UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 2 TO FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended June 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-15609
AGOURON PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
California 33-0061928
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10350 North Torrey Pines Road, La Jolla, California 92037-1020
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (619) 622-3000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, without par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
On July 28, 1998, the aggregate market value of the common stock held by
nonaffiliates totaled approximately $724,738,000 based on the closing stock
price as reported by The Nasdaq Stock Market.
On July 28, 1998, there were approximately 31,097,000 shares of common
stock, without par value, of the registrant issued and outstanding.
This Amendment No. 2 to the Annual Report on Form 10-K for Agouron
Pharmaceuticals, Inc. (the "Company") for the fiscal year ended June 30, 1998 is
being filed to amend Items 7, 10, 11, 12, 13 and 14 (exhibits 10.22, 10.23 and
10.24).
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PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
This discussion contains forward-looking statements. Such statements are
subject to certain risks and uncertainties which could cause actual results to
differ materially from those projected. See "Important Factors Regarding
Forward-Looking Statements" attached as Exhibit 99 to this Form 10-K. Readers
are cautioned not to place undue reliance on these forward-looking statements
which speak only as of the date hereof. The Company undertakes no obligation to
publicly release the result of any revisions to these forward-looking statements
which may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
The Company is committed to the discovery, development, manufacturing and
marketing of human pharmaceuticals targeting cancer, AIDS, and other serious
diseases. Operations to date have been principally funded from the Company's
equity-derived working capital, various collaborative arrangements and, most
recently, from the gross margin contribution of its first product, VIRACEPT(R)
(nelfinavir mesylate). The net income reported in fiscal 1998 is principally due
to the commercialization of VIRACEPT while the Company's prior net operating
losses reflect primarily the result of its independent research and substantial
investment in the clinical and commercial development of VIRACEPT and certain
anti-cancer compounds.
In March 1997, the Company received clearance from the United States Food
and Drug Administration ("FDA") to market VIRACEPT in the United States. For the
fiscal year ended June 30, 1998, due principally to the increasing product
contribution from VIRACEPT sales, license fees and royalties, the Company
realized a net income of $13,154,000.
RESULTS OF OPERATIONS
PRODUCT SALES
Product sales for the fiscal years ended June 30, 1997 and 1998 were
approximately $57,000,000 and $409,300,000 which included sales in the United
States of $55,559,000 and $358,321,000, respectively. The Company anticipates
that VIRACEPT sales in the United States will approximate $430,000,000 to
$440,000,000 for fiscal 1999.
CONTRACT REVENUES
Collaborative research and development agreements with Japan Tobacco Inc.
("JT"), Hoffmann-La Roche Inc. and F. Hoffmann-La Roche Ltd (collectively "HLR")
accounted for substantially all of the Company's contract revenues for 1998,
1997 and 1996. Total contract
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revenues for 1998 decreased approximately 40% from 1997 due principally to
decreased VIRACEPT program spending by Agouron, which was partially funded by
JT. Additionally, the amortization to revenue over a 24 month period of JT's
$24,000,000 milestone payment, which was received in August 1995, was completed
in June 1997. The increase in contract revenues from 1996 to 1997 of
approximately 59% was due principally to increased program activity and spending
on the JT collaborations.
In December 1997, the Company agreed to end its collaboration with HLR in
the field of cancer. As a result of the termination agreement, Agouron has
regained all rights to its anti-cancer drugs previously within the scope of the
HLR collaboration.
The Company anticipates that contract revenues for fiscal 1999 will
approximate $35,000,000 to $40,000,000.
LICENSE FEES AND ROYALTIES
The Company's license fees and royalties for 1998 and 1997 were principally
derived from F. Hoffmann-La Roche Ltd ("Roche"); license fees in 1996 were
earned from HLR. Total revenues for 1998 increased approximately 83% from 1997
due to European marketing approval for VIRACEPT. The 33% decrease from 1996 to
1997 is principally due to $9,000,000 for initial European marketing rights for
VIRACEPT in 1997 versus $15,000,000 for initial world-wide development rights
for two anti-cancer drugs in 1996.
In January and March 1998, VIRACEPT was approved for marketing in Europe
and Japan, respectively. Upon such approvals, the Company realized as revenue
license fees totaling $12,000,000. In July 1997, the Company and JT granted
Roche certain exclusive rights to VIRACEPT in several Asian countries. For such
rights, the Company received a license fee of $2,000,000.
Royalty revenues of approximately $3,852,000 have been recognized in 1998
based on estimated and actual Roche sales of VIRACEPT in its licensed territory.
The Company anticipates that license fees and royalties for fiscal 1999 will
range from $30,000,000 to $35,000,000.
COST OF PRODUCT SALES
The aggregate cost of product sales as a percentage of product sales was
approximately 43% and 42% for 1997 and 1998, respectively. Gross margins on
United States commercial sales were approximately 57% and 65% during 1997 and
1998, respectively. The Company anticipates that gross margins on United States
commercial sales will improve as product sales volumes increase and certain
manufacturing process and scale efficiencies are realized, and will approximate
71% in 1999. Aggregate gross margins will also be impacted by the size of the
Company's patient assistance program (which provides free goods to indigent
individuals), the Company's manufacturing supply arrangement with Roche (whereby
Roche has the right to either purchase product at Agouron's cost plus
contractually determined mark-ups or manufacture drug product for its own use,
subject to contractually determined fees to be paid to Agouron) and the level of
sales subject to Medicaid and other discounts or rebates in the United States.
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RESEARCH AND DEVELOPMENT
Research and development ("R&D") spending increased by approximately 39%
from 1997 to 1998 due to license fees for three development stage HIV products,
increasing average R&D staff levels (approximately 28%) and staff-related
spending (including occupancy and the addition of Alanex since late 1997) and
increased expenditures for human clinical trial activities associated with the
clinical development of certain of the Company's anti-cancer compounds. R&D
spending increased by approximately 52% from 1996 to 1997 due generally to
increasing average R&D staff levels (approximately 39%) and staff-related
expenditures (including occupancy), increased expenditures in support of human
clinical trials, an expanded access program associated with VIRACEPT and
increased expenditures for clinical trial activities associated with AG3340 and
other anti-cancer compounds. The Company anticipates that total R&D expenses in
fiscal 1999, excluding the impact of any license fees or milestone expenses in
either 1998 or 1999, will exceed fiscal 1998 expenses by approximately 40%.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative ("SG&A") expenses represented
approximately 28% of total operating expenses (excluding the cost of product
sales, royalties and write-off of in-process technology purchased) in 1998, 23%
in 1997 and 10% in 1996. SG&A increased by approximately 76% from 1997 to 1998
due principally to a full year of expenses associated with the sales force and
other marketing personnel. Spending increases from 1996 to 1997 were due chiefly
to increasing staff levels (approximately 214%) and staff-related expenditures,
certain premarketing and advertising and promotion costs associated with the
launch of VIRACEPT in March 1997 and other costs associated with a growing sales
and marketing infrastructure. The Company anticipates that total SG&A expenses
will increase by approximately 40% in fiscal 1999 due to increasing sales and
marketing activities and the support of VIRACEPT phase IV marketing studies.
ROYALTIES
The Company's obligation to share VIRACEPT profits with JT is reflected in
royalty expense for 1998 and represents approximately 19% of United States
product sales. Royalties in fiscal 1997 were not significant. It is anticipated
that royalty expense for fiscal 1999 will approximate 24% to 25% of United
States product sales.
WRITE-OFF OF IN-PROCESS TECHNOLOGY PURCHASED
In fiscal 1997, the Company acquired Alanex Corporation ("Alanex"), a
research company engaged in the discovery of drug leads through the high-speed
screening of diverse chemical libraries designed by computational methods and
generated by combinatorial chemistry. Alanex was acquired in a purchase
transaction through the issuance of approximately 2,000,000 shares of Agouron
common stock valued at approximately $61,000,000. Transaction costs were
approximately $1,300,000. In fiscal 1997, the Company recorded a write-off of
$57,500,000 (or 92% of the purchase price, including transaction costs),
representing the values determined by management to be attributable to the
in-process technology purchased. Of the amount written off, approximately 95%
was attributed to and supported by a discounted cash flow analysis of
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three drug discovery programs which anticipated revenues beginning in 2003.
Approximately 40% of the value was attributed to a compound with obesity and
cardiovascular indications, 30% for compounds with depression and anxiety
indications and 25% for a program to treat endometriosis and sex-hormone
dependent tumors. The Company believes that the values and allocations
attributable to these programs are reasonable and appropriate based on the
commercial potential of these three drug discovery programs. Further, the
Company believes that there is no persuasive evidence that the aggregate value
attributed to the three programs has been diminished since the acquisition. The
Company recorded $4,800,000 of the purchase price as an asset, attributed to
Alanex's technology and chemical compound library, which is being amortized over
the expected benefit periods. At June 30, 1998, the asset balance was
approximately $3,500,000.
INTEREST AND OTHER INCOME
Interest income increased by 1% from 1997 to 1998. Interest income
increased by approximately 23% from 1996 to 1997 due principally to a higher
average investment portfolio balance resulting from the July 1996 public
offering, receipt of $15,000,000 and $9,000,000, respectively, in license fees
from HLR (June 1996) and Roche (January 1997), significantly increased contract
funding from JT and HLR and the exercise of employee stock options. The Company
anticipates that, absent additional revenue sources or a significant change in
interest rates, fiscal 1999 interest income will be less than that of fiscal
1998.
INTEREST EXPENSE
Interest expense increased in 1998 from 1997 due to borrowings under a line
of credit which was used to partially fund quarterly royalties paid to JT
throughout the year. Interest expense decreased in 1997 from 1996 by
approximately 38% due to a decreasing level of debt and capital lease
obligations from year to year.
INCOME TAX PROVISION (BENEFIT)
The income tax provision in 1998 has been computed using an effective,
combined federal and state rate of 40%. The cash obligation of such 1998
provision has been mostly offset by the utilization of its deferred tax assets.
Based on its 1998 pre-tax profit and its estimates for future taxable income,
the Company believes it is more likely than not that its deferred tax assets
(comprised mostly of net operating loss carryforwards, deductions generated by
the exercise of stock options, and research credits) will be realized and has,
therefore, recorded the full tax benefit of its deferred tax assets. The
Company's accumulated net deferred tax assets totaled approximately $55,900,000
and $64,100,000 at June 30, 1997 and 1998. The Company anticipates that its
effective income tax rate for fiscal 1999 will range from 10% to 15%. Such
decrease from fiscal 1998 is attributed to greater expected availability of R&D
tax credits due to the anticipated increase in R&D spending and the anticipated
reduction in R&D contract revenues.
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YEAR 2000
The Year 2000 issue results from computer programs and systems that were
created to accept only two digit dates. Such systems may not be able to
distinguish 20th century dates from 21st century dates. This could result in
miscalculations and system failures. The Company has established a Year 2000
project team that is currently reviewing computer systems and computer
controlled equipment that could be affected by this issue. In this process, the
Company expects to both replace and upgrade certain systems and equipment.
Additionally, the Company is in the process of contacting all of its significant
external business partners to determine the extent to which the Company is
vulnerable to their failure to obtain Year 2000 compliance. While the total cost
of obtaining Year 2000 compliance is not known at this time, the Company
believes such cost will not have a material effect on the Company's business,
financial position, or results of operation. However, even though the Company
plans to have obtained Year 2000 compliance prior to the year 2000, the
inability of the Company or its business partners to adequately address year
2000 issues could have a significant impact on the Company's business.
LIQUIDITY AND CAPITAL RESOURCES
Prior to fiscal 1998, the Company relied principally on equity financings
and corporate collaborations to fund its operations and capital expenditures. In
fiscal 1998, due primarily to the successful commercialization of VIRACEPT,
operating activities have provided $827,000 of cash compared with using
$73,467,000 in fiscal 1997. Commercial sales of VIRACEPT for 1997 and 1998
resulted in gross margins of approximately $32,370,000 and $236,654,000.
At June 30, 1998, the Company had net working capital of approximately
$127,728,000, an increase of $11,942,000 over June 30, 1997 levels due
principally to the Company's pre-tax profit of $21,924,000. Individual working
capital components significantly impacted by the commercialization of VIRACEPT
include trade accounts receivable (an increase of $18,416,000), inventories (an
increase of $44,906,000), accounts payable (an increase of $15,560,000) and
accrued liabilities (an increase of $26,467,000, primarily due to accrued
royalties payable to JT). It is anticipated that these working capital
components and cash and short-term investments will continue to be significantly
impacted as VIRACEPT sales increase. At June 30, 1998, the Company had cash,
cash equivalents and short-term investments of approximately $87,123,000. The
Company believes that its current capital resources, existing contractual
commitments and anticipated VIRACEPT product sales contribution are sufficient
to maintain its current operations through fiscal 1999. This belief is based on
current research and clinical development plans, anticipated working capital
requirements associated with the expanding commercialization of VIRACEPT, the
current regulatory environment, historical industry experience in the
development of therapeutic drugs and general economic conditions.
The Company believes that additional financing may be required to meet the
planned operating needs after fiscal 1999 if significant and increasing positive
cash flows are not generated from commercial activities. Such needs would
include the expenditure of substantial funds to continue and expand research and
development activities, conduct existing and planned preclinical studies and
human clinical trials and to support the increasing working capital requirements
of a growing commercial infrastructure including manufacturing, sales and
marketing capabilities. As a result, the Company anticipates pursuing various
financing alternatives such as collaborative arrangements and additional public
offerings or private
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placements of securities. If such alternatives are not available, the Company
may be required to defer or restrict certain commercial activities, delay or
eliminate expenditures for certain of its potential products under development,
cancel licenses from third parties or to license third parties to commercialize
products or technologies that the Company would otherwise seek to develop or
commercialize itself.
During fiscal 1998, capital expenditures totaled $33,086,000 compared with
$14,727,000 and $3,710,000 during 1997 and 1996, of which $1,579,000, $2,355,000
and $457,000 were financed through capital lease obligations. Of the total
capital expenditures during 1998, 1997 and 1996, approximately $14,331,000,
$4,728,000 and $318,000 represented leasehold improvement costs associated with
certain of the Company's facilities. With the exception of the leasehold
improvement costs, virtually all of the capital expenditures during 1998, 1997
and 1996 represented laboratory and office equipment and scientific
instrumentation necessary to support an expanding research, development, and
commercial infrastructure. Capital expenditures during 1999 are expected to be
approximately $18,000,000 to support continued product commercialization,
development and research activities. Of the total expected capital expenditures
during 1999, approximately $4,000,000 is associated with the leasehold
improvement of existing and anticipated new administrative and laboratory
facilities. The Company may utilize lease or debt financing for certain
expenditures if available on acceptable terms.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Peter Johnson 53 President, Chief Executive Officer and Director
Marvin R. Brown, M.D. 51 Vice President, and President of Alanex
Neil J. Clendeninn, M.D., Ph.D. 49 Corporate Vice President, Head of Clinical Affairs
Steven S. Cowell 49 Corporate Vice President, Finance and Chief
Financial Officer
William C. Denby 43 Vice President, Head of Marketing and Sales
Gary E. Friedman 51 Corporate Vice President, General Counsel,
Secretary and Director
Donna C. Nichols 41 Vice President, Head of Corporate Communications
Barry D. Quart, Pharm.D. 41 Senior Vice President, Head of Drug Development
R. Kent Snyder 44 Senior Vice President, Head of Commercial Affairs
Michael D. Varney, Ph.D. 40 Vice President, Head of Research
Stephanie Webber, Ph.D. 50 Vice President, Head of Development Pharmacology
Glenn R. Zinser 56 Corporate Vice President, Head of Operations
John N. Abelson, Ph.D.(1) 59 Director
Patricia M. Cloherty(2) 56 Director
A.E. Cohen(1) 62 Director
Michael E. Herman(1) 57 Director
Irving S. Johnson, Ph.D. 73 Director
Antonie T. Knoppers, M.D.(2) 83 Director
Melvin I. Simon, Ph.D.(2) 61 Director
</TABLE>
- ------------------------------
(1) Member of Directors Compensation Committee
(2) Member of Audit Committee
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PETER JOHNSON, a founder of the Company, has served as a director and as
president and chief executive officer of the Company since its inception in
1984. Through 1989, Mr. Johnson held various positions with The Agouron
Institute, including executive director. Mr. Johnson received a M.A. from the
University of California, San Diego.
MARVIN R. BROWN joined the Company in 1997 as vice president, and president
of Alanex. In 1991, Dr. Brown founded Alanex and, from 1993 until joining the
Company, served as president, chief executive officer and chairman of the board
of Alanex. Prior to joining Alanex, Dr. Brown served as professor of medicine
and surgery and director of the peptide biology laboratory at the University of
California, San Diego from 1986 through 1991 and was on the faculty of the Salk
Institute for Biological Studies from 1975 to 1986. Dr. Brown received his M.D.
from the University of Arizona.
NEIL J. CLENDENINN joined the Company in 1993 as vice president, clinical
affairs. In 1997, Dr. Clendeninn was promoted to corporate vice president, head
of clinical affairs. From 1985 until joining the Company, Dr. Clendeninn held
various positions with Burroughs Wellcome Co., including head of the
chemotherapy section from 1988. From 1981 through 1985, Dr. Clendeninn worked
with the clinical oncology and clinical pharmacology groups at the National
Institutes of Health. Dr. Clendeninn received a M.D. and a Ph.D. in pharmacology
from New York University.
STEVEN S. COWELL joined the Company in 1991 as vice president, finance and
chief financial officer. In 1997, Mr. Cowell was promoted to corporate vice
president. From 1982 until joining the Company, Mr. Cowell held various
positions, the most recent of which was vice president and controller at Cetus
Corporation, a public biotechnology company primarily engaged in the
development, manufacture and marketing of pharmaceutical products. Mr. Cowell is
a Certified Public Accountant in California and received a B.S. in business
administration from the University of California, Berkeley.
WILLIAM C. DENBY joined the Company in 1995 and in 1997 was named vice
president, head of marketing and sales. Previously, Mr. Denby served as senior
director of marketing and sales. From 1978 until joining the Company, Mr. Denby
held various positions at Marion Laboratories, Inc. (now Hoechst Marion
Roussel), including strategic planning manager and managed care marketing
manager. Mr. Denby received a B.A. in English from the State University of New
York, and holds a M.B.A. in Finance from Rockhurst College.
DONNA C. NICHOLS joined the Company in 1987 and in 1997 was named vice
president, head of corporate communications. Previously, Ms. Nichols held
various positions within the Company, most recently as senior director,
corporate communications. Ms. Nichols attended Kent State University.
GARY E. FRIEDMAN, a founder of the Company, has served as a director since
its inception, as the secretary of the Company since 1986 and as vice president
and general counsel since 1991. In 1997, Mr. Friedman was promoted to corporate
vice president. Previously, from 1982 until joining the Company, Mr. Friedman
was a principal of the law firm of Friedman, Jay & Cramer, a Professional
Corporation. Mr. Friedman is a California Certified Specialist in Taxation. Mr.
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Friedman received a J.D. and a M.B.A. from the University of California,
Berkeley and a L.L.M. in taxation from the University of San Diego.
BARRY D. QUART joined the Company in 1993 as vice president, regulatory
affairs. In 1997, Mr. Quart was named to senior vice president, head of drug
development. From 1983 until joining the Company, Dr. Quart held various
positions with Bristol-Myers Squibb Company, including executive director of
international regulatory affairs from 1992. Dr. Quart received a Pharm.D. in
clinical pharmacy from the University of California, San Francisco.
R. KENT SNYDER joined the Company in 1991 as vice president, business
development. In 1995, Mr. Snyder's title was changed to vice president,
commercial affairs and in 1997, he was named senior vice president, corporate
affairs. From 1982 until joining the Company, Mr. Snyder held various positions
with Marion Laboratories, Inc. (now Hoechst Marion Roussel), including director
of U.S./European licensing. Prior to his employment at Marion, from 1978 to
1982, he held various sales and marketing positions with Hoffmann-LaRoche Ltd.
Mr. Snyder received a M.B.A. from Rockhurst College.
MICHAEL D. VARNEY joined the Company in 1987 and in 1997 was promoted to
vice president, head of research. A synthetic organic chemist, Dr. Varney has
been involved in all aspects of drug discovery at the Company since its
inception. Dr. Varney received his B.S. in Chemistry from UCLA and Ph.D. in
Natural Product Synthesis from the California Institute of Technology. Before
joining the Company, he completed postdoctoral research in Bioorganic Chemistry
at Columbia University.
STEPHANIE WEBBER joined the Company in 1988 and in 1997 was promoted to
vice president, head of development pharmacology. Previously, Dr. Webber served
as senior director, pharmacology and toxicology. From 1980 to 1988, Dr. Webber
was a research fellow at the Scripps Clinic and Research Foundation. She
received her B.S. in Biology from the University of Sussex, England, and holds a
Ph.D. in Zoology from the University of London.
GLENN R. ZINSER joined the Company in 1987 and, since 1995, has served as
vice president, operations. In 1997, Mr. Zinser was promoted to corporate vice
president, head of operations. Previously, from 1987 through 1995, Mr. Zinser
held various management positions with the Company, including senior director,
operations from 1993 through 1995. Mr. Zinser received a M.B.A. from the
University of California, Los Angeles.
JOHN N. ABELSON, a founder of the Company, has served as a director since
its inception. Dr. Abelson, a molecular biologist, is a member of the National
Academy of Sciences. Since 1982, Dr. Abelson has been a member of the faculty of
the Division of Biology at the California Institute of Technology where, from
1989 until 1995, he served as chairman. Previously, Dr. Abelson was a member of
the faculty in the Department of Chemistry at the University of California, San
Diego. Dr. Abelson received a Ph.D. in biophysics from The Johns Hopkins
University and was a postdoctoral fellow at the Laboratory of Molecular Biology
in Cambridge, England. Dr. Abelson also serves as a director of The Agouron
Institute.
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PATRICIA M. CLOHERTY joined the Board in 1988. Since 1970, Ms. Cloherty has
been associated with Patricof & Co. Ventures, Inc. (formerly Alan Patricof
Associates, Inc.), a New York venture capital firm ("Patricof"), and has been a
general partner of its funds since 1973. From1993 until 1997, she was president
of Patricof. From 1997 to the present, Ms. Cloherty has been executive
co-chairman as well as general partner of Patricof. Ms. Cloherty also served as
deputy administrator for the U.S. Small Business Administration in 1977 and
1978. Ms. Cloherty also serves on the board of directors of several private
companies.
A.E. COHEN joined the Board in 1992. Mr. Cohen is an independent management
consultant. From 1957 until his retirement in 1992, Mr. Cohen held various
positions at Merck & Co., Inc., including senior vice president and president of
the Merck Sharp & Dohme International Division. Currently, Mr. Cohen is the
chairman of the board of Neurobiological Technologies, Inc. and is a member of
the board of directors of Akzo Nobel N.v., Teva Pharmaceutical Industries Ltd.,
Smith Barney (Mutual Funds), and Pharmaceutical Product Development, Inc., all
of which are public companies. Mr. Cohen also serves as a consultant to The
Population Council and Chugai Pharmaceutical Co. Ltd., Tokyo ("Chugai"), and
serves as chairman of the board of Chugai's U.S. subsidiary companies. Mr. Cohen
also is a member of the board of directors of Lung Check, Inc.
MICHAEL E. HERMAN joined the Board in 1992. Mr. Herman is a private
investor, as well as president and chief operating officer of the Kansas City
Royals Baseball Team. From 1974 until his retirement in 1990, Mr. Herman held
various positions at Marion Laboratories, Inc. (now Hoechst Marion Roussel),
including executive vice president and chief financial officer. Currently, Mr.
Herman serves as chairman of the finance committee of the Ewing Marion Kauffman
Foundation, a private foundation located in Kansas City, where from 1985 through
1990, he was the president and chief operating officer. Mr. Herman is also a
member of the board of directors of Cerner Corporation, Seafield Capital and SLH
Corporation, all of which are public companies, and serves on the board of
directors of several private companies.
IRVING S. JOHNSON joined the Board in 1989. Dr. Johnson is an independent
consultant in biomedical research working with numerous private companies. From
1953 until his retirement in 1988, Dr. Johnson held various positions at Eli
Lilly and Company, including vice president of research from 1973 until 1988.
Dr. Johnson also served on several committees of the National Academy of
Sciences, the Office of Technology Assessment and the National Institutes of
Health. Currently, he is a member of the board of directors of Allelix
Biopharmaceuticals Inc. and Ligand Pharmaceuticals Incorporated, and is on the
scientific advisory board of ELAN Corporation, all of which are public
companies. Dr. Johnson received a Ph.D. in developmental biology from the
University of Kansas.
ANTONIE T. KNOPPERS joined the Board in 1991. Dr. Knoppers is an
independent management consultant. From 1952 until his retirement in 1975, Dr.
Knoppers held various positions at Merck & Co., Inc., including vice chairman of
the board and president and chief operating officer. Dr. Knoppers is a member of
the board of directors of Centocor, Inc., a public biotechnology company. In
addition, he is a former chairman of the U.S. Council of the International
Chamber of Commerce and a member of the advisory board of PaineWebber
Development Corporation, an affiliate of PaineWebber Incorporated. Dr. Knoppers
received a
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M.D. from the University of Amsterdam and a Ph.D. from the University of Leiden,
The Netherlands.
MELVIN I. SIMON, a founder of the Company, has served as a director since
its inception. Dr. Simon, a molecular geneticist, is a member of the National
Academy of Sciences. Currently, Dr. Simon is chairman of the Division of Biology
at the California Institute of Technology where he has been a member of the
faculty since 1982. Previously, Dr. Simon was a member of the faculty in the
Department of Biology at the University of California, San Diego. Dr. Simon
received a Ph.D. in biochemistry from Brandeis University. Dr. Simon also serves
as a director of The Agouron Institute.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING REQUIREMENTS
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the Commission and The Nasdaq Stock Market. Executive officers,
directors and greater than 10% shareholders are required by Commission
regulation to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on review of the copies of such forms furnished to the
Company, or written representations that no Forms 5 were required, the Company
believes that, during the applicable reporting period ending June 30, 1998, all
Section 16(a) filing requirements applicable to its executive officers,
directors and greater than 10% beneficial owners were satisfied.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Non-employee members of the Board receive cash compensation in the amount of
$250 per Board meeting for their services as Board members, and are eligible for
reimbursement of their expenses incurred to attend each such meeting in
accordance with Company policy. In addition to meeting fees, certain
non-employee directors received consulting fees during fiscal 1998. For
scientific consultation, Dr. Abelson received $30,040; Dr. Knoppers, $6,000; Dr.
Johnson, $18,750 and Dr. Simon, $26,900. For special consultation concerning
corporate development issues, Mr. Cohen received $18,250 and Mr. Herman received
$750.
12
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the aggregate compensation paid or accrued
by the Company to the Chief Executive Officer and to the four other most highly
compensated executive officers whose annual compensation exceeded $100,000 for
the fiscal year ended June 30, 1998 (collectively the "named executive
officers") for service during the fiscal years ended June 30, 1998, 1997 and
1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards(2)
Name ------------------- ------
Principal Stock All Other
Position Year Salary(1) Bonus Options Compensation(3)
-------- ---- ------ ----- ------- ------------
<S> <C> <C> <C> <C> <C>
Peter Johnson 1998 $ 395,000 $ 230,000 40,000 $ 2,998
President and Chief 1997 330,000 165,000 100,000 2,250
Executive Officer 1996 285,000 100,000 180,000 1,647
Marvin R. Brown(4) 1998 230,000 65,000 10,000 2,400
Vice President, 1997 23,523 0 0 0
President of Alanex 1996 -- -- -- --
Gary E. Friedman 1998 212,500 100,000 17,000 11,232
Corporate Vice President, 1997 195,000 70,000 26,000 2,250
General Counsel 1996 175,500 50,000 50,000 1,589
Barry D. Quart(5) 1998 230,000 125,000 21,000 2,713
Senior Vice President, 1997 180,000 115,500(5) 44,000 2,953
Regulatory Affairs 1996 165,000 70,500(5) 72,000 16,587
R. Kent Snyder(5) 1998 230,000 150,000 21,000 3,050
Senior Vice President, 1997 200,000 102,000(5) 44,000 2,250
Commercial Affairs 1996 178,500 62,200(5) 64,000 1,777
</TABLE>
- ---------------------
(1) Includes amounts deferred out of compensation under the Company's 401(k)
Plan otherwise payable in cash during each fiscal year.
(2) The Company has made no restricted stock awards, has not granted any stock
appreciation rights and has no other long-term incentive plans.
(3) (a) During 1998, the Company made matching contributions to the
Company's 401(k) Plan in the following amounts: Mr. Johnson, $2,998;
Dr. Brown, $2,400; Mr. Friedman, $3,063; Dr. Quart, $2,713; and Mr.
Snyder $3,050.
(b) During 1997, the Company made matching contributions to the Company's
401(k) Plan in the following amounts: Mr. Johnson, $2,250; Mr. Friedman
$2,250; Dr. Quart, $2,953; and Mr. Snyder, $2,250.
(c) During 1996, the Company made matching contributions to the Company's
401(k) Plan in the following amounts: Mr. Johnson, $1,647; Mr.
Friedman, $1,589; Dr. Quart, $1,959; and Mr. Snyder, $1,777.
(d) During 1996, the Company reimbursed Dr. Quart for relocation costs in
the amount of $14,628.
(e) During 1998, Mr. Friedman sold accrued but unused vacation back to
the Company in the amount of $8,169.
(4) Dr. Brown joined the Company in May 1997 with the acquisition of Alanex
Corporation.
(5) For Dr. Quart and Mr. Snyder, a portion of the bonus amount was subsequently
used to partially repay their outstanding relocation loans. These loans were
paid in full on June 30, 1997.
13
<PAGE>
The following table sets forth certain information with respect to
individual grants of stock options made during the fiscal year ended June 30,
1998, to each of the named executive officers:
OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term(2)
- --------------------------------------------------------------------------------- -----------------------------
% of Total
Options
Granted to
Employees
Options in Fiscal Exercise Expiration
Name Granted(1) Year Price Date 5% 10%
- ------------ ------------ ---------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Peter Johnson 30,145# 2.70% $30.4375 6/29/08 $577,035 $1,462,320
9,855* 0.88 30.4375 6/29/08 188,644 478,061
Marvin R. Brown 145# 0.01 30.4375 6/29/08 2,776 7,034
9,855* 0.88 30.4375 6/29/08 188,644 478,061
Gary E. Friedman 7,145# 0.64 30.4375 6/29/08 136,769 346,601
9,855* 0.88 30.4375 6/29/08 188,644 478,061
Barry D. Quart 11,145# 1.00 30.4375 6/29/08 213,337 540,639
9,855* 0.88 30.4375 6/29/08 188,644 478,061
R. Kent Snyder 11,145# 1.00 30.4375 6/29/08 213,337 540,639
9,855* 0.88 30.4375 6/29/08 188,644 478,061
</TABLE>
- ------------------------
(1) During fiscal 1998, the Agouron Stock Option Plan ("Plan") for executive
officers and directors was administered by the Board. The Board, based upon
the recommendation of the Directors Compensation Committee, determines the
number of shares to be granted and the term of such grants to each
executive officer and director. The options granted in fiscal 1998 were
either incentive stock options(*) or non-statutory stock options(#), have
exercise prices equal to the fair market values on the date of grant, vest
over a period of three years and have a term of ten years. Upon certain
corporate events as defined in the Plan which result in a change of
control, the exercise date of all outstanding options for all employees,
including executive officers, may be accelerated. The Plan also permits the
Company to assist an employee in using a so-called "cashless" exercise
procedure to pay the option exercise price.
(2) Potential realizable value is based on an assumption that the stock price
of the Common Stock appreciates at the annual rate shown (compounded
annually) from the date of grant until the end of the ten year option term.
These numbers are calculated based on the requirements promulgated by the
Securities and Exchange Commission and do not reflect the Company's
estimate of future stock price growth. Any such growth would benefit all
shareholders.
14
<PAGE>
The following table sets forth certain information with respect to each
exercise of stock options during the fiscal year ended June 30, 1998, by each of
the named executive officers and the number and value of unexercised options
held by such named executive officers as of June 30, 1998:
OPTION EXERCISES IN FISCAL 1998
AND VALUE OF OPTIONS AT JUNE 30, 1998
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options at In-the-Money Options at
Shares June 30, 1998(2) June 30, 1998(1)
-------------------------- ---------------------------
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
-------- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Peter Johnson 125,000 $5,692,095 596,923 205,767 $ 11,290,804 $ 1,312,900
Marvin R. Brown 2,500 85,744 17,845 17,325 538,428 221,014
Gary E. Friedman 1,000 24,188 241,599 61,001 4,988,364 348,337
Barry D. Quart 32,000 1,233,037 133,266 89,334 1,982,900 513,000
R. Kent Snyder 12,500 406,045 168,932 81,668 2,983,727 392,673
</TABLE>
- ---------------------
(1) Value calculated as market value of Company stock on June 30, 1998, minus
exercise price multiplied by the number of shares
(2) Adjusted to reflect the two-for-one stock split in the form of a stock
dividend in August 1997.
15
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION(1)
OVERVIEW AND PHILOSOPHY
The Directors Compensation Committee (the "Committee") is composed entirely
of outside directors and is responsible for developing and making
recommendations to the Board with respect to the Company's executive
compensation policies and practices, including the establishment of the annual
total compensation for the chief executive officer (the "CEO") and all executive
officers. The Committee has available to it an outside compensation consultant
and access to independent compensation data. The Board is responsible for
approving and implementing the compensation recommendations of the Committee.
The recommendations made by the Committee to the Board have generally been
approved without any significant modification.
The objectives of the Company's executive compensation program are to
attract, retain and motivate highly qualified executive personnel. These
objectives are satisfied through the use of three principal compensation
elements: base salary, cash bonus payments and stock options.
BASE SALARY
Base salary levels for the Company's executive officers are based on the
concept of pay for performance and are competitively set relative to the
compensation of other executives in the biotechnology industry. Extensive salary
survey data is available on the industry (notably, the annual "Biotechnology
Compensation and Benefits Survey" conducted by Radford Associates and Alexander
& Alexander Consulting Group) and is utilized by the Committee in establishing
annual base salaries. In determining base salaries, the Committee also considers
corporate performance and progress in the immediately preceding fiscal year,
individual experience and performance, specific issues which are relevant to the
Company and general economic conditions. The base salary of the CEO and all
other executive officers is reviewed annually. During fiscal year 1998, the base
salaries paid to the executive officers other than the CEO approximated the 75th
percentile of the above-noted industry survey data.
BONUS PAYMENTS
Annual cash bonus payments are discretionary. Bonus payments, if any, to
executive officers, including the CEO, are based on two principal factors:
corporate performance as compared to the Company's annual goals and objectives
and individual performance relative to corporate performance and individual
goals and objectives.
Bonus payments in 1998 were generally in recognition of the satisfaction of
several significant corporate objectives during the year, including the
establishment of the Company's first product, VIRACEPT(R) (nelfinavir mesylate)
as the market leader among all HIV protease
- ------------------------
(1) The material in this report is not soliciting material, is not deemed filed
with the SEC, and is not incorporated by reference in any filing of the Company
under the Securities Act of 1933 (the "Securities Act"), as amended, or the
Securities Exchange Act of 1934 (the "Exchange Act"), as amended, whether made
before or after the date of the Proxy Statement and irrespective af any general
incorporation language in such filing.
16
<PAGE>
inhibitors, the in-licensing of three development stage compounds to supplement
the Company's internal R&D pipeline, the continued preclinical and clinical
development of the Company's cancer and anti-viral agents and the satisfaction
of all significant financial targets for fiscal 1998.
Bonus payment recommendations for executive officers other than the CEO are
initiated by the CEO and submitted to the Committee for review and subsequent
submission to the Board. Bonus payment recommendations for the CEO are initiated
by the Committee and submitted to the Board.
Total base salary and any bonus payments are compared to "total
compensation" of peers as reported by the previously noted industry survey. Such
total compensation for the executive officers of the Company is at or above the
averages of such data, which reflects the Committee's belief that the relative
levels of corporate performance during the period were also above average.
STOCK OPTIONS
To conserve its cash resources, the Company places special emphasis on
equity-based incentives to attract, retain and motivate executive officers as
well as other employees. Under the Company's stock option plans, grants are
generally priced at the fair market value on the date of grant, vest over a
period of three or four years and have a term of ten years. Grants are made to
all employees on their date of hire based on salary level and position. All
employees, including executive officers, are eligible for subsequent,
discretionary grants which are generally based on either individual or corporate
performance. It is the Committee's intent that the interests of the Company's
shareholders and the executive officers be closely aligned through the use of
stock options. Option grants recommended by the Committee are submitted to the
Board for approval. Based on recent peer-company proxy data compiled by the
Company, the level of option grants to each executive officer in 1998 remains
competitive, and the resultant total option position as a percent of total
shares outstanding represents approximately the 70th to 90th percentile of such
positions.
CHIEF EXECUTIVE OFFICER COMPENSATION
During 1998, Mr. Johnson's base salary of $395,000 was based on individual
and corporate performance, and approximated the average of the updated industry
data for base salaries of CEOs.
During 1998, Mr. Johnson was awarded a bonus of $230,000 in recognition of
the satisfaction of several significant corporate objectives, including the
establishment of VIRACEPT(R) as the number one HIV protease inhibitor in the
United States with product sales in the United States of $358 million for fiscal
1998. The Committee believes that Mr. Johnson has made a significant
contribution during 1998 in enhancing shareholder value and establishing a sound
base for the continued enhancement of shareholder value through his managerial
and entrepreneurial efforts.
17
<PAGE>
The stock options awarded to Mr. Johnson during fiscal 1998 are competitive
and consistent with the purpose of the stock option plans. The resultant total
option position as a percent of total shares outstanding represents
approximately the 75th percentile for peer CEO positions.
EXECUTIVE COMPENSATION DEDUCTION LIMITATIONS
In 1993, Section 162(m) of the Internal Revenue Code ("Section 162(m)") was
enacted which disallows the deductibility by the Company of any compensation
over $1 million per year paid to each of the chief executive officer and the
four other most highly compensated executive officers, unless certain
performance-based compensation criteria are satisfied. While it is the
Committee's firm belief and intent that compensation from base salary and cash
bonus payments will not approach the annual Section 162(m) limitation in the
foreseeable future, additional "compensation" from the exercise of option grants
pursuant to the Company's stock option plans could result in the annual
limitation being exceeded. Accordingly, the Company's 1990 and 1996 Stock Option
Plans contain certain provisions which exempt compensation resulting from such
option exercises from the $1 million limitation. The Committee will continue to
monitor all forms of compensation to its executive officers to ensure that the
Company may maximize the tax benefits of such compensation.
Directors Compensation Committee
Michael E. Herman, Chairman
John N. Abelson, Ph.D.
A. E. Cohen
DIRECTORS COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Directors Compensation Committee is composed exclusively of three
outside directors: Mr. Herman, Mr. Cohen and Dr. Abelson. The Company is not
aware of any Committee interlocks.
18
<PAGE>
PERFORMANCE MEASUREMENT COMPARISON(1)
The chart set forth below shows the value of an investment of $100 on June 30,
1993 in the Existing Common Stock, The Nasdaq Stock Market Index (U.S.
Companies) ("Nasdaq Market (US)") and the Nasdaq Pharmaceuticals Index ("Nasdaq
Pharmaceuticals"). The total returns assume the reinvestment of dividends,
although cash dividends have not been declared on the Existing Common Stock. The
Existing Common Stock is traded on The Nasdaq Stock Market and is a component of
both the Nasdaq Market (US) and the Nasdaq Pharmaceuticals Index. The
comparisons in the chart are required by the Securities and Exchange Commission
and are not intended to forecast or be an indicator of possible future
performance of the Company's Common Stock.
[OBJECT OMITTED]
- -------------
6/30/93 6/30/94 6/30/95 6/30/96 6/30/97 6/30/98
------- ------- ------- ------- ------- -------
Agouron Common Stock $100.00 $112.50 $236.26 $390.00 $808.76 $606.20
Nasdaq market (US) 100.00 100.96 134.77 173.03 210.38 277.69
Nasdaq Pharmaceuticals 100.00 83.65 111.03 163.50 166.34 170.68
- ----------------
(1) This section is not "soliciting material," is not deemed filed with the
Securities and Exchange Commission and is not to be incorporated by
reference in any filing of the Company under the Securities Act or the
Exchange Act.
19
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of October 19, 1998 relating
to the beneficial ownership of the Existing Common Stock by (i) each person
known by the Company to beneficially own more than 5% of the outstanding shares
of the Company's Common Stock, (ii) each director, (iii) each of the executive
officers named in the Summary Compensation Table below, and (iv) all executive
officers and directors as a group.
<TABLE>
<CAPTION>
Beneficial Ownership(1)
Number of Percentage of
Beneficial Owner Shares(9) Total
- ------------------------------ --------------- -------------
<S> <C> <C>
Wellington Management Co. 5,196,000 16.61%
75 State Street, Boston, MA 02109
T. Rowe Price 2,420,000 7.74%
100 E. Pratt St., Baltimore, MD 21202
Peter Johnson(2) 706,533 2.22%
Gary E. Friedman(2) Family Trust(8) 294,123 *
John N. Abelson(2)(3)(6) 102,943 *
Patricia M. Cloherty(2) 27,659 *
A. E. Cohen(2) 73,333 *
Michael E. Herman(2)(4) 83,333 *
Irving S. Johnson(2) 41,933 *
Antonie T. Knoppers(2) 51,533 *
Melvin I. Simon(2)(3) and Linda F. Simon Living Trust(5) 122,843 *
Marvin R. Brown 194,995 *
Barry D. Quart 152,481 *
R. Kent Snyder(7) 175,035 *
All executive officers and directors as a group (19 persons) 2,706,671 8.14%
</TABLE>
- -------------------
* less than 1%.
(1) Unless otherwise indicated, the persons named in the above table exercise
sole voting and investment powers with respect to all shares beneficially
owned by them, subject to applicable community property laws. The number of
shares beneficially owned includes the following number of shares issuable
upon exercise of stock options exercisable within 60 days of October 19,
1998: Mr. Johnson, 596,923 shares; Mr. Friedman, 241,599 shares; Dr.
Abelson, 33,333 shares; Ms. Cloherty, 13,333 shares; Mr. Cohen, 43,333
shares; Mr. Herman, 39,333 shares; Dr. Johnson, 15,833 shares; Dr.
Knoppers, 43,333 shares; Dr. Simon, 33,333 shares; Dr. Brown, 23,077
shares; Dr. Quart, 117,266 shares; Mr. Snyder, 168,932 shares; and all
executive officers and directors as a group, 1,952,280 shares.
(2) Director.
(3) Does not include 1,106,000 shares held by The Agouron Institute, of which
Drs. Abelson and Simon are directors. As directors, they share voting and
investment powers as to the shares held by The Agouron Institute.
(4) Includes 20,000 shares held by the Herman Family Trading Company, a family
partnership of which Mr. Herman is the general partner, 10,000 shares held
by Vail Fishing Partners in which Mr. Herman has a 50% general partner
interest and 2,000 shares held by Mrs. Herman, of which Mr. Herman
disclaims any beneficial ownership.
(5) Shared voting and investment power.
(6) Includes 2,350 shares held by Dr. Abelson as custodian for his minor
children, of which Dr. Abelson disclaims any beneficial ownership.
(7) Includes 800 shares held by immediate family members, of which Mr. Snyder
disclaims any beneficial ownership.
(8) Includes 5,408 shares held by wife as custodian for minor children of which
Mr. Friedman disclaims any beneficial ownership.
(9) Adjusted to reflect the two-for-one stock split in the form of a stock
dividend in August 1997.
20
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
All transactions with affiliates have been and will continue to be on terms
no less favorable to the Company than could be obtained from unaffiliated
parties. Furthermore, all transactions with affiliates and any loans to Company
officers, affiliates or shareholders must be approved by a majority of the
disinterested directors.
As permitted by California law, the Articles of Incorporation and bylaws of
the Company currently provide for the limitation of director liability for
monetary damages for breach of duty to the Company and for indemnification of
agents (including officers and directors) to the fullest extent permitted under
the California General Corporation Law. The Company has entered into
Indemnification Agreements with all of its directors and officers. Additionally,
the Company has in effect a directors and officers liability insurance policy
which insures directors and officers of the Company against loss arising from
claims made against them due to wrongful acts while acting in their individual
and collective capacities as directors and officers.
21
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) LIST OF DOCUMENTS FILED AS PART OF THIS REPORT:
(1) Financial Statements and Supplementary Data
Reference is made to the Index to Financial Statements and
Schedules under Item 8 in Part II hereof, where these
documents are listed.
(2) Exhibits - see (c) below
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the fourth quarter of fiscal 1998.
(C) EXHIBITS
Exhibit
Number Exhibit
------- ---------------------------------------------------------
2.1(a) Agreement and Plan of Reorganization dated as of April 28,
1997, between Agouron Pharmaceuticals, Inc., Agouron
Acquisition Corporation and Alanex Corporation.
3.1(b) Restated Articles of Incorporation (December 10, 1992).
3.2(c) Amended and Restated Bylaws (Restated June 17, 1991).
4.1(d) Rights Agreement dated November 7, 1996, as amended on
November 27, 1996, between the Company and Chase Mellon
Shareholder Services. L.L.C., which includes, as Exhibit
A, the Certificate of Determination, Preferences and
Rights of Series B Participating Preferred Stock as filed
with the California Secretary of State on November 20,
1996.
10.01(h) 1990 Stock Option Plan (Restated November 2, 1995).
10.02(k) Form of 1990 Incentive Stock Option Agreement.
10.03(k) Form of 1990 Non-Statutory Stock Option Agreement for
Employees/Officers/Directors.
10.04(k) Form of 1990 Non-Statutory Stock Option Agreement for
Consultants.
10.05(c) 1985 Stock Option Plan (Last Amended August 14, 1991).
10.06(e) Agouron Pharmaceuticals, Inc. 401(k) Plan (Amended August
1992).
10.07(b) Agouron Pharmaceuticals, Inc. Employee Stock Purchase Plan
(October 15, 1992).
10.08(b) Agouron Pharmaceuticals, Inc. Flexible Benefits Plan
(December 10, 1992).
10.09(f) Agreement Two dated February 28, 1994 between Japan
Tobacco Inc. and the Company.
(Portions of the agreement receive confidential treatment
pursuant to an application filed April 25, 1994; File No.
0-15609).
22
<PAGE>
Exhibit
Number Exhibit
------- ----------------------------------------------------------
10.10(g) Development and License Agreement dated December 1, 1994
between Japan Tobacco Inc. and the Company (Portions of
the agreement receive confidential treatment pursuant to
an application dated January 31, 1995).
10.11(h) First Amendment to Development and License Agreement
effective December 1, 1994 between Japan Tobacco Inc. and
the Company. (Confidential treatment has been requested
for portions of this agreement pursuant to an application
dated January 31, 1996. The underlying agreement was filed
as Exhibit 10.54 on Form 10-Q for the period ended
December 31, 1994, and portions thereof receive
confidential treatment pursuant to an order of the
Securities and Exchange Commission dated June 28, 1995.)
10.12(i) Amendment effective January 1, 1996 to the Agouron
Pharmaceuticals, Inc. 401(k) Plan.
10.13(j) 1996 Stock Option Plan.
10.14(j) Form of 1996 Incentive Stock Option Agreement.
10.15(j) Form of 1996 Non-Statutory Stock Option Agreement for
Employees/Officers/Directors.
10.16(j) Form of 1996 Stock Option Agreement for Consultants
10.17(l) Second Amendment to Development and License Agreement
effective January 17, 1997 between Japan Tobacco Inc.
and the Company.(Confidential treatment has been
requested for portions of this agreement pursuant to
an application dated August 21, 1997, as separately
filed with the Securities and Exchange Commission. The
underlying agreement was filed as Exhibit 10.54 on
Form 10-Q for the period ended December 31, 1994,
and portions thereof receive confidential treatment
pursuant to an order of the Securities and Exchange
Commission dated June 28, 1995.)
10.18(l) Third Amendment to Development and License Agreement
effective December 1, 1996 between Japan Tobacco Inc. and
the Company. (Confidential treatment has been requested
for portions of this agreement pursuant to an application
dated August 21, 1997, as separately filed with the
Securities and Exchange Commission. The underlying
agreement was filed as Exhibit 10.54 on Form 10-Q for the
period ended December 31, 1994, and portions thereof
receive confidential treatment pursuant to an order of the
Securities and Exchange Commission dated June 28, 1995.)
10.19(l) VIRACEPT License Agreement between the Company and Japan
Tobacco Inc. and F. Hoffmann-La Roche Ltd dated June 30,
1997. (Confidential treatment has been requested for
portions of this agreement pursuant to an application
dated August 21, 1997, as separately filed with the
Securities and Exchange Commission.)
10.20(m) Form of 1998 Employee Stock Option Plan.
10.21(m) Form of 1998 Employee Non-Statutory Stock Option
Agreement.
23
<PAGE>
Exhibit
Number Exhibit
------- ----------------------------------------------------------
10.22 License and Supply Agreement between the Company and Japan
Energy Corporation effective as of June 30, 1998.
(Confidential treatment has been requested for portions of
this agreement pursuant to an application dated August 4,
1998, as separately filed with the Securities and Exchange
Commission.)
10.23 Common Stock Purchase Agreement between The Immune
Response Corporation and the Company dated June 11, 1998.
(Confidential treatment has been requested for portions of
this agreement pursuant to an application dated August 4,
1998, as separately filed with the Securities and Exchange
Commission.)
10.24 Amendment to the VIRACEPT License Agreement between the
Company and Japan Tobacco Inc. and F. Hoffmann-La Roche
Ltd as of May 1, 1998. (Confidential treatment has been
requested for portions of this agreement pursuant to an
application dated August 4, 1998, as separately filed with
the Securities and Exchange Commission.)
21* Subsidiaries of Agouron Pharmaceuticals, Inc.
23.1* Consent of Independent Accountants.
27* Financial Data Schedule. (Exhibit 27 is submitted as
an exhibit only in the electronic format of this Annual
Report on Form 10-K submitted to the Securities and
Exchange Commission.)
99* Important Factors Regarding Forward-Looking Statements.
----------------------
(a) Incorporated by Reference to Form 8-K filed on May 23, 1997.
(b) Incorporated by Reference to Form 10-Q filed for the quarter ended
December 31, 1992.
(c) Incorporated by Reference to Form 10-K filed for the
year ended June 30, 1991.
(d) Incorporated by Reference for Form 8-K/A
filed on December 20, 1996.
(e) Incorporated by Reference to Form 10-K
filed for the year ended June 30, 1992.
(f) Incorporated by Reference to
Form 10-Q/A filed for the quarter ended March 31, 1994.
(g) Incorporated by
Reference to Form 10-Q filed for the quarter ended December 31, 1994.
(h) Incorporated by Reference to Form 10-Q filed for the quarter ended December
31, 1995.
(i) Incorporated by Reference to Form 10-Q filed for the quarter
ended March 31, 1996.
(j) Incorporated by Reference to Form S-8 filed on
November 26, 1996.
(k) Incorporated by Reference to Form 10-Q for the
quarter ended December 31, 1996.
(l) Incorporated by Reference to Form 10-K
for the year ended June 30, 1997.
(m) Incorporated by Reference to Form S-8
filed on February 19, 1998.
* - Previously filed.
24
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AGOURON PHARMACEUTICALS, INC.
October 28, 1998 By: /s/ Steven S. Cowell
----------------------------
Steven S. Cowell
Corporate Vice President
Chief Financial Officer
25
<PAGE>
Exhibit Index
Exhibit
Number Exhibit
------- ----------------------------------------------------------
10.22 License and Supply Agreement between the Company and Japan
Energy Corporation effective as of June 30, 1998.
(Confidential treatment has been requested for portions of
this agreement pursuant to an application dated August 4,
1998, as separately filed with the Securities and Exchange
Commission.)
10.23 Common Stock Purchase Agreement between The Immune
Response Corporation and the Company dated June 11, 1998.
(Confidential treatment has been requested for portions of
this agreement pursuant to an application dated August 4,
1998, as separately filed with the Securities and Exchange
Commission.)
10.24 Amendment to the VIRACEPT License Agreement between the
Company and Japan Tobacco Inc. and F. Hoffmann-La Roche
Ltd as of May 1, 1998. (Confidential treatment has been
requested for portions of this agreement pursuant to an
application dated August 4, 1998, as separately filed with
the Securities and Exchange Commission.)
21* Subsidiaries of Agouron Pharmaceuticals, Inc.
23.1* Consent of Independent Accountants.
27* Financial Data Schedule. (Exhibit 27 is submitted as
an exhibit only in the electronic format of this Annual
Report on Form 10-K submitted to the Securities and
Exchange Commission.)
99* Important Factors Regarding Forward-Looking Statements.
* - Previously filed.
26
<PAGE>
PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED (DESIGNATED BY AN ASTERISK (*)
AND WHITE SPACE) AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT DATED AUGUST 4, 1998; FILE NO. 0-15609
LICENSE AND SUPPLY AGREEMENT
This License and Supply Agreement ("Agreement"), effective as of the
30th day of June 1998, is by and between Japan Energy Corporation, a corporation
duly organized and existing under the laws of Japan and having its principal
place of business at 10-1, Toranomon 2-chome, Minato-ku, Tokyo 105-8407, Japan
(hereinafter referred to as "JE"), and Agouron Pharmaceuticals, Inc., a
corporation duly organized and existing under the laws of the State of
California, U.S.A., and having its principal place of business at 10350 North
Torrey Pines Road, La Jolla, California 92037, U.S.A. (hereinafter referred to
as "Agouron"). JE and Agouron are sometimes hereinafter each referred to as a
Party (collectively "Parties") to this Agreement.
BACKGROUND
JE possesses technical information and know-how pertaining to a certain
pharmaceutical compound designated JE-2147 and its related compounds that may be
useful in the treatment and prevention of Human Immunodeficiency Virus
infections and other diseases.
The Parties entered into a Confidentiality Agreement effective December
31, 1997 (the "Confidentiality Agreement") and a Material Transfer Agreement
effective December 31, 1997 (the "Material Transfer Agreement"), pursuant to
which Agouron has undertaken certain evaluations of JE-2147.
JE holds patents rights pertaining to JE-2147 and its related
compounds.
Agouron desires to obtain a license from JE to enable Agouron to
develop and commercialize Product (as hereinafter defined) in certain countries
of the world, and JE is willing to grant such license on the terms and
conditions hereinafter set forth.
The Parties wish to cooperate under the terms of this Agreement to
optimize the development and commercialization of Product.
The Parties also wish to confirm their arrangement regarding the supply
of Compound by JE to Agouron and the supply of Product by Agouron to JE (both
terms as hereinafter defined).
On June 30, 1998, the parties executed and delivered to each other, by
telefax, a prior version of this Agreement. The parties now wish to supersede
such prior version of this Agreement and to formally enter into this revised
version of this Agreement.
NOW, THEREFORE, in consideration of the premises, and the mutual
covenants, benefits and obligations set forth herein, the Parties agree as
follows:
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ARTICLE I - DEFINITIONS
When used in this Agreement, the following terms shall have the
meanings set out in this Article I. Except as otherwise explicitly provided, all
references to Articles and Sections shall refer to the Articles and Sections of
this Agreement, and all references to Attachments, Exhibits and Schedules shall
refer to the Attachments, Exhibits and Schedules to this Agreement, all of which
are incorporated herein by reference.
SECTION 1.01 "Affiliate" means any person, organization or entity that
is, directly or indirectly, controlling, controlled by, or under common control
with JE or Agouron, as the case may be. The term "control" (including, with
correlative meaning, the terms "controlled by" and "under common control with"),
as used with respect to any person, organization or entity, means the
possession, directly or indirectly, of the power to direct, or cause the
direction of, the management and policies of such person, organization or
entity, whether through the ownership of voting securities, or by contract or
court order or otherwise. The ownership of voting securities of a person,
organization or entity shall not, in and of itself, constitute "control" for
purposes of this definition, unless said ownership is of a majority of the
outstanding securities entitled to vote of such person, organization or entity.
Affiliate shall also mean a limited partnership in which a subsidiary of Agouron
and/or JE is a general partner.
SECTION 1.02 "Combination Product" means any pharmaceutical product in
any dosage form that contains, in addition to * , one (1) or more * having *.
.
SECTION 1.03 "Compound" means the chemical compound known by the JE
code name JE-2147 ("JE-2147"), whose chemical structure is as follows:
*
(chemical structure)
The definition of Compound also means: (i) * JE-2147; * JE-2147, * .
SECTION 1.04 "Compound Supply Plan" means the supply plan under which
JE will provide Compound to Agouron in accordance with the provisions of Section
4.04.
SECTION 1.05 "Control," "Controlled" or "Controlling" means possession,
now or in the future, of the ability to grant a license or sublicense, as
provided for herein, without violating the terms of any agreement with, or
arrangement with, or the rights of any third party.
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SECTION 1.06 "Development Program" means all normal and customary
activities by or on behalf of JE or Agouron, independently or jointly, as the
case may be, that are necessary for the timely development of Compound and/or a
Product, including, but not limited to: (i) formulation and stability studies;
(ii) other non-clinical studies, including toxicology studies (or the applicable
equivalent), in preparation for regulatory submissions; (iii) virology studies,
including resistance and cross-resistance studies; (iv) manufacture of
preclinical and clinical materials and supplies; (v) planning, implementation,
evaluation, administration and conduct of human clinical trials, including
pharmaco-economic, quality of life and other clinical studies that are necessary
for the purposes of Registration or to expand the labeling of a Product; (vi)
manufacturing process development and scale-up; and (vii) preparation and
submission of Registration applications. The normal and customary activities
necessary for timely development of Compound and/or Product for indications in
the Field are, or will be, described generally in the Development Program that
is described in Exhibit 1, as such exhibit is amended in the future.
SECTION 1.07 "Development Program Patent Rights" means patent rights
covering those inventions conceived or reduced to practice in the Development
Program after the Effective Date of this Agreement that are contained in: (i)
any patent applications or issued patents that are, respectively, filed after
the Effective Date of this Agreement or issued from patent applications that are
filed after the Effective Date of this Agreement in the United States and/or any
other countries throughout the world, and that are Controlled by either or both
of the Parties; and (ii) any reissues, extensions (or other governmental actions
that provide exclusive rights to the patent holder in the patented subject
matter beyond the original patent expiration date), substitutions,
confirmations, registrations, revalidations, re-examinations, additions,
continuations, continuations-in-part, or divisions of or to any of the
foregoing; such inventions shall include, but not be limited to, any
compositions of matter of intermediates of the Compound, methods of use or
processes of making the Compound, intermediates thereof, or Products, which
compositions of matter, methods of use or processes of making the Compound,
intermediates thereof or Products are conceived or reduced to practice in the
Development Program after the Effective Date of this Agreement. Development
Program Patent Rights shall not include any inventions that are included in the
JE Patent Rights. For purposes of this Agreement, the terms "conceived" and
"reduced to practice" shall have the meanings determined under United States
law, regardless of where such inventive acts take place.
SECTION 1.08 "Development Program Technology" means any know-how, trade
secret, experimental data, formula, expert opinion, experimental procedure and
other confidential and/or proprietary information specifically concerning the
Compound, intermediates thereof, or a Product that is developed or acquired by
or on behalf of JE or Agouron, independently or jointly, as the case may be, in
the Development Program after the Effective Date of this Agreement that are
useful or necessary for either: (i) the formulation (including sustained-release
formulations), manufacture, use and/or application of a Product; or (ii)
obtaining Registration of a Product, including, but not limited to, information
and data arising out of pre-clinical and clinical trials and all NDA
applications, and which is under the Control of JE and Agouron, solely or
jointly. Development Program Technology shall not include JE Technology.
<PAGE>
SECTION 1.09 "Dossier" means the document that is filed with and
approved by a government or health authority for purposes of Registration, for
example, a Marketing Authorization Application.
SECTION 1.10 "Effective Date" means June 30, 1998.
SECTION 1.11 "EMEA" means the European Agency for the Evaluation of
Medicinal Products.
SECTION 1.12"FDA" means the United States Food and Drug Administration.
SECTION 1.13 "Field" means the treatment and prevention of Human
Immunodeficiency Virus ("HIV") infections.
SECTION 1.14 "Initial Commercial Sale" means the first commercial sale
of a Product *
SECTION 1.15 "JE Territory" means Japan, Taiwan, South Korea
and North Korea.
SECTION 1.16 "JE Patent Rights" means: (i) the patents and the patent
applications that are referred to in Schedule 1 of this Agreement; (ii) all
patents * , and all patents and patent applications based on, or claiming or
corresponding to the * of any * ; or (iii) any reissues, extensions (or other
governmental actions that provide exclusive rights to the patent holder in the
patented subject matter beyond the original patent expiration date),
substitutions, confirmations, registrations, revalidations, re-examinations,
additions, continuations, continuations-in-part, or divisions of or to any of
the foregoing.
SECTION 1.17 "JE Technology" means any know-how, trade secret,
experimental data, formula, expert opinion, experimental procedure, and other
confidential and/or proprietary information specifically concerning the
Compound, intermediates thereof, or a Product that was developed or acquired by
or on behalf of JE before the Effective Date of this Agreement that is necessary
or useful for either: (i) the formulation (including sustained release
formulations), manufacture, use and/or application of a Product; or (ii)
obtaining Registration of a Product, including, but not limited to, information
and data arising out of pre-clinical and clinical trials and all NDA
applications, and which is Controlled by JE.
SECTION 1.18 "Licensed Territory" means all countries of the world,
except for Japan, Taiwan, South Korea and North Korea.
SECTION 1.19 "MAA" means Marketing Authorization Application.
SECTION 1.20 "Major Market European Country" means the United Kingdom,
France, Germany, Spain or Italy.
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SECTION 1.21 "Net Sales" means the gross amount invoiced for Product by
Agouron, its Affiliates and sublicensees to non-Affiliated third parties, other
than separately itemized transportation costs, and sales taxes and other taxes
that are directly linked to and included in the gross amount invoiced, as
computed on a product-by-product basis for the countries concerned, less: (i)
deductions for returns, credits for rejected goods, and rebates, chargebacks and
allowances; (ii) usual and customary * , sales commissions, transportation
insurance charges, normal handling and packaging costs, and customs duties
and other governmental charges.
SECTION 1.22 "New Drug Application" or "NDA" means a new drug
application, product license application or comparable regulatory submission to
the FDA, the EMEA or an equivalent agency of a country in the Territory for
permission to commence commercial sale of a Product.
SECTION 1.23 "Patent Rights" means, collectively, JE Patent Rights and
Development Program Patent Rights.
SECTION 1.24 "Product" means any pharmaceutical product in any active
ingredient form or finished-dosage form that contains the Compound, including,
without limitation, Combination Products.
SECTION 1.25 "Registration" means the official approval by the
government or health authority in a country (or supra-national organization,
such as the European Agency for the Evaluation of Medicinal Products) that is
required for a Product to be offered for sale in such country, including such
authorizations as may be required for the production, importation, pricing,
reimbursement and sale of such Product, and for subsequent regulatory filings
for line extensions and/or additional indications of such Product.
SECTION 1.26 "Territory" means the world.
SECTION 1.27 "Trade Dress" means any materials directly supporting the
commercialization of a Product, including, but not limited to, packaging,
package inserts, advertising or selling aids, brochures, mailings and/or other
marketing or packaging materials.
SECTION 1.28 "Trademark(s)" means any trademark selected and owned by a
Party and registered (or applied for) by such Party, its Affiliate(s) and
sublicensee(s) in the Territory for use in connection with the marketing of
Products. The definition of Trademark(s) shall not refer to trade names or
designs such as logos used by a Party to designate the name of such Party.
SECTION 1.29 "United States" or "U.S." means the United States of
America, its territories, possessions and protectorates (including Puerto Rico),
and the District of Columbia.
<PAGE>
SECTION 1.30 "Valid Claim" means a claim within issued and enforceable
JE Patent Rights, which claim has not been: (i) abandoned or disclaimed; (ii)
declared invalid or unenforceable by a decision of a court or other governmental
agency of competent jurisdiction that is unappealable or unappealed within the
time allowed for appeal; or (iii) admitted by JE to be invalid.
ARTICLE II - COMMERCIAL RIGHTS
SECTION 2.01 LICENSE GRANTS. To implement the development and
commercialization of Compound and/or Products, the Parties, subject to the other
applicable provisions of this Agreement, grant and accept the license rights
provided below in this Article II.
(a) Subject to the provisions of Section 2.01(c), and Article V, JE
grants Agouron the exclusive right, even as to JE (with right of sublicense), to
use, offer for sale, sell and/or import in or into the Licensed Territory,
Compound and Products under applicable JE Patent Rights and Development Program
Patent Rights, and using applicable JE Technology and Development Program
Technology.
(b) Subject to the provisions of Sections 2.01(c) and 4.04, and Article
V, JE grants Agouron the non-exclusive right in the Territory (with right of
sublicense) under applicable JE Patent Rights and Development Program Patent
Rights, and using applicable JE Technology and Development Program Technology
to: (i) make and/or have made Compound, intermediates thereof used in the
process of making Compound and/or Products; (ii) use or have used any
intermediate(s) of Compound in the process of making Compound; and (iii) conduct
Development Program activities *
using Compound and/or Product in countries located outside the Licensed
Territory, which Agouron deems necessary or useful in obtaining Registration of
a Product in the Licensed Territory. It is understood and agreed to by the
Parties that Agouron shall have no rights to utilize the license rights granted
in this Section 2.01(b)(i) and (ii) to make and/or have made Compound for
commercial use unless and until Agouron becomes entitled to make independent
arrangements for the supply of Compound pursuant to the provisions of Section
4.04,and any such exercise of these license rights is subject to the terms of
Section 4.04 and/or as otherwise set forth in the Agreement.
(c) If Agouron has determined to enter into a sublicense agreement with
a non-Affiliated third party, Agouron shall notify JE of such fact, including
the expected marketing territory and the names of any non-Affiliated third
parties which Agouron then intends to contact concerning such sublicense. When
Agouron enters into a sublicense agreement with a non-Affiliated third party, it
agrees to forward to JE within * after executing such sublicense, the name and
address of the new sublicensee, as well as the * . Additionally, Agouron
shall provide JE with written evidence that each sublicensee has agreed to be
bound by the applicable terms and obligations of the licenses granted to Agouron
under this Agreement (including, without limitation, Agouron's * ). Agouron
hereby acknowledges that any act or omission
<PAGE>
of a sublicensee that would be a breach of this Agreement if performed by
Agouron, shall be deemed to be a breach by Agouron of this Agreement.
(d) Notwithstanding the terms of this Section 2.01 and subject to the
provisions of Section 4.02(n), each Party shall have a paid-up, royalty-free,
non-exclusive right to use the Compound, intermediates thereof and/or Products
in its * . Each Party shall give prior written notice to the other of its
intention to conduct any such * which are to be undertaken in the* .
(e) Agouron grants JE a paid-up, royalty-free non-exclusive right (with
right of sublicense) in the JE Territory to use the applicable Development
Program Patent Rights and applicable Development Program Technology in: (i) * of
Product in the JE Territory for indications in the Field; and (ii) * Product in
the JE Territory for indications in the Field.
(f) Agouron grants JE a paid-up, royalty-free non-exclusive right
anywhere in the Territory (with right of sublicense) under applicable
Development Program Patent Rights, and using applicable Development Program
Technology to: (i) * the Compound, intermediates thereof used in the process of
making Compound and/or Products; (ii) * any intermediate(s) of Compound in the
process of making the Compound; and (iii) conduct Development Program activities
* using Compound and/or
Product in the Licensed Territory, which JE deems necessary or useful in
obtaining Registration of a Product in the JE Territory. Agouron acknowledges
that JE has the * in the JE Territory under applicable JE Patent Rights and
using applicable JE Technology.
(g) Agouron grants JE a paid-up, royalty-free non-exclusive right (with
right of sublicense) in the JE Territory to * Compound and/or Products for
indication(s)* under applicable Development Program Patent Rights that cover
inventions which were * in the Development Program by Agouron and using
applicable Development ProgramTechnology that is * for the utilization of such
Development Program Patent Rights. Upon discovery of an indication(s) * ,
Agouron shall promptly notify JE about such discovery. JE's non-exclusive right
in the JE Territory to develop and commercialize Compound and/or Products for
such specific indication(s) * , shall be subject to JE's use of development and
commercialization efforts for such specific indication(s) * in the JE Territory.
Agouron acknowledges that JE has the * under applicable JE Patent Rights and
using applicable JE Technology.
(h) Subject to the provisions of Section 4.04, Agouron shall have a
paid-up, royalty-free, non-exclusive right anywhere in the Territory (with right
of sublicense) to * originally developed outside of the
Development Program that is * the Development Program by JE, and any * thereon
developed in the Development Program for making, having made, using and selling
the
<PAGE>
Compound, intermediates thereof and/or Products in the Licensed Territory.
Subject to the provisions of Section 4.04, JE shall have a paid-up,
royalty-free, non-exclusive right anywhere in the Territory (with right of
sublicense) to * developed outside of the Development Program that is utilized
in the Development Program by Agouron, and any * thereon developed in the
Development Program for making, having made, using and selling the Compound,
intermediates thereof and/or Products in the JE Territory. It is understood and
agreed to by the Parties that * shall have * granted in this Section
2.01(h) to make and/or have made * unless and until * entitled to make *
pursuant to the provisions of Section 4.04 and any such exercise of these
license rights is subject to the terms of Section 4.04 and/or as otherwise set
forth in the Agreement.
(i) If a Party wishes to receive a non-exclusive license to which it is not
otherwise entitled under this Agreement to use * Compound and/or * Controlled by
another Party, which * is developed or acquired by the other Party outside of
the Development Program after * of this Agreement and which is required for
making, having made, using and selling the Compound, intermediates thereof
and/or Products, then the Parties shall enter into good faith negotiations
regarding the terms of such license. If a Party wishes to receive other licenses
to which it is not otherwise entitled under this Agreement from the other Party
to * that such other Party Controls and which the Party considers useful for
making, having made, using and selling the Compound, intermediates thereof
and/or Products, then the Parties shall discuss the terms of such licenses;
provided, however, that the other Party shall have no obligation to grant such
licenses.
(j) Until the * , JE hereby grants to Agouron (with right of sublicense) a
paid-up, royalty-free, non-exclusive right to use the JE's Trademark(s) and
Trade Dress in the applicable country in the marketing of Products. After the
expiration of any royalty obligations * , JE hereby grants to Agouron (with
right of sublicense) *
of such Products in such country, any Trademark(s) and Trade Dress previously
used to market such Products in such country; if Agouron * , then the Parties
shall enter into good-faith negotiations regarding the royalty rate to be paid
to JE and the other terms of such license.
(k) Until the * , Agouron hereby grants to JE (with right of sublicense) a
paid-up, royalty-free, non-exclusive right to use Agouron's Trademark(s) and
Trade Dress in * in the marketing of Products. After the expiration of such
royalty obligations in the * , Agouron agrees to grant to JE (with right of
sublicense * of such Products in such country, any Trademark(s) and Trade Dress
previously used to market such Products in such country; if JE * , then the
Parties shall enter into good-faith negotiations regarding the royalty rate to
be paid to Agouron and the other terms of such licenses.
<PAGE>
(l) Agouron agrees to use reasonable efforts to not sell Product in the
Licensed Territory to persons who it knows, or has reason to know, will resell
and/or transfer such Product outside of the Licensed Territory.
SECTION 2.02 DISCONTINUANCE OF THE DEVELOPMENT PROGRAM.
(a) Agouron shall, in a timely manner, use reasonable diligence in the
development and Registration of a Product in the Field in the Licensed
Territory. Reasonable diligence means a commercially reasonable standard of
effort based on the commercial potential for such Product in the Licensed
Territory. Development efforts undertaken by Agouron's Affiliates and
sublicensees shall be attributed to Agouron. If, after receipt of * written
notice of the failure by Agouron to use reasonable diligence in a timely manner
in the development and Registration of a Product in the Field in the Licensed
Territory, Agouron fails to fulfill its obligations under this Section 2.02(a),
or fails to commence reasonable efforts to fulfill such obligations, JE shall
have the right, as its sole and exclusive remedy for such failure, * in the
country in which reasonable efforts have not been used under the terms of
Section 2.01 * to Agouron, its Affiliates and sublicensees. The Parties, under
such * , shall have the right (with right of sublicense) to * in or into such
country a * JE Patent Rights and Development Program Patent Rights, and using
applicable JE Technology and Development Program Technology. If Agouron
disagrees with JE's conclusion that Agouron has failed to fulfill its obligation
under this Section 2.02, or fails to commence reasonable efforts to fulfill such
obligations, the Parties shall resolve such disagreement in accordance with the
dispute resolution procedures set forth in Section 7.03.
(b) In the event that Agouron elects to discontinue the Development
Program in all countries of the Licensed Territory, JE, its Affiliates and
sublicensees shall be free, without any further action by JE or Agouron, to
discover, develop, manufacture and/or commercialize Products on their own or
with any third party. In the event of Agouron's discontinuation of the
Development Program in all countries of the Licensed Territory, neither Agouron
nor its Affiliates and sublicensees shall have any right to use its Development
Program Technology to discover, develop, manufacture and/or commercialize
Products. In such event, the licenses granted to Agouron, its Affiliates and
sublicensees by the provisions of Section 2.01 to use, offer for sale, sell
and/or import Products in the Licensed Territory under applicable JE Patent
Rights and Development Program Patent Rights, and using applicable JE Technology
and Development Program Technology, shall be terminated. Agouron, its Affiliates
and sublicensees shall have the right to use Development Program Technology it
developed or acquired before the discontinuation of the Development Program in
all countries in the Territory for uses other than the discovery, development,
manufacture and/or commercialization of Products. Additionally, Agouron shall
transfer ownership to JE of any Dossiers for Products, and shall cooperate with
JE to effect an orderly transition of Agouron's development and Registration
responsibilities to JE.
SECTION 2.03 DILIGENT EFFORTS TO MARKET. The right of Agouron to market
a Product in a country located in the Licensed Territory shall be subject to
diligent marketing efforts by Agouron commensurate with the commercial
opportunity for such Product. Agouron shall provide a reasonable level of sales
and other promotional support for such Product in a country.
<PAGE>
Marketing efforts undertaken by Agouron's Affiliates and sublicensees shall
be attributed to Agouron. If, after receipt of a * written notice of the failure
by Agouron to provide the agreed-upon level of sales and other * for a Product
in a country located in the Licensed Territory, * to fulfill its obligation
under this Section 2.03, or * to * reasonable efforts to * obligations, JE * ,
as the sole and exclusive remedy for such * , to * in such country under the
terms of Section 2.01 converted to * to Agouron, its Affiliates and
sublicensees. The Parties, under such * , shall * to *in or into such country a
Product under applicable JE Patent Rights and Development Program Patent Rights,
and using applicable JE Technology and Development Program Technology. If
Agouron disagrees with JE's conclusion that Agouron has failed to fulfill its
obligation under this Section 2.03, or fails to commence reasonable efforts to
fulfill such obligations, the Parties shall resolve such disagreement in
accordance with the dispute resolution procedures set forth in provisions of
Section 7.03.
ARTICLE III - SHARING AND PROTECTION OF INTELLECTUAL PROPERTY
SECTION 3.01 PATENTS.
(a) * the most appropriate manner to prepare, file, prosecute, maintain
and extend patent applications and issued patents to protect the commercial
interests of * in patent applications and issued patents included within the * ;
provided, however, that * to reasonably * on the most appropriate manner to file
and prosecute patents to protect the commercial interests of * in the Compound,
intermediates thereof, or Products. * the patent applications and issued patents
included within the JE Patent Rights and is responsible for all preparation,
filing, prosecution, maintenance and extension of patent applications and issued
patents for the JE Patent Rights. * be responsible for all preparation, filing,
prosecution, maintenance and extension expenses for the JE Patent Rights payable
to third parties (including expenses for the preparation, filing, prosecution
and maintenance of patent term restoration applications and supplemental
protection certificates). * promptly advise * of the grant, lapse, revocation,
surrender, invalidation, or abandonment of any JE Patent Rights anywhere in the
world. * acknowledges that all rights, titles and interest in and to the JE
Patent Rights are * , subject to * under this Agreement.
(b) Each Party shall endeavor to patent inventions or discoveries
arising during the conduct of the Development Program if such inventions or
discoveries may reasonably be considered patentable under the particular law of
the country in question and, in the exercise of reasonable business judgment,
the patenting of such inventions in such country may be considered to provide
meaningful protection, all in accordance with the standards employed by such
Party in its usual course of business. As long as a Party has rights to Compound
and/or Products hereunder, the Parties agree, if feasible, and if commercially
reasonable, to prepare, file, prosecute, maintain and extend patent applications
and patents included within the Development Program Patent Rights in accordance
with * .
<PAGE>
(c) Any patent applications and patents included within the Development
Program Patent Rights covering inventions jointly made by the employees of more
than one Party ("Jointly Invented Development Program Patent Rights") shall be
jointly assigned to the employers of such inventing employees. Any Development
Program Patent Rights covering inventions solely made by the employees of a
single Party ("Separately Invented Development Program Patent Rights") shall be
assigned to the employer of such inventing employees. Subject to the rights
given the other Party, an assignee of Development Program Patent Rights shall be
entitled to * such assignee by operation of law; * to utilize Development
Program Patent Rights that have been assigned to * are set forth elsewhere in
this Agreement.
(d) * Separately Invented Development Program Patent Rights shall
determine the most appropriate manner to prepare, file, prosecute, maintain and
extend patent applications and issued patents to protect the commercial
interests of the Parties in the Separately Invented Development Program Patent
Rights; provided, however, that *
Separately Invented Development Program Patent Rights agrees to
reasonably consult with the other Party on the most appropriate manner to file
and prosecute patents to protect the commercial interests of the Parties in such
Separately Invented Development Program Patent Rights. * Separately Invented
Development Program Patent Rights shall be responsible for all preparation,
filing, prosecution, maintenance and extension expenses for the Separately
Invented Development Program Patent Rights payable to third parties (including
expenses for the preparation, filing, prosecution and maintenance of patent term
restoration applications and supplemental protection certificates).
(e) * Jointly Invented Development Program Patent Rights shall *
determine the most appropriate manner to prepare, file, prosecute, maintain and
extend patent applications and issued patents to protect the commercial
interests of the Parties in the Jointly Invented Development Program Patent
Rights. * shall * the preparation, filing, prosecution, maintenance and
extension expenses for all Jointly Invented Development Program Patent Rights
payable to third parties (including expenses for the preparation, filing,
prosecution and maintenance of patent term restoration applications and
supplemental protection certificates, but excluding any travel expenses of the
Parties, which shall be borne by the Party incurring such expenses); each Party
shall pay its share of such expenses within * from the date of its receipt of a
proper invoice for such expenses.
(f) Notwithstanding the preceding, if * its diligent efforts, in a timely
manner, in the preparation, filing, prosecution, maintenance and extension of
such patent applications and issued patents, * the preparation, filing,
prosecution, maintenance and extension of such patent applications and issued
patents, shall * such preparation, filing, prosecution, maintenance and
extension activities for such patent applications and/or patents included within
the Development Program Patent Rights.
(g) Upon * written notice, a Party may elect to abandon any patent
applications and/or terminate its obligations to pay or share in the expenses of
preparing, filing,
<PAGE>
prosecuting, maintaining and/or extending a patent application and/or
issued patent by notifying the other Party of such election. Notwithstanding any
other provision of this Agreement, after the effective date of such election,
the Party electing to abandon or terminate its obligations for such patent
application and/or patent shall not be responsible for the above-noted expenses
that are incurred after the effective date of such election, and shall be deemed
to have transferred and assigned to the other Party all of its ownership and
license rights under such patent application and/or patent. Additionally, if *
its obligation to * on a patent application and/or issued patent * , then any
claims included within such patent application and/or patent shall be deemed to
not be a Valid Claim. The electing Party and its employees shall continue to
reasonably assist the other Party in the preparation, filing, prosecution,
maintenance and/or extension of such patent application and/or patent.
(h) Representatives of Agouron and JE shall meet * (or * if necessary) to
review and discuss the actions taken or to be taken by each of the Parties in *
interests of the Parties in the Development Program Patent Rights. Such meetings
may be conducted in person or by means of telephone conference calls. Each Party
shall * in such meetings. Prior to or immediately after the filing of the
initial patent application for an invention, the filing Party shall provide the
authorized representatives of the other Party with an English-language version
of the patent application for * . If requested by a non-filing Party, the filing
Party shall also provide such non-filing Party with a full copy of each patent
application actually filed in English and in the language in which it was
originally filed. It is the intent of the Parties that any patent issuing to the
Parties hereunder shall be *
not subject to this Agreement. Each of the Parties shall * prepare a list
that reflects, to the best of its knowledge, the current status of any
Development Program Patent Rights for which it controls the preparation, filing,
prosecution, maintenance and/or extension of the patent applications and issued
patents, which list shall be submitted to the other Party * after * . JE shall *
prepare a list that reflects, to the best of its knowledge, the current status
of the JE Patent Rights. The Parties, if they so elect,* .
(i) Each of the Parties agrees to provide all required information and
to reasonably assist the other Party in the preparation, filing, prosecution,
maintenance and extension of patent applications and issued patents included
within the Patent Rights, and for patent term restoration applications and
supplemental protection certificates for the Patent Rights.
(j) Unless otherwise agreed, each of the Parties shall require their
respective employees to: (i) assign all of their rights and ownership in joint
inventions that are included within the Jointly Invented Development Program
Patent Rights jointly to the employers of the inventing employees (or,
alternatively, require such employees to assign all of their rights and
ownership in such joint inventions to their employer for reassignment jointly to
the employers of the inventing employees); and (ii) assist without further
compensation (except for reimbursement for reasonable and necessary expenses) a
requesting Party in preparing and prosecuting the patent application on such
joint inventions throughout the Territory, and in transferring rights to the
<PAGE>
employers of the inventing employees (including executing documents) to the
patents and patent applications for such joint inventions.
(k) Each Party shall promptly notify the other Party of its knowledge
of any potential infringement of the Patent Rights by a third party. The Parties
agree to cooperate in taking commercially reasonable legal actions to protect
the commercial interests of the Parties in the Compound, intermediates thereof
or Products against infringement by third parties. If, within three (3) months
following receipt of written notice requesting a Party join in an action to
protect against such infringement by third parties, a Party fails to participate
in such commercially reasonable action by the other Party to halt an alleged
infringement, the other Party shall, in its sole discretion, have the right to
take such action in such country as it deems warranted in its own name and/or in
the name of the other Party; the Party maintaining such action shall be
responsible for the costs of maintaining the action and shall be entitled to
receive all damages recovered from the action for the past infringement. If both
Parties wish to participate in taking action to protect their commercial
interests in the Compound, intermediates thereof or Products against
infringement, then Agouron shall control such action in the Licensed Territory
and JE shall control such action in the JE Territory. The costs of maintaining
such action shall be shared equally by the Parties, and the damages recovered
from such action for the past infringement shall be divided as follows: (i)
first, pro rata between JE and Agouron in an amount sufficient to reimburse each
them for their expenses incurred in such prosecution; *
thereafter, between JE and Agouron based on good-faith negotiations regarding
how to apportion any remaining damage recovery. Each Party agrees to render such
reasonable assistance as the prosecuting Party may request.
(l) Agouron agrees to notify JE at * initially * any JE Technology or
Compound in * any country in the Territory, to allow JE time to make any patent
filings or to take any other actions necessary to protect the JE Patent Rights,
JE Technology or Compound.
SECTION 3.02 INFRINGEMENT OF PATENTS OF THIRD PARTIES. Each Party, its
Affiliates and sublicensees, and their respective employees and agents shall use
diligent efforts to avoid known infringement of patents of any third party *
and/or Products. However, a Party, its Affiliates and sublicensees, and their
respective employees and * and their respective employees and agents if the
practice of the Patent Rights, JE Technology, and/or Development Program
Technology in discovering, developing, manufacturing or commercializing the
Compound, intermediates thereof and/or Products infringe any patent of any third
party. If a Party becomes aware of any claim or suit by any third party for
infringement of a patent of such third party in connection with * of the
Compound, intermediates thereof and/or Products by a Party hereto, such Party
shall notify the other Party in writing of such claim or suit within *
thereafter. Each Party agrees to render such reasonable assistance as the other
Party may request in defending any such claim or suit. The Parties*
<PAGE>
of any existing or potential infringement claim or action that would
require the * to a third party, except that if the Parties cannot promptly reach
agreement, they shall appoint an independent patent counsel to give an opinion,
* the Parties, as to whether there is a substantial risk that the third-party
patent is both valid and infringed. If the opinion is that there is a
substantial risk that the patent is both valid and infringed, the Party
marketing a Product in a country, after consultation with the other Party, * as
it . Unless the Parties agree otherwise,*
provided, however, that in no case shall * with respect to a Product for a
country in a * be reduced * with respect to such Product for such country in
such * period. Any remaining * amount may be used as described above in
subsequent * periods to * with respect to such Product for such country. Agouron
acknowledges that it is aware of a Cooperative Research and Development
Agreement between JE and the * (hereinafter referred to as "* ), which was
originally entered into in September 1993 and amended in March 1996.
Notwithstanding the preceding* under the terms of the * , and for obtaining any
consent required by the * for this issuance of the licenses granted Agouron
under the provisions of Section 2.01. Agouron shall be entitled to * on account
of *
SECTION 3.03 TRADEMARKS. A Party, its Affiliates and sublicensees, if any,
* any trademark office in the Territory any Trademark for use with Products for
which it holds license rights to make, use and/or sell hereunder * Such Party *
, title and interest in and to the Trademark in its own name or that of its
designated Affiliate or sublicensee, if any, during and after the term of this
Agreement. If required by the laws of a specific country, the Party owning the
Trademark shall assist the other Party in qualifying as a registered user of
such Trademark in such country. The Party owning a Trademark *
The Parties shall not use a Trademark used in marketing of Products in the
Territory for marketing other commercial products in the Territory.
Additionally, the Parties agree to cooperate in reasonable efforts to protect
the rights of the Parties in a Trademark, including notification of any
infringement which may come to a Party's attention, and the proper execution and
filing of appropriate registered user documents. *
Details regarding the license provisions of the Trademark license granted in
Article II, including quality and specifications of Product, shall be agreed
upon by the Parties and later attached as Attachment 1 to this Agreement.
SECTION 3.04 INFORMATION EXCHANGe. Upon execution of this Agreement
and, thereafter, on an ongoing basis during the Development Program, each Party
shall disclose to the other Party in confidence, subject to the terms of
Sections 3.05 hereof, *
<PAGE>
, as such items specifically relates to the Compound, intermediates thereof
or Products and are necessary or useful for the development or Registration of
Compound and/or Product, including the JE Patent Rights, JE Technology,
Development Program Patent Rights and Development Program Technology; each Party
shall provide technical assistance to the other Party to enable it to utilize
such information. Notwithstanding the foregoing, a Party shall not be obligated
to disclose to the other Party any information that it is prohibited from
disclosing to the other Party, either by reason of a contract with a third party
or by law. In the event of such a restriction, the Parties shall *
disclosure to be made.
SECTION 3.05 CONFIDENTIALITY. Except as otherwise expressly specified
in this Agreement and except for the proper exercise of any license rights
granted or rights reserved under this Agreement, JE and Agouron shall each keep
in confidence and shall each use its best efforts to cause its respective
Affiliates, employees, directors, agents, consultants, clinical research
associates, outside contractors, clinical investigators and sublicensees to whom
it is permitted to disclose information pursuant to the terms of this Agreement
to retain in confidence all confidential and proprietary information of the
other Party, including the Patent Rights, JE Technology, Development Program
Technology, information and materials exchanged under the terms of the
Confidentiality Agreement and the Material Transfer Agreement between the
Parties which were both originally entered into on December 22, 1997, accounting
and financial information and/or the marketing and business plans of such other
Party that is disclosed to it hereunder. Without limiting the foregoing, JE and
Agouron shall each exercise the same degree of diligence and care with respect
to the above-described information as it exercises with respect to its other
proprietary information. Each Party represents to the other Party that it
maintains policies and procedures designed to prevent the unauthorized
disclosure of its proprietary data and information. Each Party further agrees
that it shall limit dissemination of and access to the confidential and
proprietary information of the other Party within its organization to those of
its and its Affiliates' personnel who have a need to know the information. JE
and Agouron shall each be entitled to disclose the above-described information
to its consultants, clinical research associates, outside contractors,
collaborators, clinical investigators and other third parties who are subject to
confidentiality and use obligations equivalent to those applicable to the
disclosing Party hereunder, and to governmental or other regulatory and/or
health authorities, to the extent that such disclosure is reasonably necessary
to obtain patents, to obtain authorization or to conduct clinical trials on
Compound or Products, to prepare the Dossier, and/or otherwise to fulfill its
obligations pursuant to this Agreement. Each Party shall have the right to
disclose Development Program Technology to persons it proposes to enter into
business relationships with, if such persons are subject to confidentiality
obligations equivalent to those applicable to the disclosing Party hereunder.
The preceding obligations of confidentiality shall be waived as to information
that the Party claiming waiver can demonstrate, based on written records: (i)
was in the public domain at the time of disclosure hereunder; (ii) comes into
the public domain through no fault of the Party claiming waiver; (iii) was known
to the Party claiming waiver prior to its disclosure under this Agreement,
unless such information was obtained from the other Party on a confidential
basis; (iv) is disclosed on a non-confidential basis to the Party claiming
waiver by a third party having a lawful right to make such disclosure on a
non-confidential basis; (v) is published with the prior mutual agreement of the
Parties, after having given consideration to
<PAGE>
appropriate commercial factors; (vi) comes into the public domain through
governmental publication of a patent application; or (vii) is required to be
disclosed to file a patent or other regulatory application or to comply with
applicable laws and regulations. The obligations under this Section 3.05 shall
survive to the later of: (i) ten (10) years after the end of the Development
Program; or (ii) the termination or expiration date of the last to expire of any
license(s) granted pursuant to this Agreement, to the extent the Development
Program Technology or JE Technology is applicable to the practice of grants
under such license(s); or (iii) the expiration date of the last to expire of any
patent(s) within the Patent Rights on a Product. The Parties acknowledge and
agree that the Parties' rights and obligations under the Confidentiality
Agreement and the Material Transfer Agreement between the Parties which were
both originally entered into on December 22, 1997 are hereby superseded by the
provisions of this Section 3.05.
SECTION 3.06 PUBLICATION. JE and Agouron each acknowledges the interests of
the other Party in publishing certain of the results of its development and
Registration of a Product to obtain recognition within the scientific community
and to advance the state of scientific knowledge. The Parties also recognize
their mutual interests in obtaining valid patent protection for their drug
products. Consequently, a Party, its employees or consultants wishing to make a
publication shall provide the other Party the opportunity to review a draft
manuscript at least * to the date of the intended submission for publication (*
period as the Parties agree upon in light of the availability of clinical data
or other data to be described in the proposed publication) and, upon the other
Party's written request, shall delay submission for a period (not greater than *
from the date of such written request) sufficient to provide for the filing of
appropriate patent application(s) for any patentable subject matter disclosed in
such publication. Furthermore, in acknowledgment that certain Development
Program Technology, while not of a patentable subject matter, could be necessary
to protect the commercial interests of the Parties, the Parties agree that each
Party shall review in a timely manner (not greater than * , in light of the
availability of clinical data or other data to be described in the proposed
publication, from the date of a written request to such Party) a draft
manuscript, and propose the conditions under which the portion of such
technology disclosed in the draft manuscript that could be necessary to protect
the commercial interests of the Parties can be published. If the other Party
does not object to the publication within * from the date of such written
request, the requesting Party (subject to the other Party's right to request the
* delay described above for patentable subject matter disclosed in such
publication) shall be free to publish such manuscript. If a Party objects to the
publication of a portion of the draft manuscript, such Party shall indicate
specifically what modifications to the draft manuscript it believes is
appropriate to protect the commercial interests of the Parties and the reasons
therefor. After giving reasonable consideration to the suggestions of the
objecting Party, the Party wishing to make a publication shall have the final
authority to determine the scope, timing and content of the publication. Each
Party will use * inform the other Party about proposed oral presentations which
such Party intends to make, if it will be disclosing new scientifically
significant data concerning Product at such oral presentation.
<PAGE>
ARTICLE IV - DEVELOPMENT AND COMMERCIALIZATION STRUCTURE
SECTION 4.01 COORDINATION. Coordination of the Parties' development and
commercialization efforts for Compound and Products in the Licensed Territory
shall be carried out as specified in Sections 4.02 and 4.03.
SECTION 4.02 DEVELOPMENT AND REGISTRATION; Responsibility for
Development Costs. JE and Agouron acknowledge their mutual intention to
cooperate in a commercially reasonable manner in the timely development of
Compound and Products in the Territory. The Parties further acknowledge their
mutual willingness to discuss ad hoc agreements to establish appropriate
mechanisms for such cooperation. Recognizing the importance of timely initiation
of development activities, however, JE and Agouron agree to the following basic
approach to development of Compound and Products in the Licensed Territory, and
to the conduct and funding of their respective development activities.
(a) A development plan prepared by Agouron listing the major activities
to be conducted under the Development Program for the Registration of Product in
the Field in the Licensed Territory during such period, including the timelines
for pre-clinical tests, clinical trials, and any other procedures required to
obtain such Registration, shall be set forth in Exhibit 1. After the execution
of this Agreement, Agouron shall be responsible for the design, update and
implementation of the Development Program that is undertaken by Agouron and JE
to accomplish the development plan. All costs for such implementation shall be
borne by Agouron.
(b) The Parties acknowledge that it will be necessary to amend and
update the Development Program as additional information becomes available
concerning the prerequisites necessary for Registration of Product in the
Licensed Territory. Agouron shall have the right to amend, from time to time,
the Development Program. Agouron shall advise JE in writing with respect to any
change in the Development Program that may cause a delay of five (5) months or
more in any of the basic milestones thereunder or which consists of a material
change in the clinical protocols. In addition, any change in the Development
Program that materially affects the then-existing Compound Supply Plan shall be
subject to the mutual agreement of JE and Agouron.
(c) As soon as possible after the execution of this Agreement, the
Parties shall promptly reach agreement on the basic terms under which JE will
manufacture and supply Compound to Agouron, its Affiliates and sublicensees for
use in development and registration activities for Compound and/or Product,
including the amounts and timing of deliveries of Compound (the "Compound Supply
Plan"); the Compound Supply Plan, when agreed upon, will be incorporated as part
of the Development Program.
(d) Agouron shall be responsible for conducting and paying the costs of
any studies that involve Products, and which Agouron pursues for the Licensed
Territory (including Phase IV studies and any studies required to achieve
Registration of a Product in the Licensed Territory). Agouron shall have the
responsibility, in its sole discretion, for determining the magnitude and scope
of any Phase IV studies to be conducted utilizing such Product in the Licensed
Territory. Except as provided in Section 4.02(h), Agouron shall be responsible
for the costs of regulatory
<PAGE>
applications and subsequent amendments thereto and fees payable to
regulatory agencies required for the commercialization of Products in the
Licensed Territory.
(e) Agouron, at its own cost, shall be responsible for submission of
Dossiers for a Product to the regulatory authorities in the Licensed Territory
in pursuit of approvals to sell such Product and shall have the primary
responsibility in the countries of the Licensed Territory for the ongoing
correspondence and interaction before and after Registration of such Product
with the respective regulatory authorities. Agouron, at its own cost, shall be
responsible for initially obtaining and amending, if required, all required
approvals from the regulatory authorities in the Licensed Territory for
importing, distributing and selling a Product, including negotiating pricing and
reimbursement for a Product with the regulatory authorities of the individual
countries of the Licensed Territory. All Dossiers for Product in the Licensed
Territory shall be owned by and be in the name of Agouron.
(f) JE shall cooperate with Agouron to furnish data or other
information JE has access to that is related to Compound and/or Product, to
enable Agouron, at Agouron's expense, to Register a Product in the Licensed
Territory. JE agrees to execute such documents as Agouron may reasonably request
in connection with such Product Registrations.
(g) JE will be responsible for the cost and implementation of all
clinical studies that JE, in its sole discretion, pursues to support its
development and Registration of Products in the JE Territory.
(h) JE shall be responsible for obtaining, in its name and at its cost
and expense, all necessary governmental approvals required to manufacture and
deliver Compound to Agouron. JE shall file and maintain the drug master file for
Compound with the FDA.
(i) To the extent required to support Registrations of a Product (such
as for Investigational New Drug Applications and New Drug Applications), Agouron
shall have reference rights to use the safety, manufacturing and other data in
such drug master file. Each Party shall be entitled to have the government or
health authorities cross-reference the information contained in any Dossier for
a Product filed in any country in the Territory, as may be necessary to obtain
and maintain the Registration on a Product in any other country in the
Territory.
(j) Each Party agrees to use its diligent efforts in responding in a
timely manner, but not more than thirty (30) days, to requests from the other
Party for preclinical and clinical results and other information concerning the
Development Program to enable the other Party to comply with the regulatory
requirements for the Development Program. To the extent possible, the Parties
shall develop and use compatible reporting forms in the clinical studies aimed
at achieving Registration of Products. A Party conducting a study involving
Product shall assist the other Party with incorporating the data from such study
into their Dossiers, if necessary.
(k) Agouron shall keep JE informed of its progress in the development
and Registration of Products. This information exchange shall include, at least
two (2) times per year, regular meetings of the Parties, and such written
progress reports as are agreed to by the
<PAGE>
Parties that summarize Agouron's activities during each reporting period
and Agouron's planned activities for the succeeding period. JE shall keep
Agouron informed of its development and Registration activities for Products,
including any significant planned activities for the succeeding one (1) year
period. The location for such meetings shall be at either Party's facilities or
such other sites agreed to by the Parties. Meeting minutes shall be promptly
prepared and approved by the designated representatives of each of the Parties.
Each Party shall pay all of its respective expenses for such meetings. Each of
the Parties shall assign a representative to facilitate communications between
the Parties; each representative shall report to his/her management on the
matters discussed at each of the meetings of the Parties. Each Party, prior to
its implementation of a preclinical or clinical study involving a Product that
could have a material impact on the commercial potential of such Product in the
other Party's marketing territories, shall use its reasonable efforts to provide
the other Party with a copy of the draft protocol for such study, and an
opportunity, in a timely manner, but not more than thirty (30) days, to comment
on the purpose and proposed design and implementation of such study. Each Party
shall provide the other Party with access to its relevant records and facilities
to permit a reasonable review of the progress, from time to time, of its
development and Registration activities. Each Party agrees to use its diligent
efforts in responding in a timely manner, but not more than thirty (30) days, to
requests from the other Party for information concerning the development and
Registration of Products.
(l) JE and Agouron shall each use qualified persons in the development
activities of the Development Program.
(m) All work in connection with the development of Compound or
Products, to the extent required by applicable laws or regulations, shall be
conducted in accordance with Good Laboratory Practices, Good Manufacturing
Practices and Good Clinical Practices, as such rules of practice are amended
from time to time. Each Party in the conduct of its activities shall comply with
all applicable laws, rules and regulations of each jurisdiction within the
Territory that are applicable to the development, testing, manufacture,
labeling, packaging, storage, marketing, distribution, sale, promotion and
import or export of Product.
(n) If a Party is conducting a pre-clinical study in a country located
in the other Party's marketing territory, the Party conducting the study shall
use its best efforts to avoid interfering with such other Party's activities in
such country.
SECTION 4.03 MARKETING. Agouron shall be responsible for the marketing
of Products in the Licensed Territory. JE and Agouron agree to the following
basic approach to the marketing of Products in the Licensed Territory, and to
the conduct of their marketing activities in their respective marketing
territories.
(a) Agouron shall be responsible for the design, update and
implementation of the marketing programs and distribution and sale of Product in
the Licensed Territory, including the development and selection of the marketing
plan for a Product and the promotional messages and overall positioning for a
Product in any countries located in the Licensed Territory. All costs for such
implementation shall be borne by Agouron. Agouron shall have the right to amend,
from time to time, its marketing programs.
<PAGE>
(b) The promotional messages and overall positioning for a Product that
JE shall use in its marketing programs in the JE Territory shall be consistent
with a Product's marketing plan developed by Agouron for the Licensed Territory.
JE shall modify the positioning and messages only to the extent required to
respond to country-specific needs.
(c) Agouron shall keep JE informed of Agouron's current and planned
marketing activities in the Licensed Territory. This information exchange shall
take place by means of semi-annual meetings of the Parties, and such written
progress reports as are agreed to by the Parties that summarize Agouron's
activities during a semi-annual period and Agouron's planned activities for
Products for the succeeding semi-annual period. JE shall keep Agouron informed
of JE's marketing activities in the JE Territory. The location of such meetings
shall be at either of the Party's facilities or other sites agreed to by the
Parties. Meeting minutes shall be promptly prepared and approved by the
designated representatives of each of the Parties. Each of the Parties shall pay
all of its respective expenses for such meetings. Each of the Parties shall
assign a representative to facilitate communications between the Parties; each
representative shall report to his/her management on the matters discussed at
the meetings of the Parties. At the meetings of the Parties, the representatives
of the Parties shall review and discuss the consistency of Agouron's marketing
plans for a Product in the Licensed Territory with JE's marketing plans for such
Product in the JE Territory, and the conduct of additional marketing and
post-Registration clinical studies for a Product that are not conducted as part
of the Development Program; the conduct and funding of clinical studies for a
Product that are conducted as part of the Development Program shall be governed
by the provisions of Section 4.02.
(d) Unless prohibited by law or regulation, the labeling for a Product
in the countries in the Licensed Territory shall state that such Product is
licensed from JE. To the extent required to comply with the provisions of this
Section 4.03(d), each Party grants to the other Party the right to use its name
and logos in the labeling for a Product.
(e) In accordance with the provisions of the license rights granted in
Article II, Agouron may, without charge, market a Product in the Licensed
Territory using JE's Trademarks and Trade Dress or may use its own Trademarks
and Trade Dress, and JE may, without charge, market a Product in the JE
Territory using Agouron's Trademarks and Trade Dress or may use its own
Trademarks and Trade Dress.
(f) Agouron and JE shall each use qualified persons in its marketing
activities for a Product in its respective marketing territories.
(g) Agouron shall be responsible for responding, in a timely manner, to
inquiries, and for reporting adverse drug reactions related to a Product in a
country located in the Licensed Territory. Notwithstanding Agouron's ultimate
responsibility for the professional services and the health and/or regulatory
authorities' communications related to a Product in a country located in the
Licensed Territory, to the extent reasonably possible, JE shall have the right
to review, comment and participate in communications concerning such Product
with the health and/or regulatory authorities in such country. Furthermore,
Agouron and JE shall each be entitled to respond to routine medical questions or
inquiries directed to them. Each Party shall use its best
<PAGE>
efforts to provide the other Party with all information (other than any
proprietary information not related to such Product) reasonably necessary to
respond properly and promptly to any such questions or inquiries; the Parties
shall also use their best efforts to keep such information current. The Parties
shall confer with respect to responding to anticipated inquiries and questions.
Each Party shall use its best efforts to promptly provide the other Party with
new information, scientific findings, and summaries of regulatory or judicial
requests specifically related to a Product, to the extent that such information,
findings or requests are likely to have a significant impact on the other
Party's marketing of such Product.
(h) Each Party, its Affiliates and sublicensees, agrees throughout the
duration of this Agreement to notify the other Party immediately in English of
any information concerning any serious or unexpected side effect, injury,
toxicity or sensitivity reaction, or any unexpected incidents, and the severity
thereof, associated with the clinical uses, studies, investigations, tests and
marketing of a Product, whether determined or not to be attributable to such
Product. "Serious," as used in this Section 4.03(h), refers to an experience
which is life-threatening or results in death, permanent or substantial
disability, in-patient hospitalization or prolongation of hospitalization, or
produces a congenital anomaly or cancer, or is the result of an overdose.
"Unexpected," as used in this Section 4.03(h) for a non-marketed Product, is one
that is not identified in nature, severity, or frequency in the current clinical
investigator's confidential information brochure. "Unexpected," as used in this
Section 4.03(h) for a marketed Product, is one that is not listed in the current
labeling for such Product and includes an event that may be symptomatically and
pathophysiologically related to an event listed in the labeling but differs from
the event because of increased frequency, greater severity or specificity. Each
Party shall cooperate with the other to resolve complaints received by the other
Party with respect to any Product. Without limiting the foregoing, each Party
agrees to notify the other Party of any severe, serious, alarming or unexpected
complaints that they receive, whether or not determined to be attributable to a
Product, by telephone within twenty-four (24) hours, and in writing within three
(3) business days of receipt of the complaint. All other complaints shall be
forwarded by a Party to the other Party within thirty (30) calendar days of its
receipt of the complaint.
(i) Each Party further agrees to immediately notify the other Party of
any information that such Party, its Affiliates or sublicensees receives
regarding any threatened or pending action by a governmental agency that may
affect the safety and efficacy claims of a Product or the continued development
or marketing of a Product. Upon receipt of any such information, the Parties
shall consult with each other in an effort to arrive at a mutually acceptable
procedure for taking appropriate action; provided, however, that nothing
contained herein shall be construed as restricting either Party's right to make
a timely report of such matter to any government agency, or take other action
that it deems to be appropriate or required by applicable law or regulation. The
information to be provided hereunder shall be provided in English.
(j) Without limiting the foregoing, it is also understood that each
Party may notify its Affiliates or sublicensees of any incident or event
reported by the other Party under this Section 4.03.
SECTION 4.04 SUPPLY OF COMPOUND. It is anticipated that timely
development of Compound and/or a Product will require the manufacture of
significant amounts of the
<PAGE>
Compound, and that successful worldwide commercialization of a Product will
require annual production of large quantities of the Compound.
(a) In accordance with the provisions of Section 4.04, Agouron shall
purchase from JE, and JE shall timely deliver Compound for use in the
development and Registration activities for Compound and/or Product, including
using Compound to make Product to be used in clinical studies and trials and for
special license sales. JE shall provide Agouron, * , in accordance with Compound
Supply Plan, not more than * of Compound to be used in implementing the
Development Program, provided that the total daily dose per patient does not
exceed * of Compound; if such daily dose exceeds *
of Compound per patient, then the amount to be provided by JE shall be
increased by the amount (not to exceed, in the aggregate, * ) necessary for
Agouron to implement the Development Program. JE shall * Agouron additional
Compound for use in implementing the Development Program at * such Compound *
"FBMCC" or "Fully Burdened Manufacturing Cost of Compound" means the cost of
Compound shipped, and shall include the direct and indirect costs of procuring
and/or producing Compound shipped in accordance with either generally accepted
accounting principles or the equivalent international accounting standards.
Direct costs shall include direct labor (including fringe benefits), direct
materials (including taxes and duties) and third-party contract costs required
to manufacture the bulk product Compound (or related intermediates). Indirect
costs (to be allocated to the production effort) shall include, but not be
limited to, items treated as "manufacturing overhead," such as indirect labor
and materials, fringe benefits, occupancy costs (including electricity, water,
waste disposal, other utilities and property taxes), depreciation of property,
plant and equipment used in the manufacturing process and other costs allocable
to the manufacturing process. Overhead shall not include start-up costs, or idle
or excess capacity charges. Included in the cost of Compound shall be
manufacturing variances, including inventory reserves and non-conforming
production runs. In the event Agouron intends to use a chemical compound other
than JE-2147 for use in the development and registration activities for Compound
and/or Product, Agouron shall timely consult with JE with respect to such
intentions. In the event the Parties mutually agree to utilize such alternative
chemical compound and JE agrees to be the supplier of such alternative chemical
compound to Agouron, then the Parties will determine supply arrangements
therefore in accordance with the general terms and conditions set forth herein
for the supply of Compound *, of * the amount referred to above of such
alternative chemical compound to be used in implementing the Development
Program; provided, however, that, if Agouron elects to develop a chemical
compound other than JE-2147, Agouron shall * , if any, of the cost of providing
Agouron's requirements of such alternative chemical compound for use in
implementing the Development Program, * in supplying Agouron with the amount
referred to above of JE-2147.
(b) In accordance with the provisions of Section 4.04, Agouron shall
purchase from JE, and JE shall timely deliver Compound for use in making the
finished dosage form(s) of Product to be sold in the Licensed Territory, at a
price which equals * and/or * such Compound, * of *
<PAGE>
(c) JE shall maintain books of account and complete and accurate
records of all of its FBMCC of procuring and/or producing such Compound in
sufficient detail to permit Agouron to confirm the correctness of such cost
items. JE shall provide Agouron, upon reasonable request, with copies of
invoices supporting third-party expenditures for procuring and/or producing such
Compound. If Agouron reasonably believes that an audit of FBMCC is appropriate
after reviewing the information received from JE, Agouron shall have the right,
by an independent accounting firm reasonably acceptable to JE, employed by
Agouron and at Agouron's own expense, to examine the pertinent books and records
of JE at all reasonable times (but not more often than * ) for the purpose of
determining and reporting on the correctness of FBMCC reported to Agouron; it
being understood that such examination, with respect to any audit for a * ,
shall not commence later than * following the end of such * . If an error is
found in the amount of FBMCC which is more than * of the amount initially
reported to Agouron, then JE shall reimburse Agouron for the reasonable cost of
such audit.
(d) If, JE notifies Agouron that it is unable to timely deliver
Compound ordered by Agouron in accordance with the provisions of this Section
4.04(d), or JE fails to timely deliver * of aggregate Compound ordered by
Agouron in accordance with the provisions of this Section 4.04(d) during any *
period, and such Compound was ordered by Agouron in a timely manner in
accordance with the forecasting and ordering procedures agreed upon by the
Parties, then JE agrees * to make or have made an adequate commercial
supply of Compound needed to fulfill its requirements of Compound to be used in
making Product for sale or distribution in the Licensed Territory.
Notwithstanding the preceding, it is agreed and understood that if JE is able to
supply a portion, but not all, of Agouron's requirements for Compound in a
timely manner, then the parties shall * the amount of Compound which Agouron * ,
and/or * , to fully satisfy its requirements for Compound; at a minimum, Agouron
shall be entitled to make or have made, for a commercially reasonable minimum
period, a commercially reasonable minimum amount of Compound, and JE will grant
Agouron and/or such third party * for such limited purpose. The agreed-upon
forecasting and ordering procedures shall provide, at minimum, for Agouron to
provide JE * with an * of Agouron's * of Compound to be purchased by Agouron
from JE during the following * ; for the first * , the * shall be * ; for the
next * , the estimate shall be * ; and for the subsequent * , the estimate shall
* . Agouron shall use all reasonable efforts to make each forecast as accurate
as possible. Compound will be ordered * by Agouron, and such firm purchase
order(s) shall be placed at least * (or such shorter period of time agreed upon
by the Parties) in advance of the requested delivery date(s); unless agreed to
by the Parties, no * purchase order shall be plus or minus * of the volume
included in the most recent forecast for such * , which was provided to JE at
least * prior to the scheduled delivery date, and shall not provide for more
than * . All orders shall be in writing.
<PAGE>
(e) It is the present intention of the Parties that JE shall have *
supply of Compound to Agouron (hereinafter referred to as the
"JE Compound Supply Option") in accordance with the following conditions:
(i) Within * after the * , the Parties shall agree upon a date
by which JE must exercise the JE Compound Supply Option
("Exercise Date"); the Exercise Date shall be approximately the date
which is * the expected NDA filing date for the first Product.
(ii) All Compound shall be manufactured in accordance with the
specifications to be determined during development. JE warrants that
each shipment of Compound will conform to the specifications to be
determined during development, and will be made, stored, packaged,
labeled and controlled by JE in accordance with applicable regulatory
standards. JE will provide to Agouron concurrently with each shipment
of Compound a Certificate of Analysis with respect to such compliance.
(iii) JE warrants that the manufacturing facility and the
equipment and personnel used to produce Compound that will be used for
clinical studies and/or commercial supply are now, and at the time each
batch of Compound is produced shall be, properly maintained and
qualified to make pharmaceutical grade products consistent with
applicable Good Manufacturing Practice requirements. Agouron agrees to
provide to JE technical support in meeting the Good Manufacturing
Practice requirements imposed by the regulatory agencies of the various
countries of the Licensed Territory. * .
(iv) Sale and delivery of Compound will be subject to an
agreed-upon form of purchase order being issued by Agouron and
accepted by JE. All sales and deliveries of Compound shall be on the
basis * (in accordance with INCOTERMS 1990). Title and risk of loss,
damage and delay shall pass to Agouron *
(v) If Agouron is prohibited by formal governmental or
regulatory action in a country located within the Licensed Territory
from importing into and/or selling Product containing Compound, made by
JE or its suppliers, or is prohibited from importing into and/or using
Compound made by JE or its suppliers in the manufacture of Product,
Agouron may * its requirements of Compound for such country, and
purpose. It is understood and agreed to by the Parties that such * are
* during which such prohibitions are in effect.
(vi) Each Party shall grant the other Party a right of
reference to the drug master file for Compound in the countries where
the other Party, its Affiliates or sublicensees are marketing Product
containing the Compound, and shall take all other steps as may be
reasonably requested by a manufacturer of such Compound for the
<PAGE>
limited purpose of enabling it to manufacture Compound for such other
Party. The manufacturer shall manufacture Compound in compliance with
the Dossier for the Compound. Each Party shall promptly and fully
advise the other Party of any changes, alterations or amendments to the
drug master file for Compound or any amendments, instructions or
specifications required by the health or regulatory authority, and the
Parties shall confer with respect to the best mode of compliance with
any such requirements.
(vii) In the event that, after delivery, Agouron determines
that Compound does not meet the applicable specifications, JE's
obligations shall be * , or * for such non-conforming Compound.
(f) At least * before the Exercise Date, Agouron shall * JE to * of
Compound for use in making Product. On or before the Exercise Date, JE shall
notify Agouron * the JE Compound Supply Option. If JE fails to notify Agouron *
of its election to exercise the JE Compound Supply Option on or before Exercise
Date, the JE Compound Supply Option shall * . If the JE Compound Supply Option
expires unexercised the following provisions apply:
(i) Agouron may manufacture and/or have a third party
manufacture its commercial requirements of Compound in the Territory,
and JE shall grant Agouron, and third-party manufacturers utilized by
Agouron, all necessary licenses on Compound for use solely in producing
Compound for use in making Products.
(ii) In accordance with the provisions of Section 4.05, *
for use in the JE Territory.
(g) As part of the Development Program, JE and Agouron may* and * to
optimize the cost-effective synthesis and delivery of Compound. JE and Agouron
shall * Compound * as it is * ; the Parties also agree to continue to use
technically and commercially reasonable efforts to reduce the costs of
manufacturing Compound throughout the period of commercialization of a Product
containing such Compound. In accordance with the provisions of Section 3.05,
each Party further specifically agrees that it shall limit dissemination of and
access to the confidential and proprietary information of the other Party which
such Party receives pursuant to the provisions of this Section 4.04(g), within
such Party's organization to those of its and its Affiliates' personnel who have
a need to know the information. JE and Agouron * low-cost commercial
manufacturing sources for Compound. To assure a continuous and cost-effective
supply of Compound during clinical development and commercialization, JE agrees
to use its reasonable efforts to utilize low-cost commercial manufacturing
sources for the manufacture of Compound and JE agrees to engage at least *
manufacturers for the production of Compound.
<PAGE>
SECTION 4.05 SUPPLY OF PRODUCT. The details for manufacturing Product
will be determined after the execution of this Agreement, according to the
following conditions:
(a) Agouron shall be responsible for manufacturing Product.
(b) Agouron shall * , in accordance with a Product Supply Plan to be
entered into between the Parties, * the amount of Product which can be
manufactured from * of Compound, to be used in implementing the Development
Program in the JE Territory; the Product Supply Plan, when agreed upon, will be
incorporated as part of the Development Program. Agouron * JE * Product for use
in implementing the Development Program * which equals * of procuring and/or
producing such Product, * such * of * ; provided, however, that JE shall provide
Agouron, * , all Compound necessary to manufacture such Product for JE (or *
Agouron for the cost of the Compound, plus * such * used by Agouron to
manufacture such Product for JE).
(c) In accordance with the provisions of Section 4.04, JE shall * from
Agouron, and Agouron shall timely deliver Product to be sold in the JE
Territory. The price of Product to be sold to JE by Agouron shall be at a price
which * such Product, plus a * . "FBMCP" or "Fully Burdened Manufacturing Cost
of Product" means the cost of Product shipped, and shall include the direct and
indirect costs of procuring and/or producing such Product shipped in accordance
with either generally accepted accounting principles or the equivalent
international accounting standards. Direct costs shall include direct labor
(including fringe benefits), direct materials (including taxes and duties) and
third-party contract costs required to manufacture the bulk product Compound (or
related intermediates) and the finished Product. Indirect costs (to be allocated
to the production effort) shall include, but not be limited to, items treated as
"manufacturing overhead," such as indirect labor and materials, fringe benefits,
occupancy costs (including electricity, water, waste disposal, other utilities
and property taxes), depreciation of property, plant and equipment used in the
manufacturing process, and other costs allocable to the manufacturing process.
Overhead shall not include start-up costs, or idle or excess capacity charges.
Included in the cost of Product shall be manufacturing variances, including
inventory reserves and non-conforming production runs.
(d) Agouron shall maintain books of account and complete and accurate
records of all of its FBMCP of procuring and/or producing such Product in
sufficient detail to permit JE to confirm the correctness of such cost items.
Agouron shall provide JE, upon reasonable request, with copies of invoices
supporting third-party expenditures for procuring and/or producing such Product.
If JE reasonably believes that an audit of FBMCP is appropriate after reviewing
the information received from Agouron, JE shall have the right, by an
independent accounting firm reasonably acceptable to Agouron, employed by JE and
at JE's own expense, to examine the pertinent books and records of Agouron at
all reasonable times (but not more often than * ) for the purpose of determining
and reporting on the correctness of FBMCP reported to JE; it being understood
that such examination, with respect to any audit for a * period, shall not
commence later than * following the end of such
<PAGE>
* period. If an error is found in the amount of FBMCP that is more than *
of the amount initially reported to JE, then * .
(e) Agouron shall supply Product to JE in accordance with the following
conditions:
(i) All Product shall be manufactured in accordance with the
specifications to be determined during development. Agouron warrants
that each shipment of Product to JE will * be determined during
development, and will be made, stored, packaged, labeled and controlled
by Agouron in accordance with applicable regulatory standards. Agouron
will provide to JE concurrently with each shipment of Product a
Certificate of Analysis with respect to such compliance.
(ii) Agouron warrants that the manufacturing facility and the
equipment and personnel used to produce Product that will be supplied
to JE, at the time each batch of Product is produced shall be, properly
maintained and qualified to make pharmaceutical grade products
consistent with applicable Good Manufacturing Practice requirements. JE
agrees to provide to Agouron technical support in meeting the Good
Manufacturing Practice requirements imposed by the regulatory agencies
of the various countries of the JE Territory. * .
(iii) Sale and delivery of Product to JE will be subject to *
being issued by JE and accepted by Agouron. All sales and deliveries
of Product shall be on the basis * (in accordance
with INCOTERMS 1990). Title and risk of loss, damage and delay shall*.
(iv) JE shall grant Agouron a right of reference to the drug
master file for Product in the countries of the JE Territory, and shall
take all other steps as may be reasonably requested by a manufacturer
of such Product * enabling it to manufacture Product for JE. The
manufacturer shall manufacture Product in compliance with the Dossier
for the Product. Each Party shall promptly and fully advise the other
Party of any changes, alterations or amendments to the drug master file
for Product in the countries of the JE Territory or any amendments,
instructions or specifications required by the health or regulatory
authorities in the countries of the JE Territory, and the Parties shall
confer with respect to the best mode of compliance with any such
requirements.
(v) In the event that, after delivery, JE determines that
Product does not meet the applicable specifications, Agouron's
obligations shall be *.
(f) JE, * , shall assist Agouron in the identification of low-cost
formulating sources for making Product. JE shall * , to
<PAGE>
the extent available, technical and manufacturing assistance and use of its
technology and proprietary information to Agouron in an effort to decrease the
costs of making such Product.
(g) In the event that: (i) any governmental or regulatory authority
issues a request, directive, or order that any Product be recalled or withdrawn;
or (ii) a court of competent jurisdiction in a final, nonappealable judgment
orders a recall or withdrawal of any Product; or (iii) JE and Agouron agree that
a Product should be recalled or withdrawn, each of the Parties shall take all
appropriate corrective actions to effect the recall or withdrawal in its
respective territories, and shall cooperate fully with each other in conducting
such recall to the full extent necessary to ensure that the recall is effective.
The costs and expenses of notification and destruction or return of the recalled
or withdrawn Product in the Licensed Territory shall be * comply with this
Agreement, * , its Affiliates or sublicensees, in which event the costs
and expenses s a determination based on *. In the event that either Party has
reasonable scientific grounds to request the other Party (respectively,
the "Requesting Party" and the "Requested Party") to recall or withdraw a
Product from the Requested Party's territory for health or safety reasons and
the Requested Party does not recall or withdraw said Product, * .
(h) As part of the Development Program, JE and Agouron may conduct
formulation development activities to optimize the cost-effective formulation
and delivery of Product. JE and Agouron shall * their * Product formulation
technology * to each other; the Parties also agree to * technically and
commercially reasonable efforts to * formulating Product throughout the period
of * of such Product. In accordance with the provisions of Section 3.05, each
Party further specifically agrees that it shall limit dissemination of and
access to the confidential and proprietary information of the other Party which
such Party receives pursuant to the provisions of this Section 4.05(h), within
such Party's organization to those of its and its Affiliates' personnel who have
a need to know the information. JE and Agouron agree to cooperate to identify
low-cost commercial formulating sources for Product. To assure a continuous and
cost-effective supply of Product during commercialization of the Product,
Agouron agrees to use its reasonable efforts to utilize low-cost commercial
formulating sources for the formulation of Product.
ARTICLE V - ADVANCE PAYMENTS AND ROYALTIES
SECTION 5.01 ADVANCED PAYMENTS AND ROYALTIES.
(a) Subject to the terms and conditions of this Agreement and in
consideration for the rights granted to Agouron under this Agreement, Agouron
shall make the following one-time-only payments to JE:
<PAGE>
PAYMENT
MILESTONE EVENT (U.S. Dollars)
(i) Within thirty (30) days of execution of this Agreement
(actually paid July 17, 1998) $6,000,000
(ii) Within thirty (30) days of the earlier of:
(1) the first completion of a Phase I Clinical
Study for any Product; or (2) September 30, 2000* $3,000,000
(iii) Within thirty (30) days of the earlier of:
(1) the first completion of a Pilot Phase II
Study for any Product; or (2) December 31, 2000* $3,000,000
(iv) Within thirty (30) days of first U.S. NDA or EMEA
filing for any Product $6,000,000
(v) Within thirty (30) days of first U.S. NDA approval
for any Product $3,000,000
(vi) Within thirty (30) days of the first European
Commission approval for any Product
(but not before receipt of pricing approval
for such Product in
at least one (1) Major Market European Country) $5,000,000
TOTAL PAYMENTS: $26,000,000
* The specified calendar milestone payment dates referred to in items (1)
and (2) above (i.e. for item (1): September 30, 2000; or for item (2): December
31, 2000) shall be extended by the number of day(s) which the completion of the
applicable milestone (i.e. for item (1): the first completion of a Phase I
Clinical Study for any Product; or for item (2) the first completion of a of a
Pilot Phase II Study for any Product) is delayed by reasons beyond Agouron's
control, as a result of: (i) governmental and/or regulatory actions or changes
in policies of the applicable authorities; (ii) safety or efficacy concerns
about JE-2147; (iii) failure of JE to timely provide ordered Compound to
Agouron; (iv) difficulties to find effective Product formulations despite
Agouron's reasonable efforts; or (v) such other reasons as Parties may agree
upon after good faith negotiations.
________________________________________________________________________________
* of the payments made pursuant to the provisions of this Section 5.01(a) shall
be creditable against future royalty payments to be made to JE pursuant to the
provisions of Section 5.01(b); provided, however, that in no case shall such
credits against royalties payable to JE with respect for a semi-annual calendar
period exceed more than * of the amount of royalties otherwise due for such
semi-annual period. Any remaining creditable amount may be credited as described
above in subsequent semi-annual calendar periods against royalties due JE for
such semi-annual periods. Except as expressly provided elsewhere in this
Agreement, payments made pursuant to the provisions of this Section 5.01(a)
shall be nonrefundable. If Agouron elects to terminate its marketing rights for
a Product in all of the countries located in the Licensed Territory pursuant to
the provisions of Section 6.02(b),* .
(b) Subject to the terms and conditions of this Agreement and in
consideration for the rights granted to Agouron under this Agreement, Agouron
shall pay to JE a royalty * whose manufacture, use or sale would have infringed
(in the absence of license rights granted by JE to Agouron under this Agreement)
a Valid Claim in the country(s) where such manufacture, use or sale of Product
occurred.
(c) The Parties agree that the calculation of the amount of royalties due
shall be subject to and in accordance with the following provisions:
(i) Royalties under Section 5.01(b) shall be payable only once
with respect to a given unit of Product, regardless of the number of
Valid Claims pertaining to such
<PAGE>
Product or the number of countries in which the manufacture, use or
sale of a given unit of Product occurs.
(ii) Royalties due on the sale of a Product shall only be
owed from the date of the *by a Party, its Affiliates or sublicensees
of such Product in a country in the Licensed Territory, until the
latest of: (i) the * anniversary of the * in any dosage form of such
Product in such country if * in making, using or selling such Product,
or such earlier date as the antitrust law (or other law of similar
nature) in such country limiting the accrual of royalties requires;
or (ii) the * that would have been * by the manufacture, use or sale
of such Product in the country(s) where the manufacture, use or sale
of such Product occurred.
(iii) Royalties under Section 5.02(b) shall be payable if
either the manufacture, use or sale of a Product would have infringed
(in the absence of license rights granted by JE to Agouron under this
Agreement) a Valid Claim in the country(s) where such manufacture, use
or sale of Product occurred. Thus, royalties under 5.02(b) are payable
if a Product is manufactured in a country where a Valid Claim would be
infringed by such manufacture, and then is transferred for use or sale
into a country where no such Valid Claims exist. Alternatively,
royalties under 5.02(b) are payable if a Product is first sold in a
country where a Valid Claim would be infringed by such sale, even if no
Valid Claims were infringed by the manufacture of that Product in the
country of manufacture.
(iv) If any patent included within the JE Patent Rights
expires, Agouron's obligation to pay or cause to be paid patent
royalties on Net Sales of a Product shall cease with respect to such
patent, but patent royalties will continue to be payable by Agouron
under any other Valid Claim covering such Product in the jurisdiction
where such Product was made, used or sold.
(v) Where no Valid Claims are utilized in making, using or
selling a Product but JE Technology, and/or Development Program
Technology developed independently by JE, is utilized in making, using
or selling the applicable Product, the royalty rate on Net Sales of
such Product that would otherwise apply to the Net Sale of such Product
for such semi-annual period in such country shall be reduced by fifty
percent (50%). Where no Valid Claims are utilized in making, using or
selling a Product and no JE Technology and/or Development Program
Technology developed independently by JE, is utilized in making, using
or selling the applicable Product, no royalty shall be due on the Net
Sales of such Product.
(vi) If in any country where no such Valid Claims exist, or
where the Parties mutually agree that it is not commercially reasonable
to pursue third-party infringers, the amount of non-Affiliated,
third-party sales of a Product containing Compound in such country
exceeds * of the total sales of all products containing Compound in
such country in any semi-annual calendar period, the royalty rate that
would otherwise apply for such semi-annual calendar period in such
country shall be
<PAGE>
reduced by fifty percent (50%). The amount of sales of
products (for calculations to be made pursuant to Section 5.02(b))
shall be ascertained by the reputable published marketing data for such
country or as otherwise mutually agreed. If the Parties are unable to
agree whether it is commercially reasonable to pursue a third-party
infringer, then the issue shall be decided by arbitration in accordance
with the provisions of Section 7.03.
(vii) In the event that: (i) compulsory licenses for a Product
(which compulsory licenses have a maximum royalty rate lower than that
which would otherwise apply to Net Sales of such Product) must be
granted in a country located in the Licensed Territory, and sales under
such compulsory licenses exceed * of the total sales of all Products
containing Compound in such country in any semi-annual calendar period;
or (ii) a governmental authority in a country imposes a maximum royalty
rate lower than that which would otherwise apply to Net Sales of such
Products in such country, then the royalty rate which would otherwise
apply for such semi-annual period in such country shall be reduced to
equal such lower rate.
(viii) In calculating royalties with respect to a Combination
Product, the Parties shall enter into good-faith negotiations regarding
the percentage of the Net Sales of such Combination Product to be used
in calculating royalties payable with respect to such Combination
Product on a country-by-country basis. If the Parties are unable to
agree upon such percentage, royalties with respect to a Combination
Product in a country shall be equal to the royalty rate on Net Sales of
such Product that would otherwise apply to the Net Sale of such Product
for such semi-annual period, multiplied by a fraction whose numerator
is a Party's, its Affiliates' or sublicensees' published sales price in
such country for equivalent dosages of all active ingredients that are
Compounds contained in a given Combination Product, and whose
denominator is such Party's, its Affiliates' or sublicensees' published
sale price in such country for equivalent dosages of all active
ingredients contained therein. If the numerator and denominator cannot
be determined in the manner set forth above, then the numerator shall
be the manufacture or acquisition cost of Compounds contained therein,
and the denominator shall be the sum of the numerator and the cost
(calculated on the same basis if manufactured; otherwise, on the basis
of purchase price) of all other active ingredients contained therein.
In each case, the cost is to be determined in accordance with the
Party's standard accounting procedures. If specific value is added to a
Product by special devices for dispensing or administering such Product
or by diluents or similar exogenous materials which accompany such
Product as it is sold, the Parties, using mechanisms similar to those
described above in this Section 5.01(c)(viii), shall determine in good
faith an amount to be deducted from the gross amount invoiced for such
Product to remove from the amount of Net Sales the specific value added
to such Product by such special devices or exogenous materials.
<PAGE>
SECTION 5.02 GENERAL LICENSING TERMS.
(a) No sales shall be deemed to have occurred as the result of sales
between and among the Parties, their Affiliates and sublicensees; it being
understood that sales occur when made to non-Affiliated third-party purchasers.
A sale of a Product shall be deemed to have occurred upon the earliest of
invoicing or delivery of such Product for value to a non-Affiliated third-party
purchaser. In the case of a sale or other disposal of a Product for value other
than in an arm's-length transaction exclusively for money, such as barter or
counter-trade, sales shall be calculated using the fair market value of such
Product (if higher than the stated sales price) in the country of disposal.
(b) The Parties agree that the accounting and payment of royalties
shall comply with the following terms and conditions:
(i) The royalty payments will be made semi-annually within
sixty (60) days after the last day of the months of June and December
during the royalty term of this Agreement. Upon payment of the such
royalties, Agouron shall provide JE with royalty reports that indicate
the Net Sales by calendar month upon which the royalty is based.
(ii) Agouron shall remit in immediately available funds the
milestone payments and all royalty payments which are due pursuant to
the provisions of Section 5.01 to JE by bank wire transfer to the JE
bank account specified by JE to Agouron. A payment shall be deemed paid
as of the date on which it was wired to the account JE designated
pursuant to the provisions of the immediately preceding sentence. Any
royalty payments due that are not paid on or before the date such
payments are due shall bear interest at the lower of: (A) the prime
rate applied by the Chase Manhattan Bank in New York, New York, U.S.A.,
on the due date, plus one hundred (100) basis points; or (B) the
highest interest rate permitted by applicable law, calculated on the
number of days in each month that such payment is delinquent.
(iii) Agouron shall be entitled to withhold from a royalty or
other payment due JE, the amount, if any, of any withholding tax
assessable to JE, provided evidence of payment of any such tax is
promptly provided to JE. If any taxes (other than value-added taxes)
are imposed on payments of royalties to JE and are required to be
withheld therefrom, such taxes shall be for the account of JE, and the
payments due to JE shall be reduced accordingly. Agouron shall advise
JE and provide it with copies of the tax receipts for all taxes
deducted from the payment of royalties due JE, and shall give JE such
assistance as may reasonably be necessary to enable JE to claim
exemption from such withholding liability. The Parties will exercise
their best efforts to ensure that any withholding taxes imposed are
reduced as far as possible under the provisions of any future tax
treaty between the United States and Japan or any other relevant treaty
or law.
(iv) Agouron shall maintain and cause its Affiliates and
sublicensees to maintain books of account and complete and accurate
records pertaining to the sale or other disposition of Products and of
the royalties and other amounts payable under this Agreement in
sufficient detail to permit JE to confirm the correctness of such
items.
<PAGE>
Upon the annual request by JE, Agouron, at its own expense,
agrees to instruct its independent accounting firm to perform, during
Agouron's annual audit, such additional auditing and accounting
procedures as are necessary to enable such accounting firm to confirm
to JE the correctness of the amounts stated in any reports provided by
Agouron. Notwithstanding the preceding, if JE reasonably believes that
an additional audit is appropriate after reviewing the information
received from Agouron's independent accounting firm, JE shall have the
right, by an independent accounting or audit specialty firm reasonably
acceptable to Agouron, employed by JE and at JE's own expense, to
examine pertinent books and records of Agouron and its Affiliates and
sublicensees, including royalty reports of sublicensees, at all
reasonable times (but not more often than once each calendar year) for
the purpose of determining and reporting on the correctness of such
accounting; it being understood that such examination, with respect to
any annual audit, shall not commence later than two (2) years following
the end of such annual auditing period. If an error is found in such
accounting which is more than five percent (5%) of the amount initially
stated in such accounting, then Agouron shall reimburse JE for the
reasonable cost of such audit. Adjustments in the amounts due because
of an audit shall be settled on or before the next semi-annual payment
date. Any payments due pursuant to the terms of this Section 5.02(b)
that are not paid on or before the date such payments are due shall
bear interest at the lower of: (i) the prime rate applied by the Chase
Manhattan Bank in New York, New York, U.S.A., on the due date, plus one
hundred (100) basis points; or (ii) the highest interest rate permitted
by applicable law, calculated on the number of days in each month that
such payment is delinquent.
(c) Upon the expiration of the foregoing royalty obligations in a
country, Agouron shall be thereafter free, at no cost to JE, to use any
remaining JE Technology to commercialize generic equivalents of the Compound,
intermediates thereof and Products in such country on a non-exclusive basis;
provided, however, that such commercialization is subject to any other
continuing obligations due JE, including license obligations under Article II,
if any.
(d) The Parties agree in the future to use their reasonable efforts to
negotiate any additional licensing terms for the Compound, intermediates thereof
and/or Products which may be necessary to clarify the rights and obligations of
the Parties.
SECTION 5.03 FOREIGN CURRENCY.
(a) Net Sales and any milestone and royalty amounts shall be stated in
United States dollars. Remittal of milestone payments and royalties shall be
made in United States dollars. Any required conversion of Net Sales to United
States dollars shall be done using the monthly average rate of exchange for the
calendar month in which such Net Sales occurred. The conversion from a foreign
currency to United States dollars shall be made by using the average of the
daily official rates of exchange for each day in the calendar month, as
published by the New York edition of the Wall Street Journal, or another
qualified source that is mutually acceptable to the Parties.
(b) To the extent the local currency of the country in which a sale of
Product occurs can be freely converted into United States dollars and remitted
to a United States bank account,
<PAGE>
payments of royalties shall be made in United States dollars to a bank
account designated by JE. If, due to restrictions or prohibitions imposed by a
national or international authority, such conversion or remittance cannot be
made, the Parties shall consult to find a prompt and acceptable solution, and
Agouron shall, from time to time, deal with such monies as JE may lawfully
direct, but at no additional out-of-pocket expense. Notwithstanding the
foregoing, if required remittances in any country cannot be converted or
remitted to JE for any reason within three (3) months after such remittance is
otherwise due, then Agouron shall be obligated to deposit the local currency
equivalent of the required United States dollar remittance in a bank account in
such country in the name of JE. If free conversion of such funds to United
States dollars is not possible within twelve (12) months of the original
remittance due date, Agouron shall transfer such local currency funds (including
any interest earned from the deposit of the local currency) to JE. If free
conversion of such funds to United States dollars becomes possible within twelve
(12) months of the original remittance due date, the conversion of local
currency to United States dollars shall be based on the monthly average rate of
exchange for the calendar month immediately preceding the month in which such
remittance is made, as such average rate of exchange is computed above.
ARTICLE VI - TERM AND TERMINATION
SECTION 6.01 TERMINATION FOR BREACH. Either Party may, at its option,
terminate this Agreement for cause in the event the other Party shall commit a
material breach of this Agreement and shall fail to cure such breach during: (i)
the one hundred twenty (120) day period (thirty (30) day period in the case of
any payment default) following receipt of a written notice of such breach from
the non-breaching Party if such material breach can be reasonably remedied
within such one hundred twenty (120) day period; or (ii) the two hundred forty
(240) day period following receipt of a written notice of such breach from the
non-breaching Party if such material breach cannot be reasonably remedied within
one hundred twenty (120) days after such notice, provided that the Party in
material breach diligently endeavors to remedy such material breach, and it may
be reasonably concluded that such material breach is remediable within such two
hundred forty (240) day period. After the end of the applicable cure period, the
Party who has the right of termination may exercise its termination option by
giving the breaching Party prior written notice of at least fifteen (15) days of
its election to terminate. Any termination of this Agreement shall not release
the breaching Party from any obligations incurred hereunder, and the
non-breaching Party shall be entitled to pursue an action for damages arising as
a result of such material breach.
SECTION 6.02 TERMINATION BY AGOURON.
(a) Agouron may elect to cancel the development and Registration of a
Product in a country located in the Licensed Territory upon ninety (90) days'
written notice. In the event that Agouron elects to discontinue the development
and Registration of a Product in a country located in the Licensed Territory,
JE, its Affiliates and sublicensees shall be free, without any further action by
JE or Agouron, to develop and/or commercialize Products in such country on their
own or with any third party, and to retain, use and disclose to any such third
party information and materials that have been developed in the development and
Registration of a Product; provided that JE shall not disclose to such third
party the confidential and proprietary information of
<PAGE>
Agouron (other than clinical, regulatory and manufacturing information and
materials specifically relating to such Product). In the event of the
discontinuation of Agouron's development and Registration of a Product in a
country, the licenses granted to it by the provisions of Section 2.01 to use,
offer for sale, sell and/or import in or into such country, such Product under
applicable JE Patent Rights and Development Program Patent Rights, and using
applicable JE Technology and Development Program Technology shall be terminated.
Agouron shall transfer ownership of any Dossiers for a Product in such country
to JE, and shall cooperate with JE to effect an orderly transition of Agouron's
development and Registration responsibilities in such country to JE.
(b) Agouron may elect to terminate its marketing rights for a Product
on a country-by-country basis upon ninety (90) days' written notice. In the
event that Agouron elects to terminate its marketing rights for a Product in a
country: (i) the licenses granted to Agouron by the provisions of Section 2.01
to use, offer for sale, sell and/or import in or into such country such Product
under applicable JE Patent Rights and Development Program Patent Rights, and
using applicable JE Technology and Development Program Technology shall be
terminated, and JE and its Affiliates and sublicensees shall be free to market
such Product in such country on its own or with any third party; (ii) Agouron
shall transfer ownership to JE of any Dossiers for such Product in such country;
and (iii) Agouron shall cooperate with JE to effect an orderly transition of
Agouron's marketing responsibilities in such country to JE.
(c) If there is a material breach of this Agreement by JE but Agouron
nevertheless wishes to retain its rights granted by the terms of this Agreement
in Compound and/or Products, then Agouron shall be entitled to terminate the
licenses granted to JE and to pursue an action for damages arising as a result
of such material breach.
SECTION 6.03 TERMINATION BY MUTUAL AGREEMENT. The Parties may at any
time terminate this Agreement, in part or in its entirety, by mutual
written agreement.
SECTION 6.04 TERMINATION UPON BANKRUPTCY. In the event that a Party is
subject to any proceeding under the bankruptcy laws, including appointment of a
receiver, trustee, liquidator or other custodian of its business or
substantially all of its assets, and such proceeding, if involuntary, is not
dismissed or discharged within one hundred fifty (150) days after such
proceeding is instituted, or upon the liquidation, dissolution, or winding up of
its business, then this Agreement, at the election of the other Party, shall be
terminated in its entirety for cause upon a notice in writing of at least
fifteen (15) days from the Party who is not bankrupt or insolvent.
SECTION 6.05 DISPOSITION OF INVENTORY. In the event of the cancellation
or termination of any license rights with respect to a Product, the inventory of
such Product may be sold for up to six (6) months after date of cancellation or
termination, provided the required payments, if any, are paid thereon.
SECTION 6.06 EFFECT OF TERMINATION. The termination of this Agreement
shall, to the extent not otherwise expressly provided herein, have no effect on
the rights and obligations of the Parties under this Agreement with respect to:
(i) the Parties' obligations of confidentiality,
<PAGE>
indemnification and compensation for services performed; (ii) a Party's
liability for failure to fulfill its obligations or undertakings under this
Agreement; and (iii) the rights or obligations of the Parties otherwise
expressly stated in this Agreement to survive the termination of this Agreement.
Any other provisions of this Agreement that by their nature are intended to
survive termination shall also survive. Upon any termination of this Agreement
in its entirety because of a breach of a Party, neither Party waives any rights
to any remedies it may have arising out of the termination. In the event of any
breach by a Party with respect to the obligations which continue after a
termination in its entirety of this Agreement, the non-breaching Party shall
have all remedies available to it, as if the Agreement were still in effect on
the date of such breach.
ARTICLE VII - WARRANTIES AND COVENANTS;
INDEMNITIES; INSURANCE; DISPUTE RESOLUTION
SECTION 7.01 WARRANTIES AND COVENANTS.
(a) Each Party represents and warrants to the other Party that it has
the legal power, authority and right to enter into this Agreement and to perform
all of its respective obligations set forth herein, including the attachments
hereto.
(b) JE acknowledges and represents that the patents and patent
applications listed in Schedule 2 are the only patents and patent applications
included within the JE Patent Rights that are jointly owned by JE and a third
party, and that such patents and patent applications are only subject to the
conditions and restrictions noted on Schedule 2 and, except as otherwise noted
on Schedule 2, that the license of such JE Patent Rights to Agouron under the
terms of this Agreement do not require the consent of such joint owner. JE
further represents and warrants that none of the JE Patent Rights are subject to
the provisions of the * .
(c) JE represents and warrants that, as of the date this Agreement is
executed, it was not aware of the existence of any patent applications or
patents owned and Controlled by a third party covering Compound that might
materially prevent the Parties from commercializing Compound in the Licensed
Territory, except for the patent application listed in Schedule 7.01(c).
(d) JE represents and warrants that: (i) it has the right to grant the
licenses set forth in Article II; and (ii) there are no suits, claims or
proceedings pending in any court or by or before any governmental body or agency
with respect to the JE Patent Rights or JE Technology that would materially
interfere with the ability of Agouron to fully exercise the licenses granted to
it under this Agreement, including the exclusive license rights under Section
2.01(a). Agouron represents that, to the best of its knowledge, it does not have
any know-how, trade secret, experimental data, formula, expert opinion,
experimental procedure or other confidential and/or proprietary information
specifically concerning the Compound, intermediates thereof, or a Product that
was developed or acquired by or on behalf of Agouron before the Effective Date
of this Agreement that is necessary for either: (i) the formulation (including
sustained-release formulations), manufacture, use and/or application of Product;
or (ii) obtaining Registration of Product, including, but not limited to,
information and data arising out of pre-clinical and clinical trials involving
Product and all NDA applications for Product, and which is under the Control of
Agouron.
<PAGE>
(e) Each Party covenants that it shall not commit any act or fail to
take any action that, in any significant way, would be in conflict with its
material obligations under this Agreement and the attachments hereto.
(f) Each Party promises to comply in all material respects with the
terms of the licenses granted to it under this Agreement, and with all federal,
state, local and foreign laws, rules and regulations applicable to the
development, manufacture, distribution, import and export, and sale of
pharmaceutical products pursuant to this Agreement.
(g) EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, EACH OF
THE PARTIES MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OF ANY SUBJECT MATTER INCLUDED WITHIN THE
CLAIMS OF THE PATENT RIGHTS, INCLUDING THE COMPOUND. THE PARTIES UNDERSTAND AND
AGREE THAT DEVELOPMENT AND COMMERCIALIZATION OF COMPOUND AND/OR PRODUCTS WILL
INVOLVE APPROVAL BY REGULATORY AUTHORITIES, AND THAT NO PARTY IS GUARANTEEING
THE SAFETY OR EFFICACY OF COMPOUND AND/OR PRODUCTS, OR THAT COMPOUND AND/OR
PRODUCTS WILL RECEIVE THE REQUIRED APPROVALS.
SECTION 7.02 INDEMNITIES; INSURANCE.
(a) Agouron shall indemnify and hold harmless JE and its Affiliates,
employees, and agents (a "JE Indemnified Party") from and against any and all
liabilities, losses, damages, costs, or expenses (including reasonable
investigative and attorneys' fees) which the JE Indemnified Party may incur,
suffer or be required to pay resulting from or arising in connection with any
product liability or other claims (other than claims for patent infringement)
arising from the use by any person of any Product, to the extent such product
liability or other claim results from the negligent, reckless or intentional
misconduct of Agouron, its Affiliates or sublicensees, or their respective
employees and agents, or on account of Agouron's failure to fulfill its
obligations or undertakings under this Agreement; provided, however, that in no
event shall Agouron be liable to a JE Indemnified Party for any indirect,
incidental, special or consequential damages, including loss of revenues or
profits from sales of Products.
(b) JE shall indemnify and hold harmless Agouron and its Affiliates,
employees, and agents (an "Agouron Indemnified Party") from and against any and
all liabilities, losses, damages, costs, or expenses (including reasonable
investigative and attorneys' fees) that the Agouron Indemnified Party may incur,
suffer or be required to pay, resulting from or arising in connection with any
product liability or other claims (other than claims for patent infringement)
arising from the use by any person of any Product, to the extent such product
liability or other claim results from the negligent, reckless or intentional
misconduct of JE, its Affiliates or sublicensees, or their respective employees
and agents, or on account of JE's failure to fulfill its obligations or
undertakings under this Agreement; provided, however, that in no event shall JE
be liable to an Agouron Indemnified Party for any indirect, incidental, special
or consequential damages, including loss of revenues or profits from sales of
Products.
<PAGE>
(c) To the extent that a product liability or other claim (other than a
claim for patent infringement) results from the negligent, reckless or
intentional misconduct of more than one Party, their Affiliates, sublicensees,
or their respective employees and agents, the Parties agree to share in an
equitable manner such liabilities, losses, damages, costs, or expenses in
proportion to the relative fault of each of the Parties, their Affiliates,
sublicensees, or their respective employees and agents.
(d) Unless the Parties agree otherwise, all other liabilities, losses,
damages, costs, or expenses (including reasonable investigative and attorneys'
fees) under this Section 7.02 relating to or involving a Product in a country,
except as provided by the terms of Sections 7.02(a), (b) and (c), shall be the
responsibility of the Party marketing such Product in such country. The Party
marketing a Product in a country shall indemnify the non-marketing Party in such
country from and against any and all liabilities, losses, damages, costs, or
expenses (including reasonable investigative and attorneys' fees) which such
non-marketing Party may incur, suffer or be required to pay resulting from or
arising in connection with any product liability or other claims (other than
claims for patent infringement) arising from the use by any person of such
Product in such country. Section 3.02 sets forth the Parties' liability
obligations arising from claims for patent infringement.
(e) The aforesaid obligations of the indemnifying Party shall be
subject to the indemnified Party fulfilling the following obligations:
(i) The indemnified Party shall fully cooperate with the
indemnifying Party in the defense of any claims, actions, etc., which
defense shall be controlled by the indemnifying Party.
(ii) The indemnified Party shall not, except at its own cost,
voluntarily make any payment or incur any expense with respect to any
claim or suit without the prior written consent of the indemnifying
Party, which consent such Party shall not be required to give.
(iii) The indemnified Party shall notify the indemnifying
Party promptly after receipt of a notice of the commencement of any
litigation or threat thereof that may reasonably lead to a claim for
indemnification.
(f) The Parties agree to maintain appropriate amounts of product
liability insurance coverage and to have the other Party included as an
additional insured on such policies.
SECTION 7.03 DISPUTE RESOLUTION. In the event of any controversy or
claim arising out of or relating to any provision of this Agreement or any term
or condition hereof, or the performance by a Party of its obligations hereunder,
the Parties shall try to settle their differences amicably between themselves.
If the representatives of the Parties are unable to reach agreement on any such
issue, the issue shall be submitted for consideration, in the case of Agouron,
to a designee of its Chief Executive Officer and, in the case of JE, to a
designee of its Managing Director of Pharmaceuticals and Biobusiness Division.
If such designees are unable to agree,
<PAGE>
then the issue shall be resolved, in the case of Agouron, by its Chief
Executive Officer and, in the case of JE, by its Managing Director of
Pharmaceuticals and Biobusiness Division. Any unresolved issues arising between
the Parties relating to, arising out of, or in any way connected with this
Agreement or any term or condition hereof, or the performance by a Party of its
obligations hereunder, whether before or after termination of this Agreement,
except as otherwise provided in this Agreement, shall be finally resolved by
binding arbitration. Whenever a Party shall decide to institute arbitration
proceedings, it shall give written notice to that effect to the other Party. The
Party giving such notice shall refrain from instituting the arbitration
proceedings for a period of sixty (60) days following such notice. If JE is the
Party initiating the arbitration, the arbitration shall be held in San Diego,
California, according to the rules of the American Arbitration Association
("AAA"). If Agouron is the Party initiating the arbitration, the arbitration
shall be held in Tokyo, Japan, according to the rules of the Japan Commercial
Arbitration Association ("JCAA"). The arbitration shall be conducted by a single
arbitrator mutually chosen by the Parties. If the Parties cannot agree upon a
single arbitrator within fifteen (15) days after the institution of the
arbitration proceeding, then the arbitration shall be conducted by a panel of
three arbitrators appointed in accordance with applicable AAA or JCAA rules;
provided, however, that each Party shall, within thirty (30) days after the
institution of the arbitration proceedings, appoint one arbitrator with the
third arbitrator being chosen by the other two arbitrators. If only one Party
appoints an arbitrator, then such arbitrator shall be entitled to act as the
sole arbitrator to resolve the controversy. Any arbitration hereunder shall be
conducted in the English language, to the maximum extent possible. All
arbitrator(s) eligible to conduct the arbitration must agree to render their
opinion(s) within thirty (30) days of the final arbitration hearing. The
arbitrator(s) shall have the authority to grant injunctive relief and specific
performance and to allocate between the Parties the costs of arbitration in such
equitable manner as he/she determines; provided, however, that each Party shall
bear its own costs and attorneys' and witness' fees. Notwithstanding the terms
of this Section 7.03, a Party shall also have the right to obtain, prior to the
arbitrator(s) rendering the arbitration decision, provisional remedies,
including injunctive relief or specific performance, from a court having
jurisdiction thereof. The arbitrator(s) shall, upon the request of either Party,
issue a written opinion of the findings of fact and conclusions of law and shall
deliver a copy to each of the Parties. Decisions of the arbitrator(s) shall be
final and binding on all of the Parties. Judgment on the award so rendered may
be entered in any court having jurisdiction thereof.
ARTICLE VIII - DISCLOSURE OF AGREEMENT
SECTION 8.01 DISCLOSURE OF AGREEMENT. Except as agreed to by the
Parties, and as required for the performance of its obligations hereunder,
neither JE nor Agouron shall release any information to any third party with
respect to any of the terms of this Agreement without the prior written consent
of the other Party, which consent shall not unreasonably be withheld. This
prohibition includes, but is not limited to, press releases, educational and
scientific conferences, promotional materials and discussions with the media.
The Parties shall jointly prepare and release a public announcement regarding
the existence of this Agreement. If a Party determines that it is required by
law, including securities laws and regulations pertaining to publicly traded
companies, to release information to any third party regarding the terms of this
Agreement, it shall notify the other Party of this fact prior to releasing the
information. The notice to the other Party shall include the text of the
information proposed for release. The other Party shall have
<PAGE>
the right to confer with the notifying Party regarding the necessity for
the disclosure and the text of the information proposed for release, but the
notifying Party shall have the discretion to release the information as it deems
necessary to fulfill its requirements under law. Notwithstanding the preceding,
JE and Agouron shall each have the right to disclose the terms of this Agreement
to persons it proposes to enter into business relationships with, if such
persons are subject to confidentiality and use obligations equivalent to those
applicable to the disclosing Party hereunder.
ARTICLE IX - GENERAL PROVISIONS
SECTION 9.01 NO IMPLIED LICENSES. Only the licenses granted pursuant to
the express terms of this Agreement shall be of any legal force and effect. No
license rights shall be created by implication or estoppel.
SECTION 9.02 NO WAIVER. Any failure by a Party to enforce any right
which it may have hereunder in any instance shall not be deemed to waive any
right which it or the other Party may have in any other instance with respect to
any provision of this Agreement, including the provision which such Party has
failed to enforce.
SECTION 9.03 SEVERABILITY; GOVERNMENT ACTS. In the event that any
provision of this Agreement is judicially, or by a competent authority,
determined to be unenforceable, in part or in whole, with regard to any or all
of the countries in the Territory, the remaining provisions or portions of this
Agreement shall be valid and binding to the fullest extent possible, and the
Parties shall endeavor to negotiate additional terms, as feasible, in a timely
manner so as to fully effectuate the original intent of the Parties, to the
extent possible, in the applicable countries. In the event that any act,
regulation, directive, or law of a country, including its departments, agencies
or courts should make impossible or prohibit, restrain, modify or limit any
material act or obligation of a Party under this Agreement, and if any Party to
this Agreement is materially adversely affected thereby, the Parties shall
attempt in good faith to negotiate a lawful and enforceable modification to this
Agreement that substantially eliminates the material adverse effect; provided
that, failing any agreement in that regard, the Party who is materially
adversely affected shall have the right, at its option, to suspend or terminate
this Agreement as to such country.
SECTION 9.04 AMBIGUITIES. Ambiguities, if any, in this Agreement shall
not be construed against any Party, irrespective of which Party may be deemed to
have authored the ambiguous provision.
SECTION 9.05 NOTIFICATION AND GOVERNMENTAL APPROVALS. After execution
of this Agreement, to the extent required by law, Agouron, after consultation
with JE, shall notify the appropriate authorities in the Licensed Territory
about the terms of this Agreement; JE, after consultation with Agouron, shall
notify the appropriate authorities in the JE Territory about the terms of this
Agreement. JE and Agouron shall obtain any government approval(s) required to
enable this Agreement to become effective, or to enable any payment hereunder to
be made, or any other obligation hereunder to be observed or performed.
Third-party costs and expenses incurred in notifying governmental authorities or
obtaining governmental approval shall be
<PAGE>
shared equally between the Parties. Each Party shall keep the other Party
informed of its progress in notifying such governmental authorities and
obtaining such government approval, and shall cooperate with the other Party in
any such efforts.
SECTION 9.06 U.S. EXPORT CONTROLS. The Parties agree to comply with the
United States laws and regulations governing exports and re-exports of the
Compound, intermediates thereof, Products, Development Program Technology, JE
Technology or any other technology or software developed or disclosed as a
result of this Agreement. The Parties acknowledge that any performance under
this Agreement is subject to any restrictions which may be imposed by the United
States laws and regulations governing exports and re-exports. Each Party agrees
to provide the other Party with any reasonable assistance, including written
assurances which may be required by a competent governmental authority and by
applicable laws and regulations as a precondition for any disclosure of
technology or software by the other Party under the terms of this Agreement. The
obligations of this Section 9.06 shall survive termination or expiration of this
Agreement.
SECTION 9.07 NO AGENCY. JE and Agouron shall have the status of
independent contractors under this Agreement and, except as otherwise explicitly
provided in this Agreement, nothing in this Agreement shall be construed as an
authorization of a Party to act as an agent of the other Party.
SECTION 9.08 CAPTIONS; NUMBER; OFFICIAL LANGUAGE. The captions of the
articles and sections of this Agreement are for general information and
reference only, and this Agreement shall not be construed by reference to such
captions. Where applicable in this Agreement, the singular includes the plural
and vice versa. To the extent appropriate, the meaning of terms whose first
letters are capitalized, but which are variations of terms that are defined
elsewhere in this Agreement, shall each have the same meaning as the defined
term. English shall be the official language of this Agreement and any license
agreement provided for hereunder, and all communications between the Parties
hereto shall be conducted in that language.
SECTION 9.09 FORCE MAJEURE. A Party shall not be responsible to the
other Party for any failure, delay or interruption in the performance of any of
its obligations under this Agreement if such failure, delay or interruption is
caused by any act of God, earthquake, fire, casualty, flood, war, epidemic,
riot, insurrection, or any act, exercise, assertion or requirement of a
governmental authority, or other cause beyond the reasonable control of the
Party affected if the Party affected shall have used its best efforts to avoid
such occurrence. If a Party believes that the performance of any of its
obligations under this Agreement shall be delayed or interrupted as a result of
any of the reasons stated in this Section 9.09, and provided such Party is able
to do so, such Party shall promptly notify the other Party of such delay or
interruption and the cause therefor, and shall provide such other Party with its
estimate of when the performance of its obligations shall recommence. When the
Party affected is able to recommence the performance of obligations delayed or
interrupted as a result of any of the reasons stated in this Section 9.09, it
shall so notify the other Party and, except as otherwise provided in this
Agreement, it shall promptly resume the performance of such obligations.
<PAGE>
SECTION 9.10 AMENDMENT. This Agreement, including the Attachments,
Exhibits and Schedules, constitutes the full agreement of the Parties with
respect to the subject matter of this Agreement, and incorporates any prior
discussions between them with respect to such subject matter. This Agreement
supersedes the rights and obligations of JE and Agouron under the Confidential
Disclosure Agreement and the Material Transfer Agreement between the Parties
which were both originally entered into on December 22, 1997. This Agreement,
including the attachments hereto, shall not be amended, supplemented or
otherwise modified, except by an instrument in writing signed by duly authorized
officers of the Parties.
SECTION 9.11 APPLICABLE LAW. This Agreement shall be construed and the
rights of the Parties shall be determined in accordance with the laws of Japan;
provided, however, that with regard to issues concerning the validity and
construction of patents, trademarks and other intellectual property, the rights
of the Parties shall be determined in accordance with the laws of the country
under which such intellectual property rights were granted.
SECTION 9.12 NOTICES. Any notice required or permitted to be given
under this Agreement shall be in writing and shall be given in person, delivered
by recognized overnight delivery service, sent by mail (certified or registered,
or air mail for addresses outside of the continental U.S.), or by telefax (or
other similar means of electronic communication), whose receipt is confirmed by
confirming telefax, and addressed, in the case of JE, to its Managing Director
of Pharmaceuticals and Biobusiness Division and, in the case of Agouron, to the
Senior Vice President, Commercial Affairs (with a copy to the Legal Department),
at the addresses shown at the beginning of this Agreement, or such other person
and/or address as may have been furnished in writing to the notifying Party in
accordance with the provisions of this Section 9.12. Except as otherwise
provided herein, any notice shall be deemed delivered upon the earliest of: (i)
actual receipt; (ii) four (4) business days after delivery to such recognized
overnight delivery service; (iii) eight (8) business days after deposit in the
mail; or (iv) the date of receipt of the confirming telefax.
SECTION 9.13 ASSIGNMENT. This Agreement shall be assignable by a Party
to its Affiliates; if this Agreement is assigned by a Party to an Affiliate, the
Party shall still be responsible for all of its obligations as specified in this
Agreement. This Agreement shall only be assignable by a Party to a
non-Affiliated third party with the prior written consent of the other Party,
which consent may be withheld at the sole discretion of such other Party. Any
such assignment without the prior written consent of the other Party shall be
void. Notwithstanding the preceding, in the event of: (i) a sale or transfer of
all or substantially all of a Party's assets; or (ii) the merger or
consolidation of a Party with another company, this Agreement shall be
assignable to the transferee or successor company.
SECTION 9.14 SUCCESSION. This Agreement shall be binding upon all
successors in interest, assigns, trustees and other legal representatives of the
Parties.
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement at
a formal signing ceremony on July 28, 1998, in duplicate originals, by their
respective officers thereunto duly authorized.
JAPAN ENERGY CORPORATION AGOURON PHARMACEUTICALS, INC.
By: /s/ Nimoyama By: /s/ Johnson
Name: Akihiko Nimoyama Name: Peter Johnson
Title: Representative Director and Title: Chief Executive Officer
President and President
By: /s/ Irino By: /s/ Friedman
Name: Ken Irino Name: Gary E. Friedman, Esq.
Title: Senior Management Director Title: Corporate V.P. and
General Counsel
WITNESSED BY:
By: /s/ Miyake By: /s/ Snyder
Name: Toshinobu Miyake Name: R. Kent Snyder
Title: Assoc. Dir., Title: Senior Vice President
General Mgr. of Coordination Business Development
Pharmaceuticals & Biobusiness Division
<PAGE>
SCHEDULE 1
*
<PAGE>
SCHEDULE 2
*
<PAGE>
SCHEDULE 7.01(c)
*
<PAGE>
EXHIBIT 1
*
<PAGE>
ATTACHMENT 1
*
PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED (DESIGNATED BY AN ASTERISK (*)
AND WHITE SPACE) AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT
DATED AUGUST 4, 1998; FILE NO. 0-15609
COMMON STOCK PURCHASE AGREEMENT
This Common Stock Purchase Agreement ("Agreement") is made and entered
into as of June 11, 1998 by and between THE IMMUNE RESPONSE CORPORATION., a
Delaware corporation (hereinafter referred to as the Company) and AGOURON
PHARMACEUTICALS, INC., a California corporation ("Agouron"), which parties
hereby agree as follows:
1. AUTHORIZATION; COMMITMENT; CLOSING
1.01 AUTHORIZATION. The Company proposes to authorize, issue and sell to
Agouron on or before January 15, 2000, certain amounts of its common stock,
$.0025 par value ("Common Stock"), as described and determined below.
1.02 COMMITMENT. Subject to Paragraph 5.06 and the terms and conditions
hereof and on the basis of the representations and warranties hereinafter set
forth, the Company agrees to issue and sell to Agouron, and Agouron agree to
purchase from the Company as of the dates and for the consideration set forth
below, the number of shares of the Company's Common Stock as determined below.
The Common Stock which Agouron is acquiring pursuant to the terms of this
Agreement is hereinafter referred to as "Restricted Common Stock". Agouron is
hereinafter sometimes referred to as the "Purchaser." The purchases of the
Common Stock shall occur on the seven purchase dates set forth below. On each
purchase date, Agouron shall be entitled to acquire such number of shares of
Restricted Common Stock (rounded up to the nearest whole share) as may be
purchased for $2,000,000, at a purchase price equal to the stated premium set
forth opposite the applicable purchase date, over the then fair market value
("FMV") of the Common Stock on The NASDAQ Stock Market. FMV shall be defined as
the average closing price of the Common Stock on The NASDAQ Stock Market for the
five (5) trading days immediately preceding the referenced purchase date. In the
event the FMV is * on any purchase date, the premium applicable to such purchase
date shall be adjusted to *
PURCHASE DATE PURCHASE PRICE PREMIUM OVER FM
- ------------- -------------- ---------------
June 11, 1998 $2,000,000 50%
October 15, 1998 $2,000,000 *
January 15, 1999 $2,000,000 *
April 15, 1999 $2,000,000 *
July 15, 1999 $2,000,000 *
October 15, 1999 $2,000,000 *
January 15, 2000 $2,000,000 *
1.03 CLOSING. Separate closings of the purchase and sale of the
Restricted Common Stock ("Closings") shall occur on each of the purchase dates
set forth above and shall take place at such time and place as the Company and
Purchaser shall agree. At each Closing the Company shall deliver to Purchaser
the number of shares of Restricted Common Stock required by Paragraph 1.02,
above, upon delivery to the Company by Purchaser of a certified check or wire
transfer of funds in the amount of $2,000,000. The Restricted Common Stock to be
delivered to Agouron hereunder at each Closing will be evidenced by a single
certificate
<PAGE>
registered in Agouron's name or in the name of such nominee as
Agouron may specify and, when issued in accordance with the terms of this
Agreement for the consideration expressed herein, will be duly authorized,
validly issued, fully paid, nonassessable and free and clear of any liens or
encumbrances caused or created by the Company (except that such Restricted
Common Stock of the Company will be subject to restrictions on transfer under
federal and applicable state securities laws).
2. REPRESENTATIONS
2.01 REPRESENTATIONS OF THE COMPANY. The Company represents and warrants
as follows:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority which are
necessary to own and operate its business and properties and
to carry on its business as it is being conducted. The Company
is duly licensed and qualified and in good standing in the
State of California and in such other jurisdictions in which
the ownership or lease of property or the conduct of its
business makes such licensing or qualification necessary.
(b) There are no proceedings pending or, to the knowledge of
the Company, threatened against or affecting the Company in
any court or before any governmental authority or agency or
arbitration board or tribunal which involve the possibility of
materially and adversely affecting the properties, business,
prospects or condition (financial or otherwise) of the
Company.
(c) The issuance and sale of the Restricted Common Stock and
compliance by the Company with all of the provisions of this
Agreement are within the corporate powers of the Company and
have been duly authorized by all proper corporate action on
the part of the Company and will not (i) conflict with or
result in any breach of any of the terms, conditions or
provisions of, or constitute a default under the Articles of
Incorporation of the Company or the Bylaws of the Company,
(ii) conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute a default
under or give any party the right to terminate or accelerate
performance under any other agreement or instrument to which
the Company is a party (iii) require consent under any other
contract to which the Company is a party, (iv) result in the
creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Company pursuant to the terms of
any other contract to which the Company is a party or (v)
conflict with any provision of any applicable judgment,
decree, order, statute, rule, or regulation of any court or
any public, governmental or regulatory agency or body having
jurisdiction over the Company.
(d) This Agreement is a valid and binding agreement of the
Company and is enforceable against the Company in accordance
with the terms hereof, except as such enforceability may be
affected by applicable bankruptcy laws and equitable remedies.
<PAGE>
(e) The authorized capital stock of the Company consists of
5,000,000 shares of preferred stock (preferred stock) and
40,000,000 shares of common stock. As of the date hereof, 200
shares of its Series F Convertible Preferred Stock are
outstanding. This preferred stock is convertible into common
stock initially at a conversion price equivalent to $14.07 per
share of common stock. If the Company's common stock does not
trade at prices higher than $14.07 per share over a period of
time, the conversion price will be adjusted downward on April
24, 1999 (or sooner if the Company issues common stock at less
than $14.07 per share) and quarterly thereafter. As of June 9,
1998, 22,900,350 shares of voting common stock are
outstanding. As of the date hereof, 4,497,749 stock options
issued pursuant to the Company's stock option plans and two
(2) warrants to purchase a total of 2,051,281 shares of voting
stock are outstanding. Up to 6,180,000 shares of common stock
may be issued under the Company's stock option plans. Except
as set forth above, there are no other options, warrants,
conversion privileges, preemptive rights, or rights of first
refusal granted by the Company in favor of any other person
presently outstanding or in existence to purchase or acquire
any of the authorized but unissued Common Stock of the
Company, other than any of such items granted pursuant to this
Agreement. The Company has provided to Purchaser copies of its
currently in effect Articles of Incorporation and Bylaws, its
Form 10-K for the year ended December 31, 1997, its 1997
Annual Report, its Proxy statement dated April 27, 1998 and
its Form 10-Q for the quarter ended March 31, 1998. The
Company warrants that the information contained in such
documents as updated and supplemented prior to the date of the
Closing is true and correct and when taken as a whole does not
omit a fact necessary to make the information contained
therein in light of the circumstance under which the documents
were made (taking into account, without limitation, the type
of transaction contemplated by this Agreement and the
sophistication and nature of the Purchaser), not misleading.
The Company acknowledges that the Purchaser is relying on the
written documentation provided by the Company to Purchaser as
described above in making its decision to purchase the
Restricted Common Stock.
(f) Since March 31, 1998, except for the sale of 200 shares of
Series F Convertible Preferred Stock for $10 million, there
has not been any change in the assets, liabilities, financial
condition or operations of the Company other than changes in
the ordinary course of business, none of which individually or
in the aggregate have had a material adverse affect on such
assets, liabilities, financial condition or operations of the
Company.
2.02 REPRESENTATIONS OF THE PURCHASER. The Purchaser represents and
warrants as follows:
(a) It is the intent of the Purchaser that its purchase of the
Restricted Common Stock contemplated by this Agreement shall
constitute a transaction exempt from registration under the
Securities Act of 1933, as amended (the "Securities Act") and
any applicable state securities laws.
<PAGE>
(b) Purchaser will not offer or sell any Restricted Common
Stock except pursuant to an effective registration statement
under the Securities Act or in transactions which do not
require registration under the Securities Act.
(c) Purchaser is a corporation duly organized and validly
existing under the laws of the State of California is in good
standing under such laws and has all requisite corporate
powers and authority to enter into this Agreement.
(d) On or prior to the date of the initial Closing, Purchaser
will have taken all action necessary for the authorization,
execution, delivery and performance of this Agreement.
(e) Purchaser has (i) reviewed this Agreement, and the written
statements, and documents, delivered to Purchaser as described
in Section 2.01(e); and, (ii) received satisfactory response
from the Company as to matters about which Purchaser has
inquired relating to this Agreement, and other documents
described in Section 2.01(e) and relating to the Company's
business condition, prospects and plans as necessary to
evaluate the merits and risks of acquiring the Restricted
Common Stock. Purchaser has informed the Company that
Purchaser is relying on all such information and documents in
making its decision to purchase the Restricted Common Stock.
(f) Purchaser (i) has had the risks involved in the investment
represented by this Agreement explained; (ii) has knowledge
and experience in financial and business matters to evaluate
the merits and risks of the investment represented by this
Agreement; (iii) is able to bear the economic risk of the
investment represented by this Agreement (including a complete
loss of this investment); and (iv) has determined that this
investment is suitable for Purchaser in light of Purchaser's
financial circumstances and available investment
opportunities.
(g) Purchaser is acquiring the Restricted Common Stock for its
own account and with its general assets for the purpose of
investment and not with a view to the resale, transfer or
distribution thereof, and has no present intention of selling,
transferring, negotiating or otherwise disposing of any
Restricted Common Stock. Notwithstanding anything in this
Agreement to the contrary, it is agreed that the Purchaser
shall have the right to assign or transfer the Restricted
Common Stock to its Affiliates at any time without the consent
of the Company.
3. NON-DISCLOSURE. Except as agreed to by the parties neither the Company nor
the Purchaser shall release any information to any third party with respect to
any of the terms of this Agreement without the prior written consent of the
other, which consent shall not unreasonably be withheld. This prohibition
includes, but is not limited to, press releases, promotional materials and
discussions with the media. If the Company determines that it is required by law
to release information to any third party regarding the terms of this Agreement,
it shall notify the Purchaser of this fact prior to releasing the information.
The notice to the Purchaser shall include the text of the information proposed
for release. The Purchaser shall
<PAGE>
have the right to confer with the Company regarding the necessity for the
disclosure and the text of the information proposed for release.
4. COMPLIANCE WITH SECURITIES ACT
4.01 CERTAIN DEFINITIONS. As used herein, the following terms shall have
the following respective meanings:
(a) COMMISSION. Shall mean the Securities and Exchange
Commission, or any other Federal agency at the time
administering the Securities Act or the Trust Indenture Act,
as the case may be.
(b) SECURITIES ACT. Shall mean the Securities Act of 1933, as
amended, or any similar Federal statute, and the rules and
regulations of the Commission thereunder, all as the same
shall be in effect at the relevant time.
(c) EXCHANGE ACT. Shall mean the Securities Exchange Act of
1934, as amended, or any similar Federal statute, and the
rules and regulations of the Commission thereunder, all as the
same shall be in effect at the relevant time.
(d) RESTRICTED COMMON STOCK. Shall mean the Common Stock of
the Company issued and sold pursuant to this Agreement which
by the terms hereof is required to bear the legend specified
in Section 4.02 hereof.
4.02 RESTRICTION OF TRANSFERABILITY; LEGEND. Shares of Restricted Common
Stock shall not be resold or transferred unless registered under the Securities
Act or unless an exemption from registration is available for such sale or
transfer. The conditions specified below are intended to ensure compliance with
the provisions of the Securities Act in respect of any transfer of stock. Each
certificate for shares of Restricted Common Stock shall be stamped or otherwise
imprinted with a legend in substantially the following form:
The shares evidenced by this certificate have not
been registered under the Securities Act of 1933, as
amended, and may not be sold or transferred in the
absence of such registration or an exemption
therefrom under said Securities Act and the transfer
of such shares is subject to terms and conditions
specified in the Common Stock Purchase Agreement
dated as of June 11, 1998, between the Company and
Agouron Pharmaceuticals, Inc.
If shares of Restricted Common Stock evidenced by certificates bearing a legend
required by this Section 4.02 are sold in accordance with a registration
statement which has become effective under the Securities Act, or if the Company
shall receive an opinion of its counsel to the effect that any legend required
under this Section 4.02 is not, or is no longer, necessary or required with
respect to such shares (including, without limitation, because of the
availability of the exemption afforded by Rule 144 of the General Rules and
Regulations of the Commission), the Company shall, or shall instruct its
transfer agent and registrar to, remove such legend or issue new certificates
without such legend in lieu thereof.
<PAGE>
4.03 INFORMATION REQUIREMENTS. The Company agrees to:
(a) Make and keep public information available, as such term
is understood and defined in Commission Rule 144 and Rule
144A, under the Securities Act;
(b) Use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act; and
(c) Furnish to any holder of Restricted Common Stock a copy of
the most recent annual or quarterly report of the Company, and
such other publicly available reports and documents of the
Company, so that such holder may avail itself of any rule or
regulation of the Commission allowing it to sell any such
securities without registration.
4.04 PIGGY-BACK REGISTRATION RIGHTS. If the Company before January 15,
2001 contemplates a public offering of shares of its Common Stock to be
registered under the Securities Act, the Company shall so notify the Purchaser
in writing of its intention to do so, at least twenty (20) days prior to the
filing of a registration statement for such offering. If Purchaser gives written
notice to the Company, within ten (10) days of receipt of the notice from the
Company, of Purchaser's desire to have its Restricted Common Stock included in
such registration statement, Purchaser may, subject to the provisions of this
Section 4.04, have its Restricted Common Stock included in such registration
statement. The Company shall bear all expenses in connection with the
registration and sale of any such Restricted Common Stock, other than the fees
or disbursements of any special counsel which the Purchaser may retain in
connection with the registration of its Restricted Common Stock or any portion
of the underwriter's commission, discounts and expenses attributable to the
Restricted Common Stock being offered and sold by the Purchaser. Notwithstanding
the foregoing, if the managing underwriter of any such offering determines that
the number of shares proposed to be sold by the Company, by other shareholders
having piggy-back rights, and/or by the Purchaser is greater than the number of
shares which the underwriter believes feasible to sell at the time, at the price
and upon the terms approved by the Company, then the number of shares which the
underwriter believes may be sold shall be allocated for inclusion in the
registration statement in the following order of priority: (i) shares being
offered by the Company; and (ii) pro rata among the other shareholders and the
Purchaser, based on the number of shares of Common Stock each shareholder
requested to be registered. The Company shall have the right to designate the
managing underwriter in respect of a public offering pursuant to this Section
4.04.
4.05 ADDITIONAL COVENANTS CONCERNING SALE OF SHARES.
(a) The Company will notify the Purchaser of the effectiveness
of any registration statement in which Purchaser has exercised
registration rights granted pursuant to the terms of Section
4.04, together with a list of the jurisdictions where the
Company has qualified or is exempt from registration under
applicable state securities laws.
<PAGE>
(b) The Company will prepare and file with the Commission such
amendments and supplements to any registration statement filed
pursuant to the terms of Section 4.04 (and any prospectus used
in connection with such registration statement) as may be
necessary to comply with the provisions of the Securities Act
with respect to the sale of Restricted Common Stock by the
Purchaser.
(c) The Company will furnish to the Purchaser a reasonable
number of copies of the prospectus used in connection with a
registration statement filed pursuant to the terms of Section
4.04, including a preliminary prospectus, which prospectus
conforms to the requirements of the Securities Act, and such
other documents as the Purchaser may reasonably request, in
order to facilitate the disposition of the Purchaser's
Restricted Common Stock.
(d) In connection with any registration statement referred to
in Section 4.04 of this Agreement, Purchaser will furnish to
the Company such information as the Company may reasonably
require from Purchaser for inclusion in the registration
statement (and the prospectus included therein).
(e) The Company's obligations under Section 4.04 shall be
conditioned upon Purchaser executing and delivering to the
Company its agreement, in a form satisfactory to counsel for
the Company, that it will comply with all applicable
provisions of the Securities Act, the Exchange Act, the
securities acts of applicable states and any rules and
regulations promulgated under such acts and will furnish to
the Company information about sales made in such public
offering.
4.06 INDEMNIFICATION
In the event any of the Restricted Common Stock of Purchaser is
included in a registration statement under Section 4.04 of this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless the Purchaser and its Affiliates and their
respective officers, directors and employees, against any
losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the Securities Act, the
Exchange Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following
statements, omissions or violations (hereinafter sometimes
collectively referred to as a "Violation(s)"): (i) any untrue
statement or alleged untrue statement of a material fact
contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein
or any amendments or supplements thereto; (ii) the omission or
alleged omission to state therein a material fact required to
be stated therein, or necessary to make the statements therein
not misleading; or (iii) any violation or alleged violation by
the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any state securities law;
and the Company will
<PAGE>
reimburse each such indemnified party for
any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that
the indemnity agreement contained in this Section 4.06 shall
not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is
effected without the consent of the Company (which consent
shall not be unreasonably withheld or delayed), nor shall the
Company be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out
of or is based upon a Violation which occurs in reliance upon,
and in conformity with, written information furnished
expressly for use in connection with such registration, by any
such indemnified party.
(b) To the extent permitted by law, the Purchaser will
indemnify and hold harmless the Company and its Affiliates and
their respective officers, directors and employees against any
losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the Securities Act, the
Exchange Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any Violations, in
each case to the extent (and only to the extent) that such
Violation occurs in reliance upon, and in conformity with,
written information furnished by the Purchaser and its
Affiliates and their respective officers, directors and
employees to the Company expressly for use in connection with
such registration; and the Purchaser will reimburse each such
indemnified party for any legal or other expenses reasonably
incurred by it in connection with investigating or defending
any such loss, claim, damage, liability or action; provided,
however, that the indemnity agreement contained in this
Section 4.06 shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Purchaser,
which consent shall not be unreasonably withheld or delayed.
(c) Promptly after receipt by an indemnified party under this
Section 4.06 of notice of the commencement of any action
(including any governmental action), such indemnified party
will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 4.06, notify the
indemnifying party in writing of the commencement thereof and
the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, to
assume the defense thereof with counsel mutually satisfactory
to the parties.
5. MISCELLANEOUS
5.01 EXPENSES; FINDERS FEES. Neither party shall pay expenses and finder
fees for or to the other in connection with this transaction. Each party agrees
to indemnify and hold the other party harmless from any liability for any
commission or compensation in the nature of a finder's fee to any broker or
other person (and the costs and expenses of defending against such liability or
asserted liability) claiming to have been hired or engaged by the party.
5.02 REPLACEMENT OF CERTIFICATES FOR RESTRICTED COMMON STOCK. Upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of
<PAGE>
any certificate evidencing any Restricted Common Stock, the Company will
execute, register and deliver, in lieu thereof, a new certificate for an equal
number of shares of Restricted Common Stock. In the case of loss, theft or
destruction of a certificate, at the election of the Company, the Purchaser may
be required to provide an indemnity reasonably satisfactory to the Company or to
post a surety bond in an amount equal to the value of the shares represented by
the new certificate.
5.03 NOTICE. Any notice required to be given under the terms of this
Agreement shall be in writing, and shall be given in person, transmitted by
telecopier, e-mail or similar electronic communication, delivered by a
recognized overnight delivery service such as Federal Express or sent by mail
(certified or registered or air mail for addresses outside of the country of
origin), return receipt requested, postage prepaid and addressed to the Company
at 5935 Darwin Court, Carlsbad, California 92008, or such other address as the
Company may designate to Purchaser in writing and to the Purchaser, at the
address appearing at the beginning of this Agreement or such other address as
Purchaser may designate to the Company in writing. Except as otherwise provided
herein, any notice so given shall be deemed delivered upon the earlier of (i)
actual receipt; (ii) receipt by sender of confirmation if telecopied or sent by
e-mail or similar electronic communication; (iii) two business days after
delivery to such overnight delivery service; or (iv) five business days after
deposit in the mail.
5.04 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
parties and their respective successors and assigns.
5.05 SURVIVAL OF REPRESENTATIONS, ETC. All covenants, representations and
warranties made by the parties herein shall survive the Closings and the
delivery of this Agreement and the shares of Restricted Common Stock purchased
hereunder.
5.06 TERMINATION. Purchaser's obligation to purchase Restricted Common
Stock under this Agreement shall terminate with respect to any purchase
obligations whose purchase dates under Paragraph 1.02 occur after Purchaser has
elected to terminate, in its entirety, all of Purchaser's rights and obligations
under the Letter of Intent ("LOI") dated June 11, 1998 and the Definitive
Agreement (as defined in the LOI) between the parties.
5.07 SEVERABILITY. Should any part of this Agreement for any reason be
declared invalid, such decision shall not affect the validity of any remaining
portion, which remaining portion shall remain in force and effect as if this
Agreement had been executed with the invalid portion thereof eliminated and it
is hereby declared the intention of the parties hereto that they would have
executed the remaining portion of this Agreement without including therein any
such part, parts, or portion which may, for any reason, be hereafter declared
invalid.
5.08 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with, and governed by, the laws of the State of California without
regard to its conflict of law provisions.
5.09 CAPTIONS, FORM OF PRONOUNS. The descriptive headings of the various
sections or parts of this Agreement are for convenience only and shall not
affect the meaning or construction of any of the provisions hereof. All pronouns
used in this Agreement shall be deemed to include masculine, feminine and neuter
forms.
<PAGE>
5.10 AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the entire
contract between the parties hereto related to the purchase and sale of
Restricted Common Stock and no party shall be liable or bound to the other in
any manner by any warranties, representations or covenants except as
specifically set forth herein.
5.11 THIRD PARTIES. Nothing in this Agreement is intended to confer upon
any party, other than the parties hereto, and their respective permitted
successors and assigns, any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, except as expressly provided herein.
5.12 AMENDMENT AND WAIVER. Any provision of this Agreement may be amended
and the observance of any term hereof may be waived (either prospectively or
retroactively and either generally or in a particular instance) only with the
written consent of the Company and the Purchaser.
5.13 AFFILIATES. References to Purchaser in this Agreement shall be
deemed to include direct or indirect subsidiaries of Purchaser. The term
"Affiliate" shall have the meaning defined in the LOI.
5.14 DISPUTE RESOLUTION. In the event of any controversy or claim arising
out of or relating to any provision of this Agreement, the parties shall try to
settle their differences amicably between themselves. Any unresolved disputes
arising between the parties relating to, arising out of or in any way connected
with this Agreement or any term or condition hereof, or the performance by
either party of its obligations hereunder, whether before or after termination
of this Agreement, shall be finally resolved by binding arbitration. Whenever a
party shall decide to institute arbitration proceedings, it shall give written
notice to that effect to the other party. The party giving such notice shall
refrain from instituting the arbitration proceedings for a period of sixty (60)
days following such notice The arbitration shall be held in San Diego,
California according to the rules of the American Arbitration Association
("AAA") applicable to commercial securities matters of this nature. The
arbitration shall be conducted by a panel of three arbitrators appointed in
accordance with AAA rules; provided, however, that each party shall within
thirty (30) days after the institution of the arbitration proceedings appoint
one arbitrator with the third arbitrator being chosen by the other two
arbitrators. If only one party appoints an arbitrator, then such arbitrator
shall be entitled to act as the sole arbitrator to resolve the controversy. Any
arbitration hereunder shall be conducted in the English language and the
arbitrator(s) shall apply the law set forth in Section 5.08. All arbitrator(s)
eligible to conduct the arbitration must agree to render their opinion(s) within
thirty (30) days of the final arbitration hearing. The arbitrator(s) shall have
the authority to grant injunctive relief and specific performance, and to
allocate between the parties the costs of arbitration in such equitable manner
as he determines; provided, however, that each party shall bear its own costs
and attorney's and witness' fees. Notwithstanding the terms of this Section
5.14, a party shall also have the right to obtain prior to the arbitrator(s)
rendering the arbitration decision, provisional remedies including injunctive
relief or specific performance from a court having jurisdiction thereof. The
arbitrator(s) will, upon the request of either party, issue a written opinion of
the findings of fact and conclusions of law and shall deliver a copy to each of
the parties. Decisions of the arbitrator(s) shall be final and binding on all of
the parties. Judgment on the award so rendered may be entered in any court
having jurisdiction thereof.
<PAGE>
The execution hereof by Purchaser shall constitute a contract between us
for the uses and purposes hereinabove set forth, and this Agreement may be
executed in any number of counterparts, each executed counterpart constituting
an original but all together only one agreement.
THE IMMUNE RESPONSE CORPORATION
By /S/ DENNIS J. CARLO
By /S/ CHARLES J. CASHION
ACCEPTED AND AGREED TO AS OF THE DAY AND YEAR AFORESAID.
PURCHASER:
AGOURON PHARMACEUTICALS, INC
By /S/ PETER JOHNSON
Peter Johnson
President and Chief Executive Officer
By /S/ GARY FRIEDMAN
Gary Friedman
Secretary
EXHIBIT 10.24
PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED (DESIGNATED BY AN ASTERISK (*)
AND WHITE SPACE) AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT
DATED AUGUST 4, 1998; FILE NO. 0-15609
AMENDMENT TO THE VIRACEPT (NELFINAVIR MESYLATE) LICENSE AGREEMENT
This Amendment ("Amendment") to the VIRACEPT (Nelfinavir Mesylate)
License Agreement ("the Agreement"), effective as of this 1st day of May, 1998
("Effective Date"), is between Agouron Pharmaceuticals, Inc., a corporation duly
organized and existing under the laws of the state of California, having a
principal place of business at 10350 North Torrey Pines Road, La Jolla,
California, United States of America (hereinafter referred to as "Agouron"),
Japan Tobacco Inc., a corporation duly organized and existing under the laws of
Japan, having its principal place of business at JT Building, 2-1, Toranomon
2-chome, Minato-ku, Tokyo, Japan (hereinafter referred to as "JT"), and F.
Hoffmann-La Roche Ltd, a corporation duly organized and existing under the laws
of Switzerland, having its principal place of business at CH-4002-Basel,
Switzerland (hereinafter referred to as "Roche"). Agouron, JT and Roche are each
sometimes hereinafter referred to as a party (collectively "parties").
The parties for good and valuable consideration hereby agree as follows:
RECITALS
1. BACKGROUND
1.01 All capitalized terms, except as expressly otherwise defined
herein, shall have the meanings set forth in the Agreement.
1.02 Agouron, JT and Roche entered into a Letter of Intent on January
17, 1997 and the VIRACEPT (nelfinavir mesylate) License Agreement dated for
reference purposes only June 30, 1997, under which Agouron and JT granted, and
Roche received, a license in the Licensed Territory to use, offer for sale, sell
and/or import Products in the Field under applicable Agouron/JT Patent Rights
and Development Program Patent Rights and using applicable Agouron/JT
Technology, Roche Technology and Development Program Technology.
1.03 Roche has certain capacities to manufacture Compound as well as
formulate Product. Roche has informed Agouron and JT of its desire to
manufacture Compound and formulate Product to be sold and/or distributed in the
Licensed Territory with such Roche manufacturing and formulating
responsibilities to be phased-in over an agreed-to period of time.
1.04 The parties, in accordance with the provisions of Section 4.04(f)
of the Agreement, have discussed in good faith an arrangement under which Roche
could be the manufacturer of Compound and the formulator of Product to be sold
and/or distributed in the Licensed Territory.
1.05 Agouron and JT under certain conditions are willing to grant Roche
certain rights to manufacture Compound and formulate Product to be sold and/or
distributed in the Licensed Territory.
<PAGE>
1.06 Since Roche's assumption of the responsibility for meeting its
requirements of Compound and Product in the Licensed Territory over the phase-in
period will impact the amount and timing of Agouron's and JT's current and
future requirements for Compound and Product, their arrangements with toll
manufacturers for the manufacture of such Compound and Product and their ability
to provide Compound and Product to Roche in the future, the parties have
discussed and agreed upon a schedule under which Agouron and JT will be relieved
of any responsibility they have under Section 4.04 of the Agreement to provide
Roche with Compound and Product; Agouron and JT have indicated to Roche that
under certain circumstances they are willing to use their reasonable efforts to
supply Roche with Product after the end of such phase-in period.
1.07 Roche has developed and owns certain technology used in the
manufacture of saquinavir, however formulated ("SAQUINAVIR") which if converted,
applied and scaled-up by Roche*, could * of Compound as a result of applying *
to a new more cost-efficient method of * for making the Compound to be developed
by Roche. Roche,*
1.08 To effect the preceding and clarify the parties' rights and
obligations under the Agreement, the parties wish to amend the Agreement as
provided below.
AMENDMENT
2. GRANT OF RIGHTS TO ROCHE
2.01 Agouron and JT grant Roche and its Affiliates listed in Attachment
1 hereto, the non-exclusive right anywhere in the Territory (without the right
to sublicense), under applicable Agouron/JT Patent Rights and Development
Program Patent Rights and using applicable Agouron/JT Technology and Development
Program Technology, to internally manufacture* Roche's requirements of
Compound using* . Except as provided by Article 3, Roche shall have the right to
* needed for the manufacture of Compound from third party suppliers.
2.02 Agouron and JT grant Roche and its Affiliates listed in Attachment
1 hereto, the non-exclusive right anywhere in the Territory (without the right
to sublicense), under applicable Agouron/JT Patent Rights and Development
Program Patent Rights and using applicable Agouron/JT Technology and Development
Program Technology, to * in the Licensed Territory. Notwithstanding the
preceding, Roche shall have the right*
<PAGE>
2.03 Except as otherwise provided in the Agreement, Roche shall be
entitled to manufacture Compound unless: (i) the prerequisite requirement of
Section 4.04(f) of the Agreement is not satisfied on the second anniversary of
the Effective Date (i.e. Roche's FBMC for such Product is more than the FBMC of
alternative sources for such Product); and (ii) Agouron and JT subsequently
elect in writing to resume their responsibility under Section 4.04 of the
Agreement to provide Compound to Roche and are able to directly or indirectly,
fully satisfy Roche's projected needs for Compound; Agouron's and JT's supply
obligations for Compound under Section 4.04 of the Agreement shall be reinstated
upon the resumption by Agouron and JT of such responsibility.
2.04 Except as otherwise specifically provided in the Agreement, Roche
shall continue to be entitled to formulate Product to be sold and/or distributed
in the Licensed Territory until * after the cost of Product to be sold and/or
distributed by Agouron or JT in their respective marketing territories * Agouron
and/or JT also been responsible for the formulation of Product for Roche and
Agouron and JT subsequently * under Section 4.04 of the Agreement to provide
such Product to Roche and have the ability, directly or indirectly, * determined
pursuant to the provisions of Section 4.04(b) of the Agreement for the
applicable jurisdiction in which such Product will be sold; Agouron's and JT's
supply obligations for Product under Section 4.04 of the Agreement shall be
reinstated upon the resumption by Agouron and JT of such responsibility.
Notwithstanding Agouron's and/or JT's election described in the preceding
sentence, Roche shall be entitled to elect to continue to formulate Product if *
of Product to be sold and/or distributed by Agouron or JT in their respective
marketing territories. Additionally, Roche shall also be entitled to * Product.
Roche shall also continue to be entitled to formulate Product to be sold and/or
distributed in a country(s) located in the Licensed Territory * to be sold
and/or distributed in such country(s).
2.05 All licenses granted Roche in this Amendment in a country shall
become * in such country in accordance with the provisions of Section 5.02(j)
of the Agreement.
2.06 Roche shall not have the right to use the applicable Agouron/JT
Patent Rights and Development Program Patent Rights and applicable Agouron/JT
Technology and Development Program Technology for any purpose other than the
manufacture of Compound and/or the formulation of Product to be sold and/or
distributed in the Licensed Territory.
<PAGE>
3. LIMITATIONS
3.01 Roche's rights to manufacture Compound and formulate Product shall*
Agouron's and JT's * and needs for the United States of America, Canada, Japan,
North Korea and South Korea (including Agouron's and JT's cost of Product to be
sold and/or distributed in such countries) * Agouron's and JT's existing *
Agouron and JT each acknowledge that Roche's rights * Compound and formulate
Product to be sold and/or distributed in the Licensed Territory shall not affect
such party's * of Compound and Product provided that Roche * Agouron and/or JT
as set forth in this Amendment and Schedule 2 thereto and to be * as set forth
in Paragraph 3.02 of this Amendment.
3.02 Relations with Schedule 1 Manufacturers including* and/or * .
(a) Roche shall not conduct discussions and/or enter into * for the
* into the Compound) of Compound (including* ) and/or the formulation of
Product with * listed on Schedule 1, including* and/or * .
(b) Agouron agrees* with Roche its * after calendar * with* and/or* for *
into the Compound.
(c) Roche acknowledges that Agouron has * Compound at* and/or* during
each of calendar years* in exchange for * . Since the* Roche, * Agouron's and
JT's * plans * hereby agrees:(i) during the period * to be responsible for
the* each month an amount of Compound needed to * listed for such month in
line 3 of Schedule 2 of this Amendment; and (ii) during the period * to
be responsible for the* ; in calculating Roche's responsibility during each
* calendar 2000 for the * in line 4 of Schedule 2 of this Amendment. If during
the period* . and/or *
<PAGE>
of Agouron's and/or Roche's Compound during a* , the capacity of the
available * shall be allocated between Agouron and Roche during such * on a *
basis, based upon the ratios of * provided, however, in calculating the *
utilized by Roche during a * in line 4 of Schedule 2 of this Amendment shall be
considered to have been utilized by Roche during such* . During the period *
Agouron shall * between Agouron and Roche * which is in excess of * only if
there is* will Agouron use its reasonable efforts * of Compound. If Roche wishes
to* and/* which is in excess of* , Roche shall so notify Agouron. Roche shall
keep Agouron informed on a regular basis about Roche's projected future
requirements for* .
(d) If Agouron wishes to maintain * and/or* Roche agrees, as
provide below,* at such dedicated* ; provided, however, that before Agouron
enters into such arrangement, Agouron agrees to discuss with Roche the terms of
any such arrangement and to fully and completely confer in good faith with Roche
about alternative arrangements thereto. If Agouron after such discussions* , of
Compound at such* ; notwithstanding the preceding, Roche shall not be obligated
during * of Compound at such * , if it agrees to compensate Agouron and JT for*
of: (i)* of Compound at such* , over (ii) * If after the end of * and/or * are
unable to * of Agouron and/or Roche's * the capacity of the available * (up to
the minimum
<PAGE>
contracted amount of Compound* ) shall be * based upon the following
ratios:
To Agouron = *
To Roche = *
After the end of * Agouron shall * between
Agouron and Roche the* and/or* which is in excess of the minimum contracted
amount of Compound during a* only if there is available * after Agouron and JT
have * Agouron use its reasonable efforts to permit Roche to * . If Roche wishes
to * which is in excess of the* , Roche shall so notify Agouron. Roche shall
keep Agouron informed on a regular basis about Roche's projected future
requirements* .
3.03 Roche, * , shall conduct all activities it deems necessary
to * by applying certain existing technology used in the manufacture of * .
<PAGE>
4. MARKUP
4.01 For the rights granted pursuant to the provisions of Paragraphs
2.01-2.04, Roche agrees to pay Agouron and JT an amount equal to * on the
aggregate FBMC of Compound manufactured by Roche and Product formulated by
Roche. Roche shall account for and pay any amounts due pursuant to the
provisions of this Paragraph 4.01 because of the manufacture of Compound and/or
formulation of Product by Roche in a calendar quarter in accordance with written
instructions provided by Agouron and JT; such payments shall be included, if
possible, with any royalty payments due Agouron and JT for such calendar quarter
pursuant to the provisions of Section 5.02(f) of the Agreement. The audit and
payment terms agreed upon by the parties for the audit of Agouron's FBMC as set
forth in Section 4.04(c) of the Agreement and the payment of royalties as set
forth in Section 5.02(f) of the Agreement shall be applied MUTATIS MUTANDIS to
the calculation of Roche's FBMC and the payment of any amounts due Agouron and
JT. Notwithstanding the preceding, Roche may calculate and initially pay the
amount of quarterly payments due pursuant to the provisions of this Paragraph
4.01 using an estimated standard cost for Compound and/or Product; to the extent
that there is a difference in the estimated standard cost and actual cost for
Compound and/or Product during a calendar year Roche shall recalculate the
aggregate amount due for such calendar year and the parties shall settle any
difference in amount due by adjusting the amount of royalty and other payments
due for the calendar quarter ending December 31st of the applicable calendar
year.
5. LICENSE GRANT TO AGOURON AND JT
5.01 Roche grants Agouron and JT the non-exclusive perpetual right
anywhere in the Territory (without the right to sublicense), to manufacture and
have manufactured the Compound and intermediates thereof, under Roche patent
rights which relate to inventions made solely by employees of Roche and its
Affiliates during the development and implementation by Roche of a *
.
5.02 For the rights granted pursuant to the provisions of Paragraph 5.01,
Agouron and JT agree to compensate Roche with an amount equal to * of the
reduction of Agouron's and JT's FBMC of Compound which results from * described
in Paragraph 5.01 in the manufacture of Compound and intermediates thereof *
that is available to Agouron and JT on the date of such manufacture, but only to
the extent that * (in the absence of license rights granted under Paragraph
5.01) * owned by Roche (which * a non-appealable order). The audit and payment
terms agreed upon between the parties for the audit of Agouron's FBMC as set
forth in Section 4.04(c) of the Agreement and the payment of royalties as set
forth in Section 5.02(f) of the Agreement shall be applied MUTATIS MUTANDIS to
the * of Agouron's and JT's FBMC and the payment of sums due Roche pursuant to
the provisions of this Paragraph 5.02.
<PAGE>
5.03 Agouron and JT shall not have the right to use the patent rights
granted pursuant to the provisions of Paragraph 5.01 for any purpose other than
to manufacture or have manufactured the Compound and intermediates thereof.
6. EXCHANGE OF INFORMATION
6.01 Immediately after execution of this Amendment by the parties, and on
an ongoing basis thereafter, Roche shall provide to Agouron and JT its
information * Compound. Each party shall provide the other party with its
information on its manufacturing processes for Compound (including* ) and
formulating processes for Product, to the extent that such information is
necessary and useful for the manufacture of Compound and formulation of Product.
Such information shall include data prepared for notification of regulatory
authorities about * (including * thereof); for example, data contained in the *
.
7. SUPPLY OBLIGATIONS
7.01 Roche acknowledges that its assumption of the responsibility for
meeting its requirements of Compound and Product in the Licensed Territory over
the phase-in period described in Schedule 2 will impact the amount and timing of
Agouron's and JT's current and future requirements for Compound and Product,
their arrangements with toll manufacturers for the manufacture of such Compound
and Product and their ability to provide Compound and Product to Roche in the
future. The parties, as noted below, have agreed upon a schedule under which
Agouron and JT will be relieved of any responsibility they have under Section
4.04 of the Agreement to provide Roche with Compound and finished dosage form(s)
of Product after the dates specified below.
7.02 Except as provided in Schedule 2, Roche agrees that Agouron and JT
will be relieved of any responsibility they have under Section 4.04 of the
Agreement to provide Roche with Compound after the Effective Date of this
Amendment. Notwithstanding the preceding, to the extent Roche wishes to purchase
from Agouron and JT all or a part of its requirements of Compound after the
Effective Date of this Amendment, Agouron and JT agree to use their reasonable
efforts to supply such Compound to Roche at the price set forth in Section
4.04(b) of the Agreement. Provided, however, that the provisions of the
immediately preceding sentence shall not obligate Agouron and/or JT to allocate
their available supply of Compound between the parties after the Effective Date
of this Amendment in order to supply such Compound to Roche; only if there is
available supply of Compound after Agouron and JT have satisfied the needs in
their marketing territories, will Agouron and JT's have to use their reasonable
efforts to supply Compound to Roche.
7.03 Agouron's and JT's responsibility under the Agreement to provide Roche
Product are amended as follows:
<PAGE>
(a) Except as provided in Schedule 2, Roche agrees that Agouron and JT will
be * they have under Section 4.04 of the Agreement * Roche * ; provided however,
for purposes of removal of doubt, after * Agouron and JT * listed on Schedule 2
for the * .
(b) Notwithstanding the provisions of Paragraph 7.03(a) to the
extent Roche, in addition to the amounts of Product to be provided Roche
pursuant to the provisions of Schedule 2, wishes to purchase from Agouron and JT
all or a part of its additional requirements of Product after the Effective Date
of this Amendment, Agouron and JT agree to use their reasonable efforts to
supply such additional Product to Roche at the price set forth in Section
4.04(b) of the Agreement; further, Agouron and JT agree that after * , Roche
upon * prior notice before the start of the month in which Roche wishes to
receive a delivery of additional Product can notify Agouron and JT of its
election to * to Roche in such month by up to * of the amount listed for such
month on Schedule 2. The parties shall confer on a regular basis about * .
(c) The provisions of Paragraph 7.03(b) shall not obligate Agouron and/or
JT to allocate their available supply of Product between the parties after * in
order to supply additional Product to Roche; only if there is available supply
of Product after Agouron and JT have satisfied the needs in their marketing
territories, will Agouron and JT's have to use their reasonable efforts to
supply additional Product to Roche.
(d) Prior to * , Agouron and JT agree to use their reasonable efforts to
provide Roche with finished dosage form(s) of Product in accordance with
Schedule 2. The amounts listed on Schedule 2 plus any amount of Product ordered
pursuant to the provisions of Paragraph 7.03(b) shall be deemed to be firm
orders of Product ordered from Agouron and/or JT; to the extent Agouron and/or
JT are able to manufacture or have manufactured the amount of Product specified
in Schedule 2 plus any amount of Product ordered pursuant to the provisions of
Paragraph 7.03(b), Roche hereby guarantees that it will purchase such Product
from Agouron and/or JT.
(e) If available supply of Product for Roche * stated in Schedule 2 prior
to * , Agouron and JT shall * to Agouron, JT and Roche during an applicable * on
a * , based upon the * of such Product in Agouron and JT territories * , to the
extent such data is available) and the stated amount of Roche requirements
contained in Schedule 2 (* pursuant to the provisions of Paragraph 7.03(b));
provided, however, that the available supply of Product * purposes during a
month shall take into account the amounts of *
<PAGE>
Roche during such month and the amount of * Roche during such month shall
be considered as supplied by Agouron/JT to Roche.
(f) The parties agree that Schedule 2 was calculated and agreed upon by the
parties based Roche * for the applicable monthly periods and that after the *
that the * provisions of Section 5.01(b)(ix) of the Agreement, including the
plus or minus * of forecasted amount, shall * since Schedule 2 contains an * of
Product which Roche has requested Agouron and/or JT provided to Roche for the
applicable * .
7.04 Roche shall pay to Agouron and/or JT the amount due for its purchase
of Compound and/or Product within * of the shipping of such Compound and/or
Product; any payment for the purchase of Compound and/or Product that is not
paid on or before its due date pursuant to the terms of this Paragraph 7.04
shall bear interest at the lower of: (i) the average * as reported by Datastream
from time to time, * ; or (ii) the highest interest rate permitted by applicable
law, calculated on the number of days in each month that such payment is
delinquent. If after * of Compound and/or Product acquired from Agouron and/or
JT within * of their respective shipping dates, then Roche shall be required to
* shall be in a form and upon terms acceptable to the party from which such
Compound and/or Product is ordered, including that the requirement that the * be
in an amount adequate to pay for Compound and/or Product ordered; thereafter, if
a shipment of Compound and/or Product to Roche is not paid for within * of its
shipping date, such * may be drawn down and * Compound and/or Product to Roche
upon presentation of * .
7.05 If Agouron and/or JT in the future wish to purchase from Roche all or
a part of their requirements of Compound and/or Product, Roche agrees to
negotiate in good faith a commercially reasonable arrangement under which
Agouron and/or JT may purchase such Compound and/or Product from Roche at
Roche's FBMC plus a "commercially reasonable markup"; such "commercially
reasonable markup" shall not exceed the aggregate of (i) * of Roche's actual
third party external costs of manufacturing Compound and/ or formulating Product
(i.e. Roche's costs for * acquired from third parties plus Roche's third party *
costs) and (ii)* of Roche's internal costs of manufacturing Compound and/ or
formulating Product (i.e. Roche's * ).
<PAGE>
8. SCHEDULE 2 OF AGREEMENT
8.01 Roche acknowledges that its * of Compound and Product to be * in the
Licensed Territory during and after the phase-in period described in Schedule 2
will render inapplicable the provisions of the first sentence of Section
5.01(b)(ix) of the Agreement which provides for an * of Schedule 2 of the
Agreement in certain circumstances and that accordingly no * of Schedule 2 of
the Agreement shall be made. Notwithstanding the preceding: (i) royalty
obligations due Agouron and JT pursuant to the provisions of Section 5.01(b)(i)
of the Agreement * during the period * , because of the application of Schedule
2 of the Agreement shall not exceed the amount of royalties otherwise due under
Schedule 1 of the Agreement by more than* ; and (ii) royalty obligations due
Agouron and JT pursuant to the provisions of Section 5.01(b)(i) of the Agreement
on * during the period * because of the application of Schedule 2 of the
Agreement shall not exceed the amount of royalties otherwise due under Schedule
1 of the Agreement by more than* .
9. TRADEMARK/LABELING
9.01 The labeling for any Product to be sold and/or distributed by
Roche, unless prohibited by law or regulation, shall state that the Product is
licensed from Agouron and JT, and indicate that the Product is a product of the
joint development of Agouron, JT and Roche. Additionally, unless prohibited by
law orregulation, such labeling shall clearly indicate that the Product is not
to be resold in the United States, Canada, Japan (other than those areas in
Japan licensed to Roche), North Korea and South Korea.
10. REMAINING AGREEMENT TERMS
10.01 Except as expressly amended by the terms contained in
this Amendment, the provisions of the Agreement, as previously amended, shall
remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to enter into this Amendment to the VIRACEPT(TM) (Nelfinavir
Mesylate) License Agreement, effective as of the Effective Date.
AGOURON PHARMACEUTICALS, INC. JAPAN TOBACCO INC.
By: s/s Gary Friedman By: /s/ Masakazu Kakei
Name: Gary Friedman Name: Masakazu Kakei
Title: Corp. Vice President Title: Executive Director
By: /s/ R. Kent Snyer By: /s/ Tatsuya Yoneyama
Name: R. Kent Snyder Name: Tatsuya Yoneyama
Title: Sr. Vice President Title: Vice President, Business
Devel., Pharmaceuticals
Division
F. HOFFMANN-LA ROCHE LTD
By: /s/ St. Arnold
Name: St. Arnold
Title: Vice Director
By: /s/ B. Scholl
Name: B. Scholl
Title: Vice Director
<PAGE>
SCHEDULE 1
*
*.
*
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SCHEDULE 2
*
<PAGE>
SCHEDULE 2
*
<PAGE>
SCHEDULE 2
*
<PAGE>
SCHEDULE 2
*
<PAGE>
SCHEDULE 2
*
<PAGE>
ATTACHMENT 1
1. *
2. *
3. *
4. *
5. *
6. *
7. *
*
.
