Project Team.
BI PHARMA KG and IMCLONE shall each name representatives to a Project
Team, which shall consist of knowledgeable specialists in appropriate
disciplines who shall be responsible for planning and executing the
Project and any subsequent interactions between the parties. At regular
intervals, the Project Managers shall schedule meetings between each
company's representatives for the purpose of communicating Project
updates and providing a forum for strategic decision making and rapid
resolution of issues.
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Joint Project meetings shall be conducted by telephone-conference,
video-conference and face to face meetings. Meeting minutes shall be
prepared jointly by the Project Managers to record all issues discussed
and decisions made, subject to final approval of such minutes by both
parties. Such minutes are considered to be accepted by a party when
there is no objection made by such a party within a period of 7 (seven)
days after such minutes have been received by the respective party.
The present list of the members of the Project Team is attached hereto
as Appendix 2.
2.3 Cooperation.
BI PHARMA KG and IMCLONE each agree to work together collaboratively on
the Project as reasonably expeditiously as possible, with the objective
of completing the Project according to the mutual agreed timelines (see
Appendix 1 and Appendix 1.1).
In the course of the Project, BI PHARMA KG will at all times take into
consideration and implement the recommendations of IMCLONE as long as
they do not negatively influence other BI PHARMA KG biotech operations
and are agreed upon by the Project Team. In the absence of explicit
instructions from IMCLONE, BI PHARMA KG shall be entitled to employ its
reasonable judgment in carrying out the Project. BI PHARMA KG shall be
entitled to rely upon any instructions or directives provided by the
IMCLONE Project Manager or the IMCLONE Project Manager's supervisor
and, subject to Sections 4.5 and 4.7 below shall not be responsible for
failure to achieve any objective or the inability to adhere to any
guideline due to technical failures, incomplete direction or
documentation of Process variables, or other causes beyond the control
of BI PHARMA KG.
2.4 Access to facilities.
IMCLONE shall permit personnel of BI PHARMA KG, upon reasonable prior
written notice to IMCLONE, to visit its facilities during appropriate
times to observe the Process and certain analytical procedures for C225
as conducted by IMCLONE. BI PHARMA KG shall permit IMCLONE, upon
reasonable prior notice to BI PHARMA KG, to review the originals of all
batch records and other primary documents at its facilities and shall
allow IMCLONE personnel to be present in its facilities at appropriate
times (e.g. to observe the implementation of the Process). While
visiting the facility of the other party, personnel of BI PHARMA KG and
IMCLONE shall comply with all security and safety policies and
procedures of the other party.
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3. IMCLONE's Tasks and Responsibilities
3.1 License to Use of IMCLONE Cell Line and Intellectual Property.
IMCLONE hereby grants to BI PHARMA KG a limited, non-exclusive right
and license, without the right to sublicense, to use IMCLONE
Confidential Information, including but not limited to the Cell Line
and Process, solely for the purpose of enabling BI PHARMA KG to carry
out its tasks and responsibilities under this Agreement with respect to
the Project.
3.2 Materials and Information to be Provided.
To enable BI PHARMA KG to begin the Project, IMCLONE shall provide:
(a) 10 vials of the MCB and/or MWCB for Project start, additional
quantities may be requested.
(b) a description of IMCLONE's methods for testing of the Cell Line
and its progenitor cell line.
(c) documentation describing the exact composition of the [ *** ] and
a sufficient quantity of actual medium to enable BI PHARMA KG to
begin to culture the Cell Line upon receipt from IMCLONE;
(d) a description of the Cell Line and of genetic construct used for
expression of the Product (for registration according to German
gene technology law ("Gentechnikgesetz")), and
(e) at BI PHARMA KG's reasonable request any additional information
concerning the Process, analytical test methods, reference
materials, and any critical reagents to facilitate the Project.
3.3 Activities to be Performed. As the Project is carried out, IMCLONE
shall:
(a) use reasonable efforts to perform the work and tasks as set forth
and detailed in Appendix 3.
(b) at BI PHARMA KG's request and subject to Section 2.4 above,
arrange for BI PHARMA KG personnel to visit IMCLONE's production
facility to observe and record the Process as carried out by
IMCLONE in its facility. Any such records shall be considered
IMCLONE Confidential Information.
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4. BI PHARMA KG's Tasks and Responsibilities
4.1 BI PHARMA KG's Tasks.
In the course of this Agreement BI PHARMA KG shall perform the work and
tasks as laid down and detailed in Appendix 4 hereto.
4.2 Control of Cell Line.
BI PHARMA KG shall maintain (for safety reasons in two different
buildings) the Cell Line in safe and secure storage under its control
in its facilities and shall not permit the transfer of the Cell Line to
any third party that is not specifically authorized in writing by
IMCLONE (except to a contract laboratory used for the characterization
of the MCB or MWCB under substantially the same requirement of
confidentiality). BI PHARMA KG shall comply with all applicable
regulatory requirements relating to general safety and biosafety in
handling the Cell Line and any raw materials used in the Project.
4.3 Quarantine and Testing.
BI PHARMA KG will quarantine and test samples of the Cell Line already
provided to it in order to verify that the Cell Line is suitable for
introduction into BI PHARMA KG's facilities. The quarantine and testing
time is estimated to be about 2 (two) months.
4.4 Phase I/II Development Program.
Following quarantine testing of the MWCB (see Appendix 4) BI PHARMA KG
will transfer and establish the production process at laboratory scale
( [ *** ] fermentation scale) on the basis of Process information
supplied by IMCLONE. The agreed upon process format for Phase II of the
Project is given in Appendix 6. Material derived from such a process
will be tested for analytical equivalence with reference material from
IMCLONE. Remaining quantities may be used by IMCLONE at its discretion.
A scale-up will then be performed to the [ *** ] fermentation scale and
cGMP material [ *** ] for clinical trials will be produced at this
scale. The workscopes and timelines for such a program are given in the
Master Projectplans (see Appendix 1 and Appendix 1.1). The production
of further clinical material at [ *** ] fermentation scale, if required
by IMCLONE, has to be agreed upon separately in writing, and shall be
reflected in an amendment to this Agreement in accordance within the
terms set forth herein.
4.5 Responsibility for Failed Fermentations and Downstream Operations.
[ *** ]
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[ *** ]
(b) [ *** ]
4.6 Materials and Information to be Delivered.
BI PHARMA KG will provide IMCLONE with the following materials and
information at the times indicated:
(a) a summary of the test results generated during the 2 (two) months
quarantine period within 30 (thirty) days following the end of
such period;
(b) within 2 (two) months following completion of each Phase of the
Project (Phase I and Phase II), a report to IMCLONE, as laid down
detailed in Appendix 7 including, a summary of the data BI PHARMA
KG collects in the course of the Project and Certificates of
Analysis for release of Product for clinical use, if any;
(c) other interim results as reasonable in appropriate time periods or
requested by IMCLONE, as mutually agreed by the Project Team.
4.7 Product to be Delivered.
BI PHARMA KG shall supply Product to IMCLONE from the [ *** ] pilot
scale and all purified Product (cGMP grade) from the [ *** ] scale runs
performed by BI PHARMA KG. BI PHARMA KG shall also provide IMCLONE with
samples of vialed Product that is produced by it. All Product
delivered, if any, shall conform with the Specifications which have to
be mutually agreed upon as laid down in Appendix 5 and BI PHARMA KG
shall issue a Certificate of Analysis covering such Specifications.
If the Product is asserted by IMCLONE not to meet the Specifications,
both parties shall re-test the Product. If IMCLONE and BI PHARMA KG are
not able to agree, whether the Product meets the Specifications or not
and the parties are unable to resolve their differences, then either
party may refer the matter to an independent specialized institution of
international reputation agreeable to both parties for final analysis,
which shall be binding on both parties hereto.
All Product produced in the course of the Project shall be retained by
BI PHARMA KG and stored under conditions specified by IMCLONE (and
reasonably acceptable to BI PHARMA KG) not longer than 1 (one) year,
and delivered to IMCLONE as instructed by IMCLONE and at the cost and
risk of IMCLONE.
4.8 Prior Approval.
Prior to implementing any deviation from the Project, BI PHARMA KG
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shall notify IMCLONE and obtain the written approval of the Project
Manager of IMCLONE or other person designated in writing by IMCLONE.
4.9 Retention Samples.
According to a sampling plan to be agreed upon by the Project Team, BI
PHARMA KG shall isolate, identify and retain samples of raw materials
used in fermentations carried out in the course of the Project, of
Process media at appropriate time points in each fermentation, and of
Product at each stage of purification. Retention samples shall be
provided promptly to IMCLONE at its request. Shipment shall be at the
cost and risk of IMCLONE.
4.10 Additional Work.
On request of IMCLONE, BI PHARMA KG shall perform additional
development work to sustain the progress of the Project on conditions
in terms of money, time and scope to be subject to mutual agreement of
the parties hereto and defined in an amendment to the Master
Projectplans attached hereto as Appendix 1 and Appendix 1.1.
5. Phase I/II to be Conducted on Fixed-Fee Basis
The Project shall be conducted by BI PHARMA KG for IMCLONE on a fixed
fee basis, in consideration of payment by IMCLONE of the Project Fee.
The estimated duration of the Project shall be [ *** ] from the Start
Date as outlined in Appendix 1 and Appendix 1.1. Phase I of the Project
has been completed as of the Effective Date.
6. Phase I/II Project Fee
IMCLONE shall pay BI PHARMA KG a Project Fee of DM 8, 950,000
(eightmillionninehundredandfiftythousand Deutsche Mark) for the
services provided in carrying out the Project as defined in Appendix 1
and Appendix 1.1, regardless of the favorability or usefulness of the
results (see Section 4.5 above). Of this amount to date DM 3,130,000
has been paid for the completion of Phase I.
This fee includes all fees for BI PHARMA KG's services under the Master
Projectplans for Phase I and Phase II, including but not limited to,
fees for Cell Line validation, facility use, raw material testing,
in-process testing services including bulk and finished product
testing, environmental monitoring as appropriate, and other calibration
and validation
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activities required to facilitate the successful completion of the
technology transfer and production of the clinical grade material at
the [ *** ] fermentation scale.
Disposal of organic and hazardous waste is included in the Project Fee.
The Project Fee shall be payable in installments, each non-refundable
when paid, as described in Appendix 1 and Appendix 1.1. To the extent
BI PHARMA KG is required to repeat any fermentations or downstream
operations pursuant to Section 4.5 (b) above, any installment related
to the completion of the fermentation or downstream operation or
delivery of the Product, as the case may be, shall not be payable until
such fermentation or downstream operation or delivery of Product, as
the case may be, has been completed.
The cost of commercially available materials purchased by IMCLONE for
use at BI PHARMA KG to support development in GLP and cGMP shall be
creditable to the applicable invoice.
Each invoice shall be payable within 30 (thirty) days following receipt
thereof.
7. Additional Work / Future Activities
7.1 Additional Work.
BI PHARMA KG and IMCLONE may confer to determine if additional work
relating to Phase I or Phase II should be undertaken pursuant to
subsequent agreement between BI PHARMA KG and IMCLONE. Neither party
shall be obligated to conduct any further undertakings on behalf of the
other except as may be mutually agreed and set forth in a subsequent
written agreement.
7.2 Future Activities.
[ *** ]
7.3 Others.
IMCLONE shall not assert any right to use BI PHARMA KG facilities at
any future date as a result of its use of BI PHARMA KG facilities
pursuant to this Agreement, nor shall BI PHARMA KG assert any right to
use or have access to the Cell Line, Process, Product, MCB or MWCB as a
result of its activities pursuant to this Agreement.
8. Ownership of Project Data
8.1 General.
All information and intellectual property rights relating to the
transfer of information under Section 4.6 above, with the exception of
BI PHARMA KG Confidential Information, shall be the sole and exclusive
property of
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IMCLONE and IMCLONE shall have the right to use such
information for any purpose without further obligation to BI PHARMA KG.
For the purpose of this Agreement all information regarding BI PHARMA
KG's facility and technical equipment shall be considered BI PHARMA
KG'S Confidential Information.
8.2 Intellectual Property Rights solely covering the Product.
Any and all intellectual property rights solely covering the Product,
including, but not limited to, patents and patent applications arising
out of the activities performed under this Agreement shall be the sole
and exclusive property of IMCLONE, which shall have the sole right to
file such applications and will meet all costs in relation thereto.
Upon request of IMCLONE, BI PHARMA KG will assign any and all rights as
necessary to vest such ownership in IMCLONE.
8.3 All other Intellectual Property Rights.
All other intellectual property rights that arise out of the activities
performed under this Agreement, and that do not cover solely the
Product shall be the sole and exclusive property of BI PHARMA KG and
IMCLONE shall be granted a non-exclusive, royalty-free and worldwide
license solely for use to the Product.
9. Representations. Warranties and Indemnification
9.1 IMCLONE.
IMCLONE hereby represents, warrants and agrees that:
(a) IMCLONE is free to supply the Cell Line and IMCLONE Confidential
Information to BI PHARMA KG;
(b) IMCLONE is not aware of any special or unusual hazards involved in
handling the Cell Line or Product;
(c) IMCLONE has full corporate authority to enter into this Agreement
and this Agreement is binding upon IMCLONE in accordance with its
terms; and
(d) [ *** ]
9.2 BI PHARMA KG.
BI PHARMA KG hereby represents, warrants and agrees that:
(a) BI PHARMA KG has the lawful right to use the facilities and BI
PHARMA KG Confidential Information to be used for purposes set
forth in this Agreement;
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(b) BI PHARMA KG is not aware of any special or unusual hazards that
would arise as a result of its carrying out of the Project as
planned;
(c) BI PHARMA KG has full corporate authority to enter into this
Agreement and this Agreement is binding upon BI PHARMA KG in
accordance with its terms; and
(d) [ *** ]
(e) BI PHARMA KG warrants that the Project shall be conducted as laid
down in Appendix 1 and Appendix 1.1 and in accordance with this
Agreement and, when appropriate, in compliance with cGMP, and that
any documentation of Project results or procedures provided to
IMCLONE by BI PHARMA KG shall be accurate in all material
respects.
With regard to the results see Section 4.5 above.
10. Limitation of Liability
10.1 No Warranty of Merchantability or Fitness.
Subject to Section 9.2 above, BI PHARMA KG shall provide the results of
the Project to IMCLONE without any warranty of any kind, express or
implied, including, without limitation, any warranties of
merchantability or fitness for a particular purpose.
10.2 Limitation of Liability.
[ *** ]
10.3 Maximum Amount.
BI PHARMA KG undertakes to use its best efforts to perform the Project
under the Master Projectplans and to meet the target dates set forth in
Appendix 1 and Appendix 1.1 hereto. [ *** ].
11. Confidentiality
11.1 BI PHARMA KG.
BI PHARMA KG shall not disclose IMCLONE Confidential Information to any
person other than its employees or employees of affiliated companies of
the Boehringer Ingelheim group who are bound by similar obligations of
confidentiality and who have a need to know such information in order
to perform their duties in carrying out the Project hereunder.
11.2 IMCLONE.
IMCLONE shall not disclose any BI PHARMA KG Confidential Information to
any person other than:
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(a) its employees or consultants who are bound by substantially
similar obligations of confidentiality and who have a need to know
such information in order to provide direction to BI PHARMA KG or
evaluate the results of the Project; or
(b) regulatory authorities, for example, the FDA, that require such
information in order to review an IND or other regulatory filing.
11.3 Exceptions.
The obligations of confidentiality applicable to IMCLONE Confidential
Information and BI PHARMA KG Confidential Information shall not apply
to any information that is:
(a) known publicly or becomes known publicly through no fault of the
recipient;
(b) learned by the recipient from a third party entitled to disclose
it;
(c) developed by the recipient independently of information obtained
from the disclosing party as evidenced by prior written records of
the recipient;
(d) already known to the recipient before receipt from the disclosing
party, as shown by its prior written records;
(e) required to be disclosed by law, regulation or the order of a
judicial or administrative authority; provided that the recipient
notifies the disclosing party immediately upon receipt at any such
order or becoming aware of any such law or regulation, or released
with the prior written consent of the disclosing party.
11.4 Others.
No right or license under any patent or proprietary right is granted
hereunder by virtue of the disclosure of IMCLONE Confidential
Information or BI PHARMA KG Confidential Information except as
expressly provided herein. The obligations of both parties under this
Section 11 shall survive the expiration or termination of this
Agreement. Both IMCLONE and BI PHARMA KG shall use reasonable and
customary precautions to safeguard IMCLONE Confidential Information and
BI PHARMA KG Confidential Information, including ensuring that all
employees or consultants who are provided access to such information
are informed of the confidential and proprietary nature of such
information and understand that all such information is required to be
maintained confidential.
12. Term and Termination
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12.1 Term.
This Agreement shall come into force as of the date first above written
and commence retroactively as of the Start Date and, unless terminated
earlier as provided herein, shall terminate upon the date of payment of
the last sum due hereunder, or upon the date when the last services
required to be performed hereunder are performed, whichever date shall
last occur unless specifically extended by further written agreement.
12.2 Right to Terminate.
If it becomes apparent to either party at any stage of the Project that
it will not be possible to carry out the Project for scientific or
technical reasons or as a result of Force Majeure (as described in
Section 13 below), the parties shall permit 30 (thirty) business days
for discussion to resolve, if possible, the scientific or technical
issue giving rise to the problem. If the parties fail to resolve the
problem within this 30 (thirty) day period, either party shall have the
right to terminate this Agreement, effective upon written notice to the
other.
In the event of such a termination initiated by IMCLONE, [ *** ]
Either party may terminate this Agreement effective upon written notice
if either of the following events occurs:
(a) The other party commits a breach of this Agreement and the breach
is not remedied within 30 (thirty) days after the receipt of
notice identifying the breach, requiring its remedy and stating
the intent of the party to terminate in the absence of remedy; or
(b) The other party (i) becomes unable to pay its debts as they become
due, (ii) suspends payment of its debts, (iii) enters into or
becomes subject to corporate rehabilitation or bankruptcy
proceedings or liquidation or dissolution, (iv) makes an
assignment for the benefit of its creditors or (v) seeks relief
under any similar laws for debtor's relief.
12.3 Effect of Termination.
Upon the expiration or termination of this Agreement:
(a) At the request of IMCLONE, BI PHARMA KG shall deliver at the cost
and risk of IMCLONE all vials of the Cell Line, the MCB and the
MWCB, as well as description of all methods relating thereto to
IMCLONE or its designee and shall promptly return all IMCLONE
Confidential Information to IMCLONE; except for a single copy
and/or sample for documentation purposes only and
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(b) IMCLONE shall promptly return all BI PHARMA KG Confidential
Information to BI PHARMA KG, except for a single copy and/or
sample for documentation purposes only.
The respective rights of BI PHARMA KG and IMCLONE to
indemnification as set forth in Sections 9 and 10 above shall
survive termination of this Agreement with respect to any claims
that relate to or derive from the Project, or any acts or failures
to act, of either BI PHARMA KG or IMCLONE in connection with the
Project that occur prior to termination.
13. Miscellaneous
13.1 Force Majeure.
Neither party shall be in breach of this Agreement if there is any
failure of performance under this Agreement (except for payment of any
amounts incurred hereunder prior to Force Majeure) occasioned by any
act of God, fire, act of government or state, war, civil commotion,
insurrection, embargo, prevention from or hindrance in obtaining energy
or other utilities, labor disputes of whatever nature or any other
reason beyond the control of either party.
13.2 Publicity.
Except as required by law (e.g. SEC-requirements), no press release or
other form of publicity regarding the Project or this Agreement shall
be permitted to be published unless both parties have indicated their
consent to the form of the release. Notwithstanding the foregoing,
IMCLONE may elect to issue a press release or other form of publicity
regarding the Project at any time, but shall first notify BI PHARMA KG
of such issuance and provide BI PHARMA KG with an opportunity to
comment thereon. Nothing in this Section 13.2 shall prevent the parties
from disclosing this Agreement as required by applicable laws, rules or
regulations.
13.3. Notices.
Any notice required or permitted to be given hereunder by either party
shall be in writing and shall be (i) delivered personally, (ii) sent by
registered mail, return receipt requested, postage prepaid or (iii)
delivered by facsimile with immediate telephonic confirmation of
receipt, to the addresses or facsimile numbers set forth below: If to
BI PHARMA KG: Boehringer Ingelheim Pharma KG
Birkendorfer Stra(beta)e 65
D-88397 Biberach an der Riss
Federal Republic of Germany
Attention: Dr. Wolfram Carius
Fax: + 0049 73 51/54-98049
Phone + 0049 73 51/54-9421
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If to IMCLONE: ImClone Systems Incorporated
180 Varick Street, 7th Floor
New York, New York 10014
Attention: Mr. John B. Landes,
Vice President,
Business Development and General Counsel
Fax: 001 212 645 1405
Phone: 001 212 645 2054
Each notice shall be deemed given (i) on the date it is received if it
is delivered personally, (ii) 1 (one) day after the date it is
postmarked if it is sent by certified United States mail, return
receipt requested, postage prepaid or (iii) on the date it is received
if it is sent by facsimile with immediate telephonic confirmation of
receipt.
13.4. Applicable Law.
This Agreement shall be governed by and construed in accordance with
the laws of Germany without regard to its choice of law principles. The
courts of the place of domicile of BI PHARMA KG shall have exclusive
jurisdication over all legal matters and proceedings hereunder.
13.5 Compliance with Laws.
BI PHARMA KG shall perform the work hereunder in conformance with
GLP/cGMP, as applicable, and all German and/or EU laws, ordinances and
governmental rules or regulations pertaining thereto.
13.6. Independent Contractors.
Each of the parties hereto is an independent contractor and nothing
herein contained shall be deemed to constitute the relationship of
partners, joint venturers, nor of principal and agent between the
parties hereto. Neither party shall hold itself out to third persons as
purporting to act on behalf of, or serving as the agent of, the other
party.
13.7. Waiver.
No waiver of any term, provision or condition of this Agreement whether
by conduct or otherwise in any one or more instances shall be deemed to
be or construed as a further or continuing waiver of any such term,
provision or condition or of any other term, provision or condition of
this Agreement.
13.8 Severability.
If any provision of this Agreement is held to be invalid or
unenforceable by a court of competent jurisdiction all other provisions
shall continue in full force and effect. The parties hereby agree to
attempt to substitute for
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any invalid or unenforceable provision a valid or enforceable provision
which achieves to the greatest extent possible the economic legal and
commercial objectives of the invalid or unenforceable provision.
13.9 Entirety.
This Agreement, including any exhibits and appendices attached hereto
and referenced herein, constitutes the full understanding of the
parties and a complete and exclusive statement of the terms of their
agreement, and no terms, conditions, understandings or agreements
purporting to modify or vary the terms thereof shall be binding unless
it is hereafter made in writing and signed by both parties.
13.10 Assignment.
Neither party may assign this Agreement to a third party, except an
affiliate (including a subsidiary or division), and either IMCLONE or
BI PHARMA KG may assign this Agreement in connection with the sale of
all or substantially all of such party's assets or similar transaction.
This Agreement shall be binding upon the successors and assigns of the
parties and the name of a party appearing herein shall be deemed to
include the names of its successors and assigns.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the Effective Date.
Biberach, ...........................1999 New York, April 30, 1999
Boehringer Ingelheim Pharma KG ImClone Systems Incorporated
ppa.
/s/ Dr. Jacob /s/ Prof. R.G. Werner /s/ John B. Landes
Dr. Jacob Prof. R. G. Werner By: John B. Landes
Member of the Board Head of Industrial
Biopharmaceuticals Title: VP, General Counsel
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Appendices:
- -----------
Appendix 1: Master Projectplan including Project Timeline
Appendix 1.1: Updated Master Projectplan including Project timeline
Appendix 2: Project Team
Appendix 3: IMCLONE s Tasks in Detail
Appendix 4: BI PHARMA KG s Tasks in Detail
Appendix 5: Test Methods and Specifications for C225
Appendix 6: Protein A Process Format
Appendix 7: Summary Data Reports for Phase I and Phase II
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Appendix 1 Page 1 of 2
Master Projectplan: C225
ImClone Systems, Inc./Bl Pharma KG
Forecast of proposed Workscope and Cost Estimate
[ *** ]
<PAGE>
Appendix 1.1 Page 1 of 4
Update May 1999 Ma ster Projectplan: C225
ImClone Systems, Inc./Bl Pharma KG
Forecast of proposed Workscope and Cost Estimate
[***]
<PAGE>
<TABLE>
<CAPTION>
Appendix 2
Function Boehringer Ingelheim ImClone
<S> <C> <C>
Project Team Leader Dr. Helmut Hoffmann Mr. Ronald Martell (?)
Ms. Martie Bohn
Head of Process Development Dr. Helmut Hoffmann (?)
Cell Banking and Characterization, Dr. Stefanos Grammatikos Ms. Betsy Hornberger
Virus Testing Dr. Daniel Velez
Dr. S. Joseph Tarnowski
Small Scale Cell Culture Labs Dr. Wolfgang Noe Mr. Joel Goldstein
Mr. Rajeew Gupta
Dr. Daniel Velez
Dr. S. Joseph Tarnowski
Fermentation Pilot Plant Dr. Ralph Kempken Mr. Joel Goldstein
Mr. Rajeew Gupta
Downstream Processing Dr. Joachim Walter Dr. Daniel Velez
Mr. Joel Goldstein
Dr. S. Joseph Tarnowski
Protein Analytical Chemistry Dr. Michael Schluter Ms. Betsy Hornberger
Process Validation Mr. Norbert Hentschel Mr. Glen Noonan
Filling Mr. Hans Hormann Mr. Edward Patten
Regulatory Dr. Uwe Bucheler Ms. Gretchen Toolan
Documentation Dr. Uwe Bucheler Mr. Edward Patten
Quality Assurance Mrs. Bettina Schulz
Contract Mrs. Kipping
</TABLE>
<PAGE>
Appendix 3
ImClone's Tasks in Details
[ *** ]
<PAGE>
Appendix 4
BI PHARMA KG's Tasks in Detail
[ *** ]
<PAGE>
Appendix 5: Test Methods and Specifications for C225
[ ***]
<PAGE>
Appendix 6
[ *** ] A Process Format
[***]
<PAGE>
Appendix 7
Summary Data Reports for Phase I and Phase II
Exhibit 99.6
IMCLONE SYSTEMS INCORPORATED
1996 NON-QUALIFIED STOCK OPTION PLAN, AS AMENDED(1)
ARTICLE I
Purpose of Plan
1.1 General Purpose. The purpose of this Non-Qualified Stock Option
Plan (the "Plan") is to promote the interests of ImClone Systems Incorporated
(the "Company") by affording key consultants, advisors, directors and employees
an opportunity to acquire a proprietary interest in the Company pursuant to
stock options issued by the Company, and thus to create in such persons
increased personal interest in its continued success.
1.2 Statutory Stock Option. Options granted under the Plan are intended
to be "non-qualified" stock options under the Internal Revenue Code of 1986, as
amended (the "Code").
ARTICLE II
Shares Subject to Plan
2.1 Description of Shares. Subject to Article VIII hereof, the stock to
which the Plan applies is shares of the Company's common stock, $.001 par value
("Common Stock"), either authorized but unissued or Treasury shares. The number
of shares of Common Stock to be issued or sold pursuant to options granted
hereunder shall not exceed 4,000,000 shares; provided,
- ----------
1 This plan was adopted by the Board on February 25, 1996 and approved
by the stockholders on June 3, 1996; it was amended by the Board on April 3,
1997 and such amendments were ratified by the stockholders on June 3, 1997; it
was amended by the Board on March 29, 1999 and such amendments were ratified by
the stockholders on May 24, 1999.
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that such number shall be reduced by the number of shares which have
been sold under, or may be sold pursuant to options granted from time to time
under, the Company's 1996 Incentive Stock Option Plan (the "Incentive Stock
Option Plan") to the same extent as if such sales had been made or options had
been granted pursuant to this Plan.
2.2 Restoration of Unpurchased Shares. Any shares subject to an option
granted hereunder that, for any reason, expires or is terminated unexercised as
to such shares may again be subject to an option to be granted hereunder.
ARTICLE III
Administration; Committees; Amendments
3.1 Administration. The Plan shall be administered by any of the
Compensation Committee, the Stock Option Committee (which is a subcommittee of
the Compensation Committee) (collectively, the "Committees") or the Board of
Directors of the Company (the "Board"). The Committees shall be comprised of not
less than two persons who shall be appointed by the Board from among the members
of the Board. Members of the Committees and the Board shall be eligible to
become participants under the Plans and may receive discretionary and
non-discretionary grants of options.
3.2 Duration; Removal; Etc. The members of the Committees shall serve
at the pleasure of the Board, which shall have the power at all times to remove
members from the Committees or to add members thereto. Vacancies in the
Committees, however caused, shall be filled by action of the Board.
2
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3.3 Meetings; Actions of Committee. Each of the Committees may select
one of its members as its Chairman and shall hold its meetings at such times and
places as it may determine. All decisions or determinations of the Committees
and the Board shall be made by the majority vote or decision of all of its
members, whether present at a meeting or not; provided, however, that any
decision or determination reduced to writing and signed by all of the members
shall be as fully effective as if this had been made at a meeting duly called
and held. Each of the Committees and the Board may make such rules and
regulations for the conduct of its business not inconsistent herewith as it may
deem advisable.
3.4 Interpretation. The interpretation and construction by any of the
Committees or the Board of the provisions of the Plan or of the options granted
hereunder shall be final, unless in the case of the Committees otherwise
determined by the Board. No member of the Board or of the Committees shall be
liable for an action taken or determination made in good faith.
3.5 Amendments or Discontinuation. The Board may make such amendments,
changes, and additions to the Plan, or may discontinue and terminate the Plan,
as it may deem advisable from time to time; provided, however, that no action
shall affect or impair any options theretofore granted under the Plan, and
provided, further, however, that the affirmative vote of the owners of a
majority of the outstanding shares of Common Stock present at a meeting in
person or by proxy and entitled to vote shall be necessary to effect any
amendment to the Plan which would increase the number of shares of Common Stock
subject to options granted under the Plan.
3
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ARTICLE IV
Participants; Maximum Grant; Duration of Plan
4.1 Eligibility and Participation. Options shall be granted only to
persons ("Participants") who at the time of granting are key consultants,
advisors, directors or employees of the Company. Any of the Committees or the
Board shall determine the key consultants, advisors, directors and employees to
be granted options hereunder, the number of shares of Common Stock subject to
such options, the exercise prices of options, the terms thereof and any other
provisions not inconsistent with the Plan.
4.2 Guidelines for Participation. In selecting Participants and
determining the numbers of shares of Common Stock for which options are to be
granted, any of the Committees or the Board shall consult with officers and
directors of the Company, and shall take into account the duties of the
respective persons, their present and potential contributions to the success of
the Company, and such other factors as any of the Committees or the Board shall
deem relevant.
4.3 Duration of Plan. All options under the Plan shall be granted
within ten years from the date the Plan is approved by the shareholders of the
Company.
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ARTICLE V
Terms and Conditions of Options
5.1 Individual Stock Option Agreements. All stock options granted
pursuant to the Plan shall be evidenced by stock option agreements ("Stock
Option Agreements"), which need not be identical, between the Company and the
Participant in such form as any of the Committees or the Board shall from time
to time approve, subject to the terms of the Plan.
5.2 Number of Shares. Each Stock Option Agreement shall state the total
number of shares of Common Stock with respect to which the option is granted,
the terms and conditions of the option, and the exercise price or prices
thereof, it being understood that any of the Committees or the Board shall,
subject to the terms of Article VII hereof, have authority to prescribe in any
Stock Option Agreement that the option evidenced thereby may be exercisable in
full or in part, as to any number of shares subject thereto, at any time or from
time to time during said term as any of the Committees or the Board may
determine; provided that no option granted pursuant to the Plan shall be
exercisable after the expiration of ten years from the date such option is
granted. Except as otherwise provided in any Stock Option Agreement, an option
may be exercised at any time or from time to time during the term of the option
as to any or all full (but no fractional) shares which have become purchasable
under such option. Subject to the terms of Article VII hereof, any of the
Committees or the Board shall have the right to accelerate, in whole or in part,
from time to time, conditionally or unconditionally, the right to exercise any
option granted hereunder.
5
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5.3 Option Price. Subject to the terms of Article VII hereof, the price
at which the shares of Common Stock subject to each option granted under this
Plan may be purchased (the "option price" or "exercise price") shall be
determined by any of the Committees or the Board, which shall have the authority
at the time the option is granted to prescribe in any Stock Option Agreement
that the price per share, with the passage of pre-determined periods of time,
shall increase from the original price to higher prices.
5.4 Method of Exercising Option; Full Payment. Subject to the terms of
Article VII hereof and Section 6.1 and Section 6.2 hereof, options granted
pursuant to the Plan may be exercised only if the Participant was, at all times
during the period beginning on the date the option was granted and ending on the
date of such exercise, a key consultant, advisor, director or employee of the
Company. Options shall be exercised by written notice to the Company, addressed
to the Company at its principal place of business. Such notice shall state the
Participant's election to exercise the option and the number of shares of Common
Stock in respect of which it is being exercised, and shall be signed by the
Participant so exercising the option. Such notice shall be accompanied by (a)
the Stock Option Agreement (which, if not exercised for all the shares subject
thereto, shall be appropriately endorsed and returned to the Participant); (b)
payment of the full purchase price of such shares, which payment shall be in
cash, by check or in stock of the Company that has been owned by the Participant
for at least six months, or notes of the Company or, as agreed to by the Board,
other consideration; and such written representations and other documents as may
be desirable, in the opinion of the Company's legal counsel, for purposes of
compliance with state or Federal securities or other laws. In the case of
payment made in stock of the Company, the stock shall be valued at its Fair
6
<PAGE>
Market Value (as hereinafter defined) on the last business day prior to the date
of exercise. The term "Fair Market Value" for the Common Stock on any particular
date shall mean the last reported sale price of the Common Stock on the
principal market on which the Common Stock trades on such date or, if no trades
of Common Stock are made or reported on such date, then on the next preceding
date on which the Common Stock traded. The Company shall deliver a certificate
or certificates representing shares of Common Stock purchased pursuant to such
notice to the purchaser as soon as practicable after receipt of such notice,
subject to Article IX hereof. Any of the Committees or the Board may amend an
already outstanding Stock Option Agreement to add a provision permitted by
clause (b) of this Section 5.4, and no such amendment, by itself, shall be
deemed to constitute the grant of a new option for purposes of this Plan.
5.5 Rights as a Shareholder. No Participant shall have any rights as a
shareholder with respect to shares of Common Stock subject to an option granted
under the Plan until the date of the issuance to such Participant of a stock
certificate in respect of such shares. No adjustment shall be made for dividends
or other rights for which the record date is prior to the date such stock
certificate is issued.
5.6 Other Provisions. Stock Option Agreements entered into pursuant to
the Plan may contain such other provisions (not inconsistent with the Plan) as
any of the Committees or the Board may deem necessary or desirable, including,
but not limited to, covenants on the part of the Participant not to compete, not
to sell Common Stock obtained from the exercise of options for specified periods
of time, and remedies available to the Company in the event of the breach of any
such covenant.
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<PAGE>
ARTICLE VI
Termination; Transferability
6.1 Termination. Except as otherwise provided in connection with the
grant of any option or the termination of any Participant, the right to exercise
any unexercised portion of any option granted under the Plan shall terminate on
the date of termination of the relationship between the Participant and the
Company, for any reason, without regard to cause, other than by reason of death
or disability. The option may not be exercised thereafter, and the shares of
Common Stock subject to the unexercised portion of such option may again be
subject to new options under the Plan. Such restrictions shall not apply to the
options granted pursuant to Article VII which shall be exercisable in accordance
with the terms thereof.
6.2 Death or Disability of Participant. Except as otherwise permitted
in connection with the grant of any option or the death or disability of a
Participant, in the event a Participant dies or is disabled while he is a
consultant, advisor, director or employee of the Company, any options
theretofore granted to him shall be exercisable only within the next 12 months
immediately succeeding such death or disability and then only (a) in the case of
death, by the person or persons to whom the Participants rights under the option
shall pass by will or the laws of descent and distribution, and in the case of
disability, by such Participant or his legal representative, and (b) if and to
the extent that he was entitled to exercise the option at the date of his death
or disability. Such restrictions shall not apply to the options of Participating
Directors which shall be exercisable in accordance with the terms set forth in
Article VII hereof.
6.3 Transferability. Options granted to a Participant under the Plan
shall not be transferable otherwise than by will, by the laws of descent and
distribution, or (if authorized in
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the applicable Stock Option Agreement) pursuant to a qualified domestic
relations order ("QDRO") as defined by the Internal Revenue Code of 1986, as
amended, or Title I of the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder. During the Participant's lifetime, options
shall be exercised only by such Participant, such Participant's guardian or
legal representative, or (if authorized in the applicable Stock Option
Agreement) such Participant's transferee pursuant to a QDRO.
ARTICLE VII
Directors' Grants
7.1 Eligibility. Annually, on February 15 of each of the Company's
Fiscal Years, any Director of the Company who at the time is not a full-time
employee of the Company (a "Participating Director"), shall be granted an option
for 15,000 shares of Common Stock, except that the Chairman who is not a
full-time employee of the Company shall be granted an option for 30,000 shares
of Common Stock. Each person who becomes a Participating Director after the
first day of the Company's fiscal year and within nine months of that date shall
be granted, on the date that person becomes a Participating Director, an option
for a number of shares of Common Stock determined by pro rating the normal
15,000 share annual amount (or 30,000 if the Chairman) based on the period of
time remaining in the fiscal year in which such person becomes a Participating
Director. No person who owns 10% or more of the outstanding Common Stock of the
Company (including shares of Common Stock issuable upon exercise of outstanding
options and warrants), shall be granted options under this Article. Options
under this Article are non-discretionary.
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<PAGE>
7.2 Options Terms. Options granted under this Article VII shall not be
exercisable until the date upon which the option holder has provided one year of
continuous service as a Participating Director following the date of grant of
such option. Options granted pursuant to this Article shall have an exercise
price equal to the Fair Market Value (as hereinafter defined) of the Common
Stock on the date of the grant. The term "Fair Market Value" for the Common
Stock on any particular date shall mean the last reported sale price of the
Common Stock on the principal market on which the Common Stock trades on such
date or, if no trades of Common Stock are made or reported on such date, then on
the next preceding date on which the Common Stock traded. Notwithstanding any
other provisions of this Plan, options granted under this Article shall remain
exercisable for ten years after the date of grant and the option holder (or his
legal representative or that of his estate) may continue to exercise an option
notwithstanding that the holder ceases to be a Participating Director.
7.3 Other Provisions. In all other respects, Options granted under this
Article VII shall be subject to the other provisions of the Plan, including but
not limited to those governing method of exercise, exercise payment, tax
withholding, and transferability. Notwithstanding any other provisions of this
Plan, the provisions of this Article VII may not be amended more than once every
six months, other than to comport with changes in the Code.
ARTICLE VIII
Capital Adjustments
8.1 Capital Adjustments. If any change is made in the shares of Common
Stock subject to the Plan or subject to any option granted under the Plan
(through merger, consolidation,
10
<PAGE>
reorganization, recapitalization, stock dividend, split-up, combination of
shares, exchange of shares, issuance of rights to subscribe, or change in
capital structure), appropriate adjustments shall be made by any of the
Committees or the Board as to the maximum number of shares subject to the Plan
and the number of shares and price per share subject to outstanding options as
shall be equitable to prevent dilution or enlargement of option rights. Any
determination made by any of the Committees or the Board under this Article VIII
shall be final, binding and conclusive upon each Participant.
ARTICLE IX
Legal Requirements, Etc.
9.1 Revenue Stamps. The Company shall be responsible and shall pay for
any transfer, revenue, or documentary stamps with respect to shares issued upon
the exercise of options granted under the Plan.
9.2 Legal Requirements. The Company shall not be required to issue
certificates for shares upon the exercise of any option unless and until, in the
opinion of the Company's legal counsel, such issuance would not result in a
violation of any state or Federal securities or other law. Certificates for
shares, when issued, shall have, if required in the opinion of the Company's
legal counsel, the following legend, or statements of other restrictions,
endorsed thereon, and may not immediately be transferable:
The shares of Common Stock evidenced by this certificate have been
issued to the registered owner in reliance upon written representations
that these shares have been purchased for investment. These shares may
not be sold, transferred, or assigned unless, in the opinion of the
Company and its legal counsel, such sale, transfer, or assignment will
not be in violation of the Securities Act of 1933, as
11
<PAGE>
amended, applicable rules and regulations of the Securities and
Exchange Commission and any applicable state securities laws.
9.3 Private Offering. The options to be granted under the Plan are
available only to a limited number of present and future key consultants,
advisors, directors and employees of the Company who have knowledge of the
Company's financial condition, management, and affairs. Such options are not
intended to provide additional capital for the Company, but are to encourage
stock ownership by the Company's key personnel. By the act of accepting an
option, in the absence of an effective registration statement under the
Securities Act of 1933, as amended, Participants shall agree that upon exercise
of such option, they will acquire the shares of Common Stock that are the
subject thereof for investment and not with any intention at such time to resell
or redistribute the same, and they shall confirm such agreement at the time of
exercise, but the neglect or failure to confirm the same in writing shall not be
a limitation of such agreement.
12
<PAGE>
ARTICLE X
General
10.1 Application of Funds. The proceeds received by the Company from
the sale of shares of Common Stock pursuant to the exercise of options therefor
shall be used for general corporate purposes.
10.2 Right of the Company to Terminate Relationship. Nothing contained
in the Plan or in a Stock Option Agreement shall confer upon any Participant any
right to be continued as a consultant, advisor, director or employee of the
Company, or interfere in any way with the right of the Company to terminate such
relationship for any reason whatsoever, with or without cause, at any time.
10.3 No Obligation to Exercise. The granting of an option hereunder
shall impose no obligation upon the Participant to exercise such option.
10.4 Effectiveness of Plan. The Plan shall become effective upon its
adoption by the Board. Options may be granted under the Plan prior to the
approval of the Plan by the Shareholders, but no such option may be exercised
prior to such approval.
10.5 Other Benefits. Participation in the Plan shall not preclude a
Participant from eligibility in any other stock benefit plan of the Company or
any old age benefit, insurance, pension, profit sharing, retirement, bonus or
other plan which the Company has adopted, or may, at any time, adopt.
10.6 Tax Requirements. The exercise or surrender of any option under
this Plan shall constitute a Participant's full and complete consent to whatever
action any of the Committees or
13
<PAGE>
the Board elect to satisfy the Federal and state withholding requirements, if
any, which the Committee in its discretion deems applicable to such exercise.
10.7 Interpretations and Adjustments. To the extent permitted by Law,
an interpretation of the Plan and a decision on any matter within any of the
Committees' or the Board's discretion made in good faith is binding on all
persons. A misstatement or other mistake of fact shall be corrected when it
becomes known, and the person responsible shall make such adjustment on account
thereof as he considers equitable and practicable.
10.8 Information. The Company shall, upon request or as may be
specifically required hereunder, furnish or cause to be furnished, all of the
information or documentation which is necessary or required by any of the
Committees or the Board to perform its duties and functions under the Plan.
10.9 Governing Law. The Plan and any and all options granted thereunder
shall be governed by, and construed and enforced in accordance with, the laws of
the State of New York from time to time in effect.
10.10 Certain Definitions.
10.10.1 "Parent". The term "parent" shall mean a "parent corporation"
as defined in Section 424(e) of the Code.
10.10.2 "Subsidiary". The term "subsidiary" shall mean a "subsidiary
corporation" as defined in Section 424(f) of the Code.
10.10.3 "Disabled". The term "disabled" shall have the definition set
forth in Section 22(a) (3) of the Code.
14
Exhibit 99.7
IMCLONE SYSTEMS INCORPORATED
1996 INCENTIVE STOCK OPTION PLAN, AS AMENDED(1)
ARTICLE 1
Purpose of Plan
1.1 General Purpose. The purpose of this Incentive Stock Option Plan
(the "Plan") is to promote the interests of ImClone Systems Incorporated, and
any subsidiaries of such company, as from time to time may be formed or acquired
(collectively, the "Company"), by affording key executives and employees an
opportunity to acquire a proprietary interest in the Company pursuant to stock
options issued by the Company, and thus to create in such employees increased
personal interest in its continued success.
1.2 Statutory Stock Option. Options granted under the Plan are intended
to be "incentive stock options" to which Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), applies.
- ----------
(1) This plan was adopted by the Board on February 25, 1996 and approved by the
stockholders on June 3, 1996; it was amended by the Board on April 3, 1997 and
such amendments were ratified by the stockholders on June 3, 1997; it was
amended by the Board on March 29, 1999 and such amendments were approved by the
stockholders on May 24, 1999.
1
<PAGE>
ARTICLE II
Shares Subject to Plan
2.1 Description of Shares. Subject to Article VII hereof, the stock to
which the Plan applies is shares of the Company's common stock, $.001 par value
("Common Stock"), either authorized but unissued or Treasury shares. The number
of shares of Common Stock to be issued or sold pursuant to options granted
hereunder shall not exceed 4,000,000 shares; provided, that such number shall be
reduced by the number of shares which have been sold under, or may be sold
pursuant to options granted from time to time under, the Company's 1996
Non-Qualified Stock Option Plan (the "Non-Qualified Plan"), to the same extent
as if such sales had been made or options had been granted pursuant to this
Plan.
2.2 Restoration of Unpurchased Shares. Any shares subject to an option
granted hereunder or under the Non-Qualified Plan that, for any reason, expires
or is terminated unexercised as to such shares may again be subject to an option
to be granted hereunder.
ARTICLE III
Administration; Committees; Amendments
3.1 Administration.. The Plan shall be administered by any of the
Compensation Committee, the Stock Option Committee (which is a subcommittee of
the Compensation Committee) (collectively, the "Committees") or the Company's
Board of Directors (the "Board"). The Committees shall be comprised of not less
than two persons who shall be appointed by the Board from among the members of
the Board. Members of the Committees shall not be eligible
2
<PAGE>
to become participants under the Plan while they are members of the Committees
or for a period of three months thereafter.
3.2 Duration; Removal; Etc. The members of the Committees shall serve
at the pleasure of the Board, which shall have the power at all times to remove
members from the Committees or to add members thereto. Vacancies in the
Committees, however caused, shall be filled by action of the Board.
3.3 Meetings; Actions of Committees. Each of the Committees and the
Board may select one of its members as its Chairman and shall hold its meetings
at such times and places as it may determine. All decisions or determinations of
each of the Committees and the Board shall be made by the majority vote or
decision of all of its members, whether present at a meeting or not; provided,
however, that any decision or determination reduced to writing and signed by all
of the members shall be as fully effective as if it had been made at a meeting
duly called and held. Each of the Committees and the Board may make such rules
and regulations for the conduct of its business not inconsistent herewith as it
may deem advisable.
3.4 Interpretation. The interpretation and construction by any of the
Committees or the Board of the provisions of the Plan or of the options granted
hereunder shall be final, unless in the case of the Committees otherwise
determined by the Board. No member of the Board or of the Committees shall be
liable for any action taken or determination made in good faith.
3.5 Amendments or Discontinuation. The Board may make such amendments,
changes, and additions to the Plan, or may discontinue and terminate the Plan,
as it may deem advisable from time to time; provided, however, that no action
shall affect or impair any options
3
<PAGE>
theretofore granted under the Plan, and provided, further, however, that the
affirmative vote of the owners of a majority of the outstanding shares of Common
Stock present at a meeting in person or by proxy and entitled to vote at the
meeting shall be necessary to effect any amendment to the Plan which would (a)
increase the number of shares of Common Stock subject to options granted under
the Plan, or (b) authorize the granting of options at a price below the minimum
price established by Section 5.3 hereof.
ARTICLE IV
Participants; Maximum Grant; Duration of Plan
4.1 Eligibility and Participation. Options shall be granted only to
persons ("Participants") who at the time of granting are key executives or key
employees of the Company. Subject to the provisions of Section 4.3 hereof, the
Committees or the Board shall determine the key executives and key employees to
be granted options hereunder, the number of shares of Common Stock subject to
such options, the exercise prices of options, the terms thereof and any other
provisions not inconsistent with the Plan.
4.2 Guidelines for Participation. In selecting Participants and
determining the numbers of shares of Common Stock for which options are to be
granted the Committees or the Board shall consult with officers and directors of
the Company, and shall take into account the duties of the respective employees,
their present and potential contributions to the success of the Company, and
such other factors as any of the Committees or the Board shall deem relevant.
4
<PAGE>
4.3 Maximum Grant. Notwithstanding anything to the contrary in the
Plan, the aggregate fair market value (determined as of the time the option is
granted) of the Common Stock for which any Participant may be granted options in
any calendar year (under all plans, including the Plan, providing for the grant
of incentive stock options of the Company and its parent and subsidiaries) shall
not exceed $100,000.
4.4 Duration of Plan. All options under the Plan shall be granted
within ten years from the date the Plan is adopted, or the date the Plan is
approved by the shareholders of the Company, whichever is earlier.
ARTICLE V
Terms and Conditions of Options
5.1 Individual Stock Option Agreements. All stock options granted
pursuant to the Plan shall be evidenced by stock option agreements ("Stock
Option Agreements"), which need not be identical, between the Company and the
Participant in such form as any of the Committees or the Board shall from time
to time approve, subject to the terms of the Plan.
5.2 Number of Shares. Each Stock Option Agreement shall state the total
number of shares of Common Stock with respect to which the option is granted,
the terms and conditions of the option, and the exercise price or prices
thereof, it being understood that any of the Committees or the Board shall have
authority to prescribe in any Stock Option Agreement that the option evidenced
thereby may be exercisable in full or in part, as to any number of shares
subject thereto, at any time or from time to time during the term of the option,
or in such
5
<PAGE>
installments at such times during said term as any of the Committees or the
Board may determine; provided that no option granted pursuant to the Plan shall
be exercisable after the expiration of ten years from the date such option is
granted. A previously granted incentive stock option shall be treated as
outstanding until it is exercised in full or expires by reason of the lapse of
time. Except as otherwise provided in any Stock Option Agreement, an option may
be exercised at any time or from time to time during the term of the option as
to any or all full (but no fractional) shares which have become purchasable
under such option. Any of the Committees or the Board shall have the right to
accelerate, in whole or in part, from time to time, conditionally or
unconditionally, the right to exercise any option granted hereunder.
5.3 Option Price. The price at which the shares of Common Stock subject
to each option granted under this Plan may be purchased (the "option price" or
"exercise price") shall be determined by any of the Committees or the Board,
which shall have authority at the time the option is granted to prescribe in any
Stock Option Agreement that the price per share, with the passage of
pre-determined periods of time, shall increase from the original price to higher
prices, but in no case shall the original exercise price of any option be less
than 100% of the fair market value of such shares on the date the option is
granted, as determined by any of the Committees or the Board in accordance with
applicable Treasury Regulations. Notwithstanding anything contained to the
contrary herein, no option shall be granted to any employee who, at the time the
option is granted, owns more than 10% of the total combined voting power of all
classes of stock of the Company or of its parent or subsidiary unless, at the
time option is granted, the exercise price of the option is at least 110% of the
fair market value of the shares of Common Stock
6
<PAGE>
subject to the option and such option by its terms is not exercisable after the
expiration of five years from the date such option is granted. For purposes of
determining the ownership of stock of the Company, the rules of Section 424(d)
of the Code shall be applied.
5.4 Method of Exercising Option; Full Payment. Subject to Section 6.1
and 6.2 hereof, options granted pursuant to the Plan may be exercised only if
the Participant was, at all times during the period beginning on the date the
option was granted and ending on the date of such exercise, an employee of the
Company, a parent or subsidiary of the Company, or a corporation or a parent or
subsidiary of such corporation issuing or assuming a stock option in respect of
such option in a transaction to which Section 424(a) of the Code applies.
Options shall be exercised by written notice to the Company, addressed to the
Company at its principal place of business. Such notice shall state the
Participant's election to exercise the option and the number of shares of Common
Stock in respect of which it is being exercised, and shall be signed by the
Participant so exercising the option. Such notice shall be accompanied by (a)
the Stock Option Agreement (which, if not exercised for all the shares thereto,
shall be appropriately endorsed and returned to the Participant; (b) payment of
the full purchase price of such shares, which payment shall be in cash, by check
or in stock of the Company that has been owned by the participant for at least
six months, or notes of the Company or, as agreed to by the Board, other
consideration; and (c) such written representations and other documents as may
be desirable, in the opinion of the Company's legal counsel, for purposes of
compliance with state or Federal securities or other laws. In the case of
payment made in stock of the Company, the stock shall be valued at its Fair
Market Value (as hereinafter defined) on the last business day prior to the date
7
<PAGE>
of exercise. The term "Fair Market Value" for the Common Stock on any particular
date shall mean the last reported sale price of the Common Stock on the
principal market on which the Common Stock trades on such date or, if no trades
of Common Stock are made or reported on such date, then on the next preceding
date on which the Common Stock traded. The Company shall deliver a certificate
or certificates representing shares of Common Stock purchased pursuant to such
notice to the purchaser as soon as practicable after receipt of such notice,
subject to Article VIII hereof. Any of the Committees or the Board may amend an
already outstanding Stock Option Agreement to add a provision permitted by
clause (b) of this Section 5.4, and no such amendment, by itself, shall be
deemed to constitute the grant of a new option for purposes of this Plan;
provided that this sentence shall not be determinative of whether any such
amendment constitutes a new grant for purposes of qualification as an Incentive
Stock Option.
5.5 Rights as a Shareholder. No Participant shall have any rights as a
shareholder with respect to shares of Common Stock subject to an option granted
under the Plan until the date of the issuance to such Participant of stock
certificates in respect of such shares. No adjustment shall be made for
dividends or other rights for which the record date is prior to the date such
stock certificate is issued.
5.6 Other Provisions. Stock Option Agreements entered into pursuant to
the Plan may contain such other provisions (not inconsistent with the Plan) as
any of the Committees or the Board may deem necessary or desirable, including,
but not limited to, covenants on the part of the Participant not to compete, not
to sell Common Stock obtained from the exercise of
8
<PAGE>
options for specified periods of time, and remedies available to the Company in
the event of the breach of any such covenant.
ARTICLE VI
Termination of Employment; Transferability
6.1 Termination of Employment. Except as otherwise provided in
connection with the grant of any option or the termination of any Participant,
the right to exercise any unexercised portion of any option granted under the
Plan shall terminate immediately upon termination of the employment relationship
between the Participant and the Company (or its parent or subsidiary, as the
case may be), for any reason, without regard to cause, other than by reason that
the Participant dies or becomes disabled (as defined in the Code). The option
may not be exercised thereafter, and the shares of Common Stock subject to the
unexercised portion of such option may again be subject to new options under the
Plan.
6.2 Death or Disability of Participant. Except as otherwise permitted
in connection with the grant of any option or the death or disability of a
Participant, in the event a Participant dies or is disabled while in the employ
of the Company or of a parent or subsidiary of the Company, any options
theretofore granted to him shall be exercisable only within the next 12 months
immediately succeeding such death or disability and then only in the case of
death (a) by the person or persons to whom the Participant's rights under the
option shall pass by will or the laws of descent and distribution, and, in the
case of disability, by such Participant or his legal
9
<PAGE>
representative, and (b) if and to the extent that he was entitled to exercise
the option at the date of his death.
6.3 Transferability. Options granted to a Participant under the Plan
shall not be transferable otherwise than by will, by the laws of descent and
distribution, or (if authorized in the applicable Stock Option Agreement)
pursuant to a qualified domestic relations order ("QDRO") as defined by the
Internal Revenue Code of 1986, as amended, or Title I of the Employee Retirement
Income Security Act of 1974, as amended, or the rules thereunder. During the
Participant's lifetime, options shall be exercised only by such Participant,
such Participant's guardian or legal representative, or (if authorized in the
applicable Stock Option Agreement) such Participant's transferee pursuant to a
QDRO.
ARTICLE VII
Capital Adjustments
7.1 Capital Adjustments. If any change is made in the shares of Common
Stock subject to the Plan or subject to any option granted under the Plan
(through merger, consolidation, reorganization, recapitalization, stock
dividend, split-up, combination of shares, exchange of shares, issuance of
rights to subscribe, or change in capital structure), appropriate adjustments
shall be made by any of the Committees or the Board as to the maximum number of
shares subject to the Plan and the number of shares and price per share subject
to outstanding options as shall be equitable to prevent dilution or enlargement
of option rights; provided, however, that any such adjustment shall comply with
the rules of Section 424(a) of the Code and provided further
10
<PAGE>
that in no event shall any adjustment be made that would cause any option
granted hereunder to be considered other than an incentive stock option. Any
determination made by any of the Committees or the Board under this Article VII
shall be final, binding and conclusive upon each Participant.
ARTICLE VIII
Legal Requirements, Etc.
8.1 Revenue Stamps. The Company shall be responsible and shall pay for
any transfer, revenue, or documentary stamps with respect to shares issued upon
the exercise of options granted under the Plan.
8.2 Legal Requirements. The Company shall not be required to issue
certificates for shares upon the exercise of any option unless and until, in the
opinion of the Company's legal counsel, such issuance would not result in a
violation of any state or Federal securities or other law. Certificates for
shares, when issued, shall have, if required in the opinion of the Company's
legal counsel, the following legend, or statements of other restrictions,
endorsed thereon, and may not be immediately transferable:
The shares of Common Stock evidenced by this certificate have been
issued to the registered owner in reliance upon written representations
that these shares have been purchased for investment. These shares may
not be sold, transferred, or assigned unless, in the opinion of the
Company and its legal counsel, such sales, transfer, or assignment will
not be in violation of the Securities Act of 1933, as amended,
applicable rules and regulations of the Securities and Exchange
Commission and any applicable state Securities laws.
11
<PAGE>
8.3 Private Offering. The options to be granted under the Plan are
available only to a limited number of present and future key executives and
employees of the Company and its subsidiaries who have knowledge of the
Company's financial condition, management, and affairs. Such options are not
intended to provide additional capital for the Company but are to encourage
stock ownership by the Company's key personnel. By the act of accepting an
option, in the absence of an effective registration statement under the
Securities Act of 1933, as amended, Participants shall agree that upon exercise
of such option, they will acquire the shares of Common Stock that are the
subject thereof for investment and not with any intention at such time to resell
or redistribute the same, and they shall confirm such agreement at the time of
exercise, but the neglect or failure to confirm the same in writing shall not be
a limitation of such agreement.
ARTICLE IX
General
9.1 Application of Funds. The proceeds received by the Company from the
sale of shares of Common Stock pursuant to the exercise of options therefor
shall be used for general corporate purposes.
9.2 Right of the Company to Terminate Employment. Nothing contained in
the Plan or in a Stock Option Agreement shall confer upon any Participant any
right to be continued in the employ of the Company or of any subsidiary of the
Company, or interfere in any way with the
12
<PAGE>
right of the Company, or such subsidiary, to terminate his employment for any
reason whatsoever, with or without cause, at any time.
9.3 No Obligation to Exercise. The granting of an option hereunder
shall impose no obligation upon the Participant to exercise such option.
9.4 Effectiveness of Plan. The Plan shall become effective upon its
adoption by the shareholders of the Company. Options may be granted under the
Plan prior to the approval of the Plan by the Shareholders, but no such option
may be exercised prior to such approval.
9.5 Other Benefits. Participation in the Plan shall not preclude a
Participant from eligibility in any other stock benefit plan of the Company or
any old age benefit, insurance, pension, profit sharing, retirement, bonus or
other plan which the Company has adopted, or may, at any time, adopt for the
benefit of its parents' or its subsidiaries' executives and/or employees.
9.6 Company Records. Records of the Company as to a Participant's
period of employment, termination of employment and the reason therefor, leaves
of absence, re-employment, and other matters will be conclusive for all purposes
hereunder.
9.7 Tax Requirement. The exercise or surrender of any option under this
Plan shall constitute a Participant's full and complete consent to whatever
action the Committee elects to satisfy the Federal and state withholding
requirements, if any, which the Committee in its discretion deems applicable to
such exercise.
9.8 Interpretations and Adjustments. To the extent permitted by law, an
interpretation of the Plan and a decision on any matter within any of the
Committees' or Board's discretion made in good faith is binding on all persons.
A misstatement or other mistake of fact shall be
13
<PAGE>
corrected when it becomes known, and the person responsible shall make such
adjustment on account thereof as he considers equitable and practicable.
9.9 Information. The Company shall, upon request or as may be
specifically required hereunder, furnish or cause to be furnished, all of the
information or documentation which is necessary or required by any of the
Committees or the Board to perform its duties and functions under the Plan.
9.10 Notice of Disqualifying Disposition. If a Participant sells or
otherwise disposes of any share of Common Stock transferred to him pursuant to
the exercise of an option granted hereunder within two years from the date of
the granting of the option or within one year of the transfer of such shares to
him (i.e., a "disqualifying disposition"), the Participant, within ten days
thereafter, shall furnish to any of the Committees or the Board at the principal
offices of the Company, written notice of such sale or other disposition.
9.11 Governing Law. The Plan and any and all options granted thereunder
shall be governed by, and construed and enforced in accordance with, the laws of
the State of New York from time to time in effect.
9.12 Certain Definitions.
9.12.1 "Parent". The term "parent" shall mean a "parent
corporation" as defined in Section 424(e) of the Code.
9.12.2 "Subsidiary". The term "subsidiary" shall mean a
"subsidiary corporation" as defined in Section 424(f) of the Code.
14
<PAGE>
9.12.3 "Incentive Stock Option". The term "incentive stock
option" shall mean an option described in Section 422(b) of the code.
9.12.4 "Disabled." The term "disabled" shall have the
definition set forth in Section 22(a)(3) of the Code.
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,672
<SECURITIES> 38,006
<RECEIVABLES> 0
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<INVENTORY> 0
<CURRENT-ASSETS> 42,490
<PP&E> 26,836
<DEPRECIATION> (13,742)
<TOTAL-ASSETS> 58,098
<CURRENT-LIABILITIES> 21,176
<BONDS> 2,200
0
400
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<SALES> 0
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<TOTAL-COSTS> 8,826
<OTHER-EXPENSES> (564)
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