SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
Commission File Number: 0-19131
MEDIMMUNE, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-1555759
State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or organization)
35 West Watkins Mill Road
Gaithersburg, Maryland 20878
(Address of principal executive office)
(Zip Code)
Registrant's telephone number, including area code: (301) 417-0770
Securities Registered pursuant to Section 12(b) of the Act: None
Securities Registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 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 [ ].
Aggregate market value of the 54,907,653 shares of voting stock held by
non-affiliates of the registrant based on the closing price on
February 28, 1999 was $3,019,920,915 . Common Stock outstanding as of
February 28, 1999: 55,311,727 shares.
Documents Incorporated by Reference:
Document Part of Form 10-K
Proxy Statement for the Annual Meeting Part III
of Stockholders to be held May 20, 1999.
MEDIMMUNE, INC.
FORM 10-K
TABLE OF CONTENTS
PART I PAGE
Item 1. Business 1
Item 2. Properties 41
Item 3. Legal Proceedings 42
Item 4. Submission of Matters to a Vote of Security Holders 42
PART II
Item 5. Market for MedImmune, Inc.'s Common Stock and Related
Shareholder Matters 42
Item 6. Selected Financial Data 43
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 45
Item 7A. Quantitative and Qualitative Disclosures about Market
Risk 57
Item 8. Financial Statements and Supplementary Data 59
Report of Independent Accountants 90
Report of Management 91
Item 9. Changes in and Disagreements with Accountants on
Accounting Financial Disclosure 92
PART III
Item 10. Directors and Executive Officers of MedImmune, Inc. 93
Item 11. Executive Compensation 93
Item 12. Security Ownership of Certain Beneficial Owners and
Management 93
Item 13. Certain Relationships and Related Transactions 93
PART IV
ITEM 14. Exhibits, Financial Statement Schedule, and
Reports on Form 8-K 94
SIGNATURES 95
Schedule I S-1
Exhibit Index E-1
Exhibits (Attached to this Report on Form 10-K)
CytoGam and RespiGam are registered trademarks and Synagis is a
trademark of the Company.
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THE STATEMENTS IN THIS ANNUAL REPORT THAT ARE NOT DESCRIPTIONS OF
HISTORICAL FACTS MAY BE FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS
REFLECT MANAGEMENT'S CURRENT VIEWS, ARE BASED ON CERTAIN ASSUMPTIONS AND
ARE SUBJECT TO RISKS AND UNCERTAINTIES, INCLUDING, BUT NOT LIMITED TO,
THE INFORMATION SET FORTH UNDER THE CAPTION "RISK FACTORS", AS WELL AS
OTHER RISKS DETAILED BELOW. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE CURRENTLY ANTICIPATED AS A RESULT OF THE FOREGOING OR OTHER
FACTORS.
PART I Item 1. Business
MedImmune, Inc. ("the Company"), is a biotechnology company
headquartered in Gaithersburg, Maryland with three products on the
market and a diverse product development portfolio. The Company is
focused on using advances in immunology and other biological sciences to
develop important new products that address significant medical needs in
areas such as infectious diseases, transplantation medicine, autoimmune
diseases and cancer. In 1998, the Company launched Synagis
(palivizumab) in the United States for preventing respiratory syncytial
virus (RSV) in high-risk pediatric patients. Synagis is the first
monoclonal antibody approved for an infectious disease and has become an
important new pediatric product for the prevention of RSV, the leading
cause of pneumonia and bronchiolitis in infants and children. The
Company also markets CytoGam (Cytomegalovirus Immune Globulin
Intravenous (Human), CMV-IGIV) and RespiGam (Respiratory Syncytial Virus
Immune Globulin Intravenous (Human), RSV-IGIV) and has five new product
candidates undergoing clinical trials.
Products on the Market.
Synagis
Synagis is a humanized monoclonal antibody approved for marketing in
June 1998 by the U.S. Food and Drug Administration ("FDA") for the
prevention of serious lower respiratory tract disease caused by
respiratory syncytial virus ("RSV") in pediatric patients at high risk
of RSV disease. Synagis is administered by intramuscular injection at 15
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mg/kg and is given once per month during anticipated periods of RSV
prevalence in the community. In the Northern Hemisphere, the RSV season
typically commences in October or November and lasts through March or
April.
RSV is the most common cause of lower respiratory infections in infants
and children worldwide. Healthy children and individuals with adequate
immune systems often acquire a benign chest cold when infected with RSV.
In contrast, certain high-risk infants such as premature infants and
children with chronic lung disease ("CLD"; also known as
bronchopulmonary dysplasia, or "BPD") are at increased risk for
acquiring severe RSV disease (pneumonia and bronchiolitis), often
requiring hospitalization. Each year in the United States, more than
90,000 infants are hospitalized with RSV disease. The mortality rate of
hospitalized infants with RSV infection of the lower respiratory tract
is about 2 percent. There are approximately 325,000 infants at high risk
of acquiring severe RSV disease in the United States. In a randomized,
double-blind, placebo-controlled Phase 3 clinical trial known as "IMpact-
RSV" evaluating the ability of Synagis to prevent serious RSV disease in
1,502 high-risk pediatric patients, RSV hospitalizations occurred among
53 of 500 (10.6 percent) patients in the placebo group and 48 of 1002
(4.8 percent) patients in the Synagis group, a 55 percent reduction
(p<0.001). Synagis was safe and generally well-tolerated, and the
proportions of subjects in the placebo and Synagis groups who
experienced any adverse event or any serious adverse event were similar.
In December 1997, the Company formed an exclusive worldwide marketing
alliance with Abbott Laboratories ("Abbott") to commercialize Synagis.
Within the United States, the Ross Products Division of Abbott is co-
promoting Synagis with the Company. The Company records all U.S. sales
and Abbott receives a commission on sales above pre-determined
thresholds. Each company is responsible for its own selling expenses.
Outside the United States, the International Division of Abbott
Laboratories has the exclusive right to distribute Synagis. The Company
manufactures and sells Synagis to Abbott for sales outside the United
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States. Sales to Abbott in 1998 for "named patient" sales of Synagis
outside of the United States were $2.3 million. During 1998, the
Company and Abbott submitted regulatory applications requesting approval
to market Synagis in 25 countries outside the United States: Austria,
Australia, Argentina, Belgium, Brazil, Colombia, Denmark, Finland,
France, Germany, Hungary, Ireland, Italy, Kuwait, Luxembourg,
Netherlands, New Zealand, Norway, Poland, Portugal, Greece, Spain,
Sweden, Switzerland, and the United Kingdom. By year-end 1998, approval
was received in Kuwait. In accordance with the Company's agreement with
Abbott, the Company would receive a $15 million milestone payment from
Abbott if and when marketing approval is received from the centralized
European Agency for the Evaluation of Medicinal Products ("EMEA").
There can be no assurances that the EMEA will approve Synagis for
marketing in time for the 1999 - 2000 RSV season or at all.
The Company has established a manufacturing alliance with German-based
Boehringer Ingelheim Pharma KG ("BI") to supplement its own
manufacturing capacity. In September 1998, the FDA approved the
Company's supplement to its Biologic License Application ("BLA")
allowing the Company to import and sell in the United States product
from the BI facility. Additionally, the Company's Gaithersburg
Manufacturing and Development Facility was approved to produce Synagis.
The Company has completed construction of a manufacturing facility in
Frederick, Maryland ("Frederick Manufacturing Center" or "FMC") and
plans to add this facility as a third production site, subject to FDA
clearance. Production lots of Synagis seeking to validate the
consistency of the manufacturing process are underway at the FMC. The
Company plans to submit to the FDA in 1999 an amendment to its BLA
requesting approval to sell Synagis produced at the FMC. There can be no
assurances that this approval will be received in a timely manner or at
all. The Company will continue to rely upon BI for production of
Synagis for the foreseeable future; there can be no assurances that
Synagis product supply will be properly matched with product demand. BI
produces Synagis in large lot sizes relative to overall product supply;
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there can be no assurances that failure of one or more lots of Synagis
will not adversely impact the Company's supply of product or market
perception. Additionally, because Synagis costs rely on favorable
foreign exchange rates and production yields, there can be no assurances
that Synagis will continue to be economical to purchase from BI.
In 1998, the Company sold $109.8 million of Synagis, $92.8 million of
which occurred in the fourth quarter. In general, the Company expects
most of its Synagis sales to occur in the fourth and first quarters of
the year because of the seasonality of RSV in the United States; limited
sales are expected in the second and third quarters. The Company
expects this seasonality to continue in the foreseeable future.
The Company believes that Synagis was broadly reimbursed by third party
payors during the 1998 - 1999 RSV season. There can be no assurances
that third party payors will not attempt to restrict reimbursement
guidelines of Synagis in future RSV seasons.
In November 1998, the Company began two clinical trials evaluating the
safety of Synagis in 1) children under 2 years of age with congenital
heart disease ("CHD") and 2) children with cystic fibrosis. The Company
expects both trials to be concluded by 2000. In addition, the
Cooperative Antiviral Studies Group ("CASG") at the National Institutes
of Health ("NIH") expects to begin a two-year clinical study evaluating
the administration of Synagis for treating RSV disease in bone marrow
transplant recipients. There can be no assurances that data from these
clinical trials will establish the safety or efficacy of Synagis in
these populations, or that results from these trials will not adversely
affect perceptions of Synagis in the marketplace.
Recent clinical and laboratory observations by the Company and others
have suggested that RSV may be implicated in the development of
childhood asthma. Consistent with this hypothesis, data were presented
in 1998 at the 36th Annual Meeting of the Infectious Diseases Society of
America ("IDSA") in Denver suggesting that children who received the
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Company's first RSV product, RespiGam (see below), scored better in
measurements of asthma-like symptoms than those that did not receive the
drug. While these results do not prove that RSV causes asthma, or that
RSV prevention may prevent asthma, the Company believes a prospective
study is warranted. No assurances can be given that such a prospective
study, if conducted, would prove that RSV causes asthma or that RSV
prophylaxis can prevent childhood asthma.
The Company received a composition of matter patent protecting Synagis
and its cell line through October 20, 2015. Other than the Company's
product RespiGam (see below), the Company is not aware of any competing
products being marketed anywhere in the world for the prevention of RSV
disease. The Company believes that any products being developed, if
successfully commercialized, would require at least four years of
clinical development and regulatory approval prior to reaching the
marketplace. Nevertheless, there can be no assurances that a
competitive product will not be brought to market sooner than expected,
or, if brought to market, would not be superior to Synagis. The Company
is currently working on developing third-generation products and/or
formulations for the prevention of RSV disease to preempt possible
competition in the field.
RespiGam
RespiGam, an intravenous immune globulin enriched in neutralizing
antibodies against RSV, was approved by the FDA for marketing in the
United States in January 1996. RespiGam is indicated for the prevention
of serious RSV disease in children under 24 months of age with BPD or a
history of premature birth (i.e., born at 35 weeks or less gestation).
RespiGam was the first product demonstrated to be safe and effective in
reducing the incidence and duration of RSV hospitalization and the
severity of RSV illness in these high risk infants. While Synagis is
administered by a simple intramuscular injection, RespiGam is
administered by an approximately four hour intravenous infusion.
Because of these and other considerations, the Company believes that
RespiGam will largely be replaced by Synagis in the marketplace.
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CytoGam
CytoGam is an intravenous immune globulin product enriched in antibodies
against cytomegalovirus ("CMV") and is marketed for prophylaxis against
CMV disease associated with transplantation of kidney, lung, liver,
pancreas, and heart. CMV contributes significantly to morbidity and
mortality in organ transplant recipients. CMV can cause severe pneumonia
and other organ complications related to invasive CMV disease which, if
not successfully treated, can lead to organ failure. CMV has also been
shown to cause increased bacterial and fungal infections, and has been
associated with an increased risk of rejection of the transplanted
organ. There are approximately 20,000 kidney, lung, liver, pancreas,
and heart transplants performed annually in the United States. Clinical
studies have shown a 50 percent reduction in CMV disease in kidney
transplant patients given CytoGam and a 56 percent reduction in serious
CMV disease in liver transplant patients given CytoGam. CytoGam
prophylaxis has also been associated with increased survival in liver
transplant recipients.
CytoGam was initially approved for marketing by the FDA in 1991 for the
attenuation of primary CMV disease in donor-positive/recipient-negative
kidney transplant patients, approximately 2,000 patients annually. The
approved indication was expanded in 1998 to further include lung, liver,
pancreas and heart transplant recipients, approximately 20,000 patients
annually. The Company believes that the expanded indication will not
significantly affect sales in the United States as many physicians have
already been prescribing CytoGam's use in the setting of solid organ
transplantation.
CytoGam was first sold through an exclusive distribution agreement with
Connaught Laboratories. The Company began marketing CytoGam through its
own hospital-based sales force in 1993. Sales of CytoGam have grown at a
compounded annual rate of approximately 53 percent since 1993 to $32.9
million in 1998. Sales outside the United States accounted for $6.3
million of total CytoGam sales in 1998. The Company believes a
significant portion of CytoGam sales in 1998 in the United States was
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related to the use of CytoGam as a substitute for standard intravenous
immune globulin ("IVIG"). It is unclear when and if the current supply
shortage of IVIG will end and if the continuation of such a shortage
would affect sales of CytoGam. The Company believes the United States
marketplace for CMV drugs in transplantation is competitive and no
assurances can be given that growth in the United States will continue
or that a continued IVIG shortage would increase CytoGam sales.
The Company continues to expand the opportunities for CytoGam outside
the United States. During 1998, CytoGam was approved for marketing in
Poland, Argentina and South Korea. Additionally, product was sold by
distributors in Turkey, Mexico, the Czech Republic, and Canada, and on a
named patient basis in nine other countries. Company's orphan drug
status expired in 1997 and there can be no assurance that additional CMV
intravenous specialty immune globulin products will not be successfully
commercialized by other companies. The Company is aware of one other CMV
immune globulin in development by NABI, Inc.
Products In Development
Human Papillomavirus Vaccine
The Company is developing vaccines for human papillomaviruses ("HPVs"),
the cause of genital warts and cervical cancer. There are over 75
different types of HPVs associated with a variety of clinical disorders
ranging from benign lesions to potentially lethal cancers. Four types of
HPV cause the majority of genital warts and cervical cancer cases: HPV-6
and HPV-11 (genital warts) and HPV-16 and HPV-18 (cervical cancer).
There are currently no vaccines to prevent these common sexually
transmitted diseases that affect 24 to 40 million men and women in the
United States.
The Company's strategy for vaccine development relies on a virus-like
particle ("VLP") technology for producing a structurally identical, non-
infectious form of the virus. Scientists at the Company in
collaboration with a team at Georgetown University first demonstrated
the effectiveness of a VLP vaccine candidate using a dog model for
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papillomavirus infection.
In 1998, the Company completed a double-blind, randomized, dose-
escalating, adjuvant-controlled Phase 1 clinical trial with its HPV-11
vaccine candidate, MEDI-501, evaluating its safety, tolerance, and
immunogenicity. Sixty-five healthy volunteers received an initial
injection and two booster injections of either alum-adjuvanted vaccine
at various escalating doses or alum alone. Vaccine injections were
believed to be generally well-tolerated. The most common adverse events
within four days after an injection were those commonly seen with alum-
adjuvanted vaccines, including pain at the injection site, headache and
fatigue. HPV antibodies were elevated in all patients after each of the
three injections of MEDI-501 in the dosing regimen. Antibodies that
could neutralize HPV were induced in nearly all volunteers at the higher
doses and 100 percent of the patients receiving all three injections at
the highest dose (n=10) developed elevated levels of antibodies that
could neutralize HPV.
In December 1997, the Company announced a strategic alliance with
SmithKline Beecham ("SB") to develop and commercialize the Company's HPV
vaccines. Under the terms of the agreement, SB receives exclusive
worldwide rights to the Company's HPV vaccine technology and both
companies will collaborate on research and development activities. In
January 1998, the Company received an up-front payment of $15 million
and an equity investment of $5.0 million. Pursuant to the agreement, the
Company also recorded $5.7 million in research funding during 1998, will
continue to receive certain research funding, would receive milestones
if specified development and sales goals are met, and royalties on any
product sales. Total funding and payments to the Company could total
over $85 million.
Under the terms of the agreement, the Company will conduct Phase 1 and
Phase 2 clinical trials, manufacture clinical material for those studies
and receive funding from SB for these activities. SB is responsible for
the final development of the product, as well as regulatory,
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manufacturing, and marketing activities.
MEDI-507, Anti-CD2 Humanized Monoclonal Antibody
MEDI-507 is a humanized monoclonal antibody being developed by the
Company in collaboration with BioTransplant Incorporated ("Bio
Transplant"). MEDI-507 was derived from a rat monoclonal antibody called
BTI-322. BTI-322 is a registered trademark of BioTransplant. Both MEDI-
507 and BTI-322 bind specifically to the CD2 antigen receptor found on T
cells and natural killer ("NK") cells. Laboratory studies have suggested
that BTI-322 and MEDI-507 primarily inhibit the response of T cells
directed at transplant antigens while subsequently allowing immune cells
to respond normally to other antigens. The selectivity and long lasting
effects of this inhibition suggest that these molecules may have
potential utility in applications in the transplantation field including
treatment or prevention of graft-versus-host disease ("GvHD"), or in
patients with certain autoimmune diseases.
BioTransplant exclusively licensed BTI-322 and MEDI-507 to MedImmune for
evaluation and potential commercialization. MedImmune is responsible for
all activities related to commercialization, and BioTransplant would
receive milestone payments at various stages related to regulatory
approval and royalties if the products are commercialized. BioTransplant
has retained the right to use BTI-322 and/or MEDI-507 in its proprietary
ImmunoCognance(TM) systems, which are designed to reeducate the immune
system to accept foreign tissue: AlloMune(TM) for human-to-human
transplants and XenoMune(TM) for porcine-to-human transplants.
GvHD is a potentially fatal complication of bone marrow or stem cell
transplantation caused when certain white blood cells from the donor
bone marrow attack the tissue of the recipient. Clinical manifestations
include skin rash, severe diarrhea, and liver abnormalities and
jaundice. GvHD is usually treated with a first-line therapy of
corticosteroids. Patients who develop moderate or severe GvHD have over
a 70% chance of death despite diverse treatments. Lack of understanding
of the physiologic mechanism of the disease has been a major impediment
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to the development of more effective treatments. Both T cells and NK
cells may play a role in development of GvHD. MEDI-507 which
specifically inhibits both types of cells may provide certain advantages
over current therapies. There are approximately 30,000 bone marrow and
stem cell transplants done worldwide each year.
Autoimmune diseases are of major medical importance worldwide and
include common afflictions such as rheumatoid arthritis, multiple
sclerosis, Crohn's disease and psoriasis. The Company believes the
unique immune modulatory properties of MEDI-507 observed in vitro may
have utility in certain autoimmune indications. A Phase 1 trial in
psoriasis is currently ongoing to address that possibility.
BTI-322 has been studied in over 100 patients in the United States and
Europe including a Phase 2 for treatment of steroid-refractory GvHD, and
in a Phase 1/2 for prevention of rejection.
In the Phase 2 clinical trial evaluating BTI-322 for treatment of
steroid-refractory GvHD, the compound was well-tolerated and 55% of the
patients responded positively to treatment, with either a complete
response or a reduction in grade of GvHD. The study was conducted at six
transplantation centers in 20 patients who received allogeneic (non-self
donated) bone marrow or stem cell transplantation, and who experienced
acute GvHD that was unresponsive to corticosteroid treatment. The
primary endpoints in the study were safety and reduction in grade of
GvHD. All 20 patients received a single daily dose of BTI-322 (0.1
mg/kg) for ten consecutive days, in conjunction with a standard
immunosuppression treatment regimen. The grade of GvHD was measured on a
scale of 1 (mild) to 4 (severe) with patients experiencing an overall
reduction in the grade of GvHD from 2.95 to 1.80 (p=0.0005). For the
trial, 11 patients responded positively to treatment, with six patients
experiencing a complete response to treatment and five patients showing
a reduction in the grade of GvHD. In three patients, the grade of GvHD
did not progress to a more severe stage. The grade of GvHD decreased
from 2.82 to 0.73 (p<0.00001) for the 14 patients who responded to the
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BTI-322 therapy. Aside from mild/moderate first dose reactions, patients
tolerated the BTI-322 well. As expected, some of the patients responding
to BTI-322 later experienced a relapse after treatment was completed,
indicating that further studies of extended treatment regimens would be
necessary.
A Phase 1/2 trial was completed for the prevention of acute renal
transplant rejection in which BTI-322 was given at the time of organ
transplantation. Results of the trial showed a 58% reduction at two
years post-transplant in the incidence of kidney graft rejection
episodes compared to conventional triple drug therapy alone.
Because of the encouraging results of studies evaluating BTI-322, the
Company moved forward during 1998 to clinically evaluate MEDI-507, the
humanized version of BTI-322. In the MEDI-507 antibody, the rat
components of the BTI-322 are replaced with human components thereby
reducing the likelihood that a recipient will recognize the drug as
foreign and develop an immune reaction. This potential reaction is
especially possible if the antibody is administered chronically in a
patient whose immune system is not severely suppressed, such as in many
patients with autoimmune diseases. The Company has therefore suspended
development of BTI-322 pending the results of studies evaluating MEDI-
507.
During 1998, the Company announced data from the first clinical trial
evaluating MEDI-507. The study was a Phase 1, open-label, dose-
escalating safety trial in renal allograft recipients examining three
dose levels (0.012, 0.06, and 0.12 mg/kg/dose) of MEDI-507. Thirteen
patients were given an initial dose within six hours after kidney
transplant surgery and a second dose 60-72 hours later. Results
indicated that MEDI-507 was generally well-tolerated and no anti-MEDI-
507 antibodies were detected following administration. During the first
30 days of follow up, two patients experienced acute rejection of their
kidneys.
During 1998, the Company concluded a second clinical trial of MEDI-507,
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a Phase 1/2 study evaluating MEDI-507 for the treatment of GvHD in adult
steroid-resistant stem cell transplant ("SCT") or bone marrow transplant
("BMT") patients. In one of the arms of this clinical trial, the MEDI-
507 dosing regimen was extended past the initial 10 days of treatment.
The data from this trial are currently being analyzed and the results
are expected to be presented at a medical conference in 1999.
In December 1998, the Company announced plans to initiate two additional
Phase 1/2 clinical trials to evaluate MEDI-507. Both studies are
expected to be completed in 1999. In the first study, adult steroid-
naive SCT or BMT recipients will receive MEDI-507 or placebo combined
with corticosteroids (methylprednisolone) for initial treatment of acute
GvHD. Because this study would be the first to evaluate MEDI-507 as part
of initial treatment of GvHD, all patients are expected to receive the
standard initial GvHD treatment with corticosteroids. It is anticipated
that this Phase 1/2 trial will include up to 32 patients recruited from
up to 15 centers. At year-end 1998, the trial protocol had been approved
by the FDA, and patient recruitment had begun.
In the second study, MEDI-507 will be assessed in an open-label trial
for its ability to treat GvHD in pediatric SCT or BMT patients.
Currently there are no agents approved for the treatment of GvHD in
children. Up to 20 pediatric patients (age 2-17) are expected to be
recruited from at least ten centers for this Phase 1/2 study. At year-
end 1998, the clinical trial protocol had been submitted for approval to
the FDA and, if approved, the study would commence enrollment following
the entry of initial patients in the adult trial.
The Company believes that data from the current studies evaluating MEDI-
507 may allow the Company in late 1999 to determine an appropriate
clinical strategy for MEDI-507. No assurances can be given that the
current clinical trials will be successful, or if successful, would lead
to a continuation of the program in the indications currently studied or
at all.
In 1998, the Company announced that MEDI-507 received orphan drug
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designation from the Office of Orphan Products Development of the FDA
for MEDI-507 for the treatment of GvHD. The Orphan Drug Act was
established to encourage development of drugs for rare diseases and
conditions affecting a small patient population (generally fewer than
200,000 people). Orphan designation of a product can potentially
provide a company with seven years of market exclusivity if the company
is the first to receive FDA product marketing approval for the orphan
drug in the designated indication. Additionally, this designation
provides a company with tax credits of 50% for qualified clinical
research expenses and the opportunity for clinical research grants. No
assurances can be given that MEDI-507 would be successfully developed
for GvHD treatment or, if successfully developed, would not experience
significant competition from other products for treatment of GvHD.
During 1998, the Company announced issuance of two patents from the
United States Patent and Trademark Office, relating to the MEDI-507 and
BTI-322 programs. The first patent covers composition of matter and the
use of BTI-322 and MEDI-507 to inhibit T cell-mediated immune responses;
the second patent covers the use of any antibody that binds to the
target epitope recognized by the BTI-322 and MEDI-507 antibodies.
While the Company believes these patents protect the Company against
direct imitation of BTI-322 and MEDI-507, there are no assurances that
other products with similar properties will not be developed by other
companies. The Company is aware of several companies developing
products directed at treating GvHD and autoimmune diseases with
monoclonal antibodies.
MEDI-491, B19 Parvovirus Vaccine
The Company is developing a vaccine for B19 parvovirus based on VLP
technology. Discovered in 1975, B19 parvovirus has been linked to a
number of serious conditions including certain types of miscarriages in
pregnant women, life-threatening sudden reduction of red blood cells in
sickle cell anemia patients, chronic anemia in AIDS and chemotherapy
patients, and persistent arthritis in some adults. Recently, it has
been suggested by certain laboratory observations published in medical
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journals that B19 may be associated with rheumatoid arthritis. There
are no agents available for the prevention of B19 parvovirus infection.
MEDI-491 is a vaccine intended to prevent human B19 parvovirus
infection. MEDI-491 utilizes VLP technology similar to that used for the
Company's HPV vaccine candidates. By producing two natural B19
parvovirus proteins in the correct proportions in an insect cell
recombinant protein production system, the Company and collaborators at
the National Heart, Lung, and Blood Institute("NHLBI") are able to
generate VLPs which resemble the natural B19 parvovirus particles, but
are not infectious.
The Company has completed a Phase 1 clinical trial to evaluate the
safety of MEDI-491 adjuvanted with aluminum hydroxide. MEDI-491 in this
trial appeared generally well-tolerated and measurable antibody
responses were observed.
In 1998, the Company entered into an agreement with Chiron Corporation
("Chiron") to use MF59, Chiron's proprietary vaccine adjuvant, to
improve the antibody response of MEDI-491. Pursuant to the agreement,
the Company would provide payments to Chiron if certain milestones are
achieved and would pay royalties on any commercialized products. MF59
has been evaluated by Chiron in clinical trials involving over 15,000
people. It was shown to enhance the immune response to certain antigens
and was generally safe and well-tolerated. The Company believes MF59 has
the advantage of being one of the most extensively tested
investigational vaccine adjuvants in human clinical trials.
Additionally, the Company has seen significant immune responses to MEDI-
491 when formulated with MF59 in animal studies compared to other
available adjuvants.
MedImmune believes a successful B19 parvovirus vaccine could be used
both to immunize women entering their child-bearing years to protect
them from experiencing B19 parvovirus-induced miscarriages and to
vaccinate children with sickle cell anemia to protect them against
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transient aplastic crisis.
The Company is also investigating further the potential link between B19
parvovirus infection and rheumatoid arthritis. Based on a number of
papers over the past decade implicating B19 parvovirus in rheumatoid
arthritis, authors of a recent paper in the Proceedings of the National
Academy of Sciences titled "Human B19 parvovirus as a causative agent
for rheumatoid arthritis" identified B19 parvovirus in the joint fluid
of 100% rheumatoid arthritis patients with active arthritis. The
Company is collaborating with the National Institutes of Health to
attempt to replicate and expand upon this work. No assurances can be
made that the Company will successfully establish a definitive link
between B19 parvovirus infection and rheumatoid arthritis. The Company
is not aware of any other vaccine candidates by any other company in
development for B19 parvovirus.
Urinary Tract Infection Vaccine
The Company is developing a vaccine candidate for urinary tract
infections ("UTIs"). UTIs are a significant medical problem and one of
the most common disorders prompting medical attention in otherwise
healthy women and children. UTIs, caused by the bacterium Escherichia
coli ("E. coli"), result in 7-8 million physician and hospital visits
per year at a cost of greater than $1 billion. It is estimated that by
age 30, roughly 50% of women have had at least one infection and 2-10%
are affected by recurrent infections. Recent studies have shown that,
on average, women who are 18-40 years old get 1-2 infections over a two
year period. Older adults are also at risk with the incidence as high as
33 out of 100 people. Currently, there are no vaccines to prevent UTIs.
Most infections can be treated with antibiotics; however, recurrence is
common and emerging antibiotic resistant bacteria create an additional
threat. Earlier attempts to use pili, the hair-like protein appendages
on the surface of bacteria, as vaccine targets were not successful in
protecting against a broad range of pathogenic bacteria, including E.
coli, because of the strain-to-strain variation in the major component
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<PAGE>
of the pili.
The identification of specific proteins, or "adhesins", at the end of
pili which facilitate the attachment of E. coli to human tissue,
provided a novel target for vaccine development. The Company's vaccine
strategy is based on blocking these adhesins, preventing the disease-
causing bacteria from binding and accumulating in the bladder. The novel
target of the Company's vaccine candidate is the FimH adhesin. FimH does
not vary widely among the different strains of E. coli which cause UTIs.
The Company believes this is a requisite quality for development of a
broadly effective UTI vaccine.
The Company first demonstrated the feasibility of a FimH-based UTI
vaccine to prevent UTIs in mice. In 1998, the Company completed studies
in monkeys with its UTI vaccine formulated with Chiron's MF59 (see also
B19 Parvovirus vaccine) that further supported its potential to prevent
UTIs. Laboratory tests indicated that the antibodies generated in
animals to the Company's UTI vaccine candidate react against a wide
range of UTI E. coli strains. The Company intends to begin clinical
trials with its E. coli vaccine candidate adjuvanted with MF59 in late
1999.
Lyme Disease Vaccine
The Company is developing a second-generation Lyme disease vaccine
candidate based on a protein known as decorin binding protein ("DbpA"),
found on the organism which causes Lyme disease. In 1998, the Company
announced that it had granted worldwide rights to its Lyme disease
vaccine candidate to Pasteur Merieux Connaught ("PMC"), a wholly owned
subsidiary of Rhone-Poulenc S.A., in exchange for potential milestone
payments and royalties on any future sales.
Lyme disease is the most common arthropod-borne disease in the United
States. Forty-eight states have reported cases of Lyme disease, with an
annual nationwide incidence of approximately 16,000 new cases. Lyme
disease is also reported in Europe, Japan, China and Russia. The disease
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<PAGE>
is caused by a bacterium known as B. burgdorferi and related species,
and is transferred through a tick, primarily of the genus, Ixodes, most
commonly found on the white-footed mouse or deer in the northeastern
U.S. When the tick feeds on a human host, it can transmit bacteria to
the host, thereby beginning a Lyme disease infection. Following a tick
bite, an infected person can often develop a circular rash with a bulls-
eye pattern. Weeks to months later, this rash may be followed by
neurological, cardiac and joint abnormalities, malaise and general flu-
like symptoms. Early treatment with antibiotics is generally most
effective; however, some infections, particularly if diagnosed late,
have proven to be resistant to antibiotic therapy. Difficulties with
early diagnosis as well as the occurrence of serious treatment-resistant
infections emphasize the need for safe and effective vaccines against
Lyme disease.
The first generation Lyme disease vaccine candidate of PMC is based on a
protein known as outer surface protein A ("OspA") found on the organism
which causes Lyme disease. This product has completed a Phase 3
clinical trial. The Company is also aware of another first-generation
vaccine based on OspA developed by SmithKline Beecham which has received
marketing approval from the FDA.
DbpA was discovered in 1993 by Magnus Hook, Ph.D. and Betty Guo at Texas
A&M University's Institute of Biosciences and Technology in Houston,
Texas and exclusively licensed to MedImmune. These scientists found that
a protein expressed by spirochetes which cause Lyme disease, including
Borrelia burgdorferi and related species, could bind to a protein called
"decorin" commonly found in human skin and connective tissue. Hook and
Guo determined the gene sequence encoding the protein in 1995. The
Company and Texas A&M University found that animals immunized with DbpA
can be protected from challenge with the bacterium. These researchers
have also shown the ability of antibodies directed against DbpA to
inhibit growth of B. burgdorferi and related strains, including isolates
not inhibited by antibodies directed against OspA.
To date, DbpA has been tested in animals. The Company does not believe
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<PAGE>
that a vaccine incorporating DbpA will enter clinical trials prior to
year-end 1999. PMC intends to use DbpA as a component in the development
of European, and possibly improved U.S., vaccines for the prevention of
Lyme disease. MedImmune would receive milestone payments and royalties
on sales of any vaccine incorporating DbpA.
Streptococcus pneumoniae Vaccine
The Company is involved in the discovery and screening of new proteins
for development of a Streptococcus pneumoniae vaccine. Streptococcus
pneumoniae is a major cause of pneumonia, middle-ear infections and
meningitis worldwide, especially in the very young or elderly. Pneumonia
causes more than one million deaths per year and is the most common
cause of childhood death in developing countries. In industrialized
countries, pneumococcal pneumonia is a serious problem among the
elderly. Middle-ear infections affect almost every child at least once
during the first two years of life. Vaccination against pneumococcal
infections has become more urgent in recent years due to the emergence
of antibiotic-resistant strains throughout the world.
The Company has established a research collaboration with St. Jude
Children's Research Hospital("St. Jude") to develop products for the
prevention and treatment of Streptococcus pneumoniae infection. The
Company has been granted a worldwide exclusive license from the
Rockefeller University to commercialize product candidates developed
from a novel set of genes discovered by scientists at St. Jude, formerly
at Rockefeller University. In addition, research efforts are underway by
scientists at the Company and St. Jude to identify novel conserved
surface proteins for potential vaccine applications. During 1998, a
number of promising candidate proteins were found and tested. The
Company believes that one or more candidates may be chosen for further
development in 1999.
Other Products
The Company continues to work on small feasibility studies in a number
of other areas. Any of these programs could become more significant to
18
<PAGE>
the Company over the next 12 months; however, there can be no
assurances that any of the new programs under review will generate
viable product opportunities. The Company may choose to address new
opportunities for future growth in a number of different ways including,
but not limited to, internal discovery and development of new products,
in-licensing of products and technologies, and/or merger or acquisition
of companies with products and/or technologies. Any of these activities
may require substantial capital investment.
Products and Product Development Programs
The following table summarizes the indications and current status of the
Company's products and product development programs.
Product Indication Status(1)
- ---------------------------------------------------------------
Synagis RSV Prevention of RSV disease Marketed
Monoclonal in pediatric patients at
Antibody (IM) high risk of RSV disease
CytoGam Prophylaxis of cytomegalovirus Marketed
disease associated with
transplantation of kidney,
lung, liver, pancreas and heart
RespiGam Prevention of serious RSV Marketed
RSV Immune disease in infants with
Globulin (IV) prematurity or lung disease
Synagis RSV Treatment of RSV disease in Phase 3 (4)
Monoclonal bone marrow transplant
Antibody recipients
Vitaxin Anti- Treatment of cancer by inhibition Phase 2
Alfa-V-Beta-3 of angiogenesis leiomyosarcoma
Moloclonal patents
Antibody
MEDI-507 Treatment of graft-versus-host Phase 1/2
Monoclonal disease
Antibody
MEDI-501 HPV-11 Prevention of genital warts Phase 1
Vaccine(2) Completed
MEDI-507 Treatment of psoriasis Phase 1
Monoclonal
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Antibody
MEDI-491 B19 Prevention of B19 parvovirus Phase 1
Parvovirus infection Completed
Vaccine
MEDI-504 HPV-18 Prevention of cervical cancer Clinical
Vaccine(2) Development
MEDI-503 HPV-16 Prevention of cervical cancer Clinical
Vaccine(2) Development
E. coli Vaccine Prevention of urinary tract Pre-clinical
(FimH Adhesin) infections Development
Second-Generation Prevention of Lyme disease Pre-clinical
Lyme Disease Development
Vaccine (3)
S. pneumoniae Prevention and treatment of Research
Vaccine streptococcus pneumoniae
_______________
(1) "Phase 1" and "Phase 2" clinical trials generally involve
administration of a product to a limited number of patients
to evaluate safety, dosage and, to some extent, efficacy.
"Phase 3" clinical trials generally examine the efficacy
and safety of a product in an expanded patient population at
multiple clinical sites.
(2) These products are being co-developed by the Company and
SmithKline Beecham. The Company is entitled to certain
milestone payments and royalties on any sales, if and when
cleared for marketing by the FDA. The specific clinical
status of these products is not disclosed.
(3) This product was out-licensed to Pasteur-Merieux Connaught
("PMC") in 1998. PMC is responsible for clinical
development and commercialization. The Company is entitled
to certain milestone payments and royalties on any sales, if
and when cleared for marketing by the FDA.
(4) This clinical trial is sponsored by the Cooperative
Antiviral Studies Group of the National Institutes of Health
Marketing, Research, Development and Collaborative Agreements
The Company's internal research programs are augmented by collaborative
projects with its scientific partners. As part of its strategy, the
Company has established alliances with pharmaceutical and other
biotechnology companies, academic scientists and government
laboratories. Currently, its principal strategic alliances are the
following:
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<PAGE>
Abbott Laboratories
In December 1997, the Company entered into two agreements with Abbott
Laboratories ("Abbott"). The first agreement calls for Abbott to co-
promote Synagis in the United States in exchange for a percentage of net
sales in excess of annual sales thresholds. Each company is responsible
for its own selling expenses.
The second agreement allows Abbott exclusively to distribute Synagis
outside the United States, if and when licensed for marketing by the
appropriate regulatory authorities. The Company would manufacture and
sell Synagis to Abbott at a price based on end user sales and could
receive additional milestone payments based on meeting certain
milestones and sales thresholds. In July 1998, the Company and Abbott
submitted a Marketing Authorization Application("MAA") to the European
Agency for The Evaluation of Medical Products ("EMEA") for Synagis. The
approval time of an MAA submitted to the EMEA can be 12 to 24 months or
more. As of December 31, 1998, the Company and Abbott had submitted a
total of 25 regulatory applications for approval to market Synagis. No
assurance can be given that the MAA will be approved by the EMEA in time
for the 1999 - 2000 RSV season or at all, or that any other applications
submitted to any other countries for marketing licensure will be
approved in a timely manner or at all.
American Home Products Corporation
The Company's strategic alliance with American Home Products ("AHP")
calls for the two companies to co-develop and co-promote RespiGam. The
agreement provided for AHP to fund a portion of the cost of the
development of RespiGam and to co-promote the product in the United
States. AHP shares in the profits and losses of RespiGam in the U.S.
The alliance provides for the Company to receive royalties on any sales
of AHP's RSV vaccine product, currently in Phase 2 clinical development
and for AHP to receive royalties on all domestic sales of Synagis.
SmithKline Beecham
In December 1997, the Company entered into a strategic alliance with
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<PAGE>
SmithKline Beecham PLC ("SB") to research, develop, manufacture and
commercialize therapeutic and prophylactic HPV vaccines. In exchange
for exclusive worldwide rights to the Company's HPV technology, SB
provided the Company with an up-front payment of $15 million, which was
received and recorded in 1998, future funding and potential
developmental and sales milestones which together could total over $85
million, royalties on any product sales and an equity investment of $5
million. Under the terms of the agreement, the companies will
collaborate on research and development activities. MedImmune will
conduct Phase 1 and Phase 2 clinical trials and manufacture clinical
material for those studies. SB is responsible for the final development
of the product, as well as regulatory, manufacturing, and marketing
activities.
BioTransplant, Incorporated
In October 1995, the Company and BioTransplant, Incorporated ("BTI")
formed a strategic alliance for the development of products to treat and
prevent organ transplant rejection. The alliance is based upon the
development of products derived from BTI's anti-CD2 antibody, BTI-322,
the Company's anti-T cell receptor antibody, MEDI-500, and future
generations of products derived from these two molecules (such as MEDI-
507, or humanized BTI-322). Pursuant to the alliance, the Company
received an exclusive worldwide license to develop and commercialize
BTI-322 and any products based on BTI-322, with the exception of the use
of BTI-322 in kits for xenotransplantation or allotransplantation. The
Company has assumed responsibility for clinical testing and
commercialization of any resulting products. BTI may receive milestone
payments which could total up to an additional $11.0 million, as well as
royalties on any sales of BTI-322, MEDI-500, MEDI-507 and future
generations of these products, if any.
Human Genome Sciences, Inc.
In July 1995, the Company entered into a collaborative research and
development relationship with Human Genome Sciences, Inc. ("HGS") to
create antibacterial vaccines and immunotherapeutic products based upon
the genomic sequences of bacteria. The Company and HGS have
collaborative
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<PAGE>
research efforts underway to develop a vaccine for Streptococcus
pneumoniae. Rights to another genomic sequence for vaccine development,
Helicobacter pylori, were out-licensed to Oravax, Inc. and Pasteur
Merieux Connaught in November 1996 for license payments as well as
milestone and royalty obligations. Pursuant to a collaboration and
license agreement between the Company and HGS, the Company will be
solely responsible for the commercialization of any products developed
through the collaboration, and HGS will be entitled to royalties based
upon the extent to which any products jointly developed are covered by
patents or license rights held by HGS.
Massachusetts Health Research Institute and Massachusetts Biologics
Laboratories.
In August 1989 and April 1990, the Company entered into a series of
research, supply and license agreements with Massachusetts Health
Research Institute ("MHRI") and Massachusetts Public Health Biologics
Laboratories, then a division of the Massachusetts Department of Public
Health ("The State Lab"), covering products intended for the prevention
or treatment of CMV and RSV infection and other respiratory virus
infections by immune globulins or monoclonal antibodies. The Company has
agreed to pay royalties on all sales using the licensed technology.
Pursuant to the agreements, the Company paid $17.8 million in 1998,
$13.3 million in 1997,and $11.8 million in 1996 , for royalties, process
development and manufacturing.
Pasteur Merieux Connaught
In December 1998, the Company entered into a license agreement with
Pasteur Merieux Connaught ("PMC"), a subsidiary of Rhone-Poulenc S.A.,
to develop a second generation vaccine for the prevention of Lyme
disease. The first generation vaccine candidate of PMC, OspA, has
completed a Phase 3 clinical trial. In exchange for exclusive worldwide
rights to the Company's DbpA technology, PMC made an up-front payment in
December 1998, and agreed to make additional payments if certain
development and sales milestones are achieved, and agreed to pay
royalties on any product sales. PMC indicated that it intends to use
DbpA for the development of
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<PAGE>
European, and possibly improved U.S., vaccines for the prevention of
Lyme disease.
Other Agreements
The Company has a number of other collaborative and business agreements
with academic institutions and business corporations, including
agreements with 1) Washington University in St. Louis covering
development of pilus-based anti-bacterial vaccines, 2) Georgetown
University, the German Cancer Research Center and the University of
Rochester covering development of vaccines for human papillomaviruses,
3)Chiron Corporation covering supply of MF59, a proprietary vaccine
adjuvant to be used for B19 parvovirus and E.coli development and, 4)
scientists at St. Jude for the discovery and commercialization of
products to treat and prevent Streptococcus pneumoniae. In addition, the
Company has license agreements with third parties for CytoGam, RespiGam,
Synagis and substantially all of its other potential products. Under
such license agreements the Company is obligated to pay royalties on any
sales of these products.
Marketing and Sales
The Company has developed a sales and marketing organization which it
believes is responsive to the increased importance of managed care and
the need of the healthcare industry to provide higher quality care at
lower costs.
The Company's first product, CytoGam, was originally marketed by a third
party as the Company's exclusive distributor. In December 1992, the
Company reacquired marketing rights to CytoGam and in January 1993, the
Company commenced marketing of CytoGam in the United States through its
own sales force (then consisting of 14 people) focused on 250 leading
transplantation hospitals. Sales outside the United States are made
through regional distributors.
The Company now has approximately 100 people devoted to sales and
marketing of the Company's three approved products. Approximately 50
sales and managed care representatives cover approximately 500 hospitals
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<PAGE>
and clinics in the United States, which specialize in transplantation
and/or pediatric/neonatal care, for the promotion of CytoGam and Synagis
or RespiGam, respectively. Each sales representative is responsible for
selling all three products.
The Company has established a collaboration with Abbott, through its
Ross Pediatrics Division, to co-promote Synagis in the U.S. In
addition, Abbott has agreed to serve as the Company's exclusive
distributor for Synagis outside of the U.S., if and when Synagis is
cleared for marketing by the appropriate regulatory authorities. There
can be no assurance that such approvals would be granted, or, if
granted, that approvals would occur in a timely manner.
Manufacturing and Supply
The Company has entered into manufacturing, supply and purchase
agreements in order to provide a supply of human plasma and production
capability for Synagis, CytoGam and RespiGam. CytoGam and RespiGam are
produced from human plasma collected from donors who have been screened
to have high concentrations of antibodies against CMV and RSV,
respectively. Human plasma for CytoGam and RespiGam is converted to an
intermediate raw material (Fraction II+III paste) under supply
agreements with Baxter and V.I. Technologies, Inc.
The State Lab processes the Fraction II+III paste into bulk product. The
Company has an informal arrangement with the State Lab for planned
production of bulk product for CytoGam and RespiGam. The State Lab holds
the sole product and establishment licenses for CytoGam and RespiGam.
The Company also has an agreement with Connaught Laboratories, Inc.
("Connaught") to fill and package CytoGam and RespiGam. If the State
Lab, the suppliers of the Fraction II+III paste, or Connaught is unable
to satisfy the Company's product requirements on a timely basis or is
prevented for any reason from manufacturing its products, the Company
may be unable to secure an alternative supplier or manufacturer without
undue and materially adverse operational disruption and increased cost.
25
<PAGE>
In 1997, the Company entered into a manufacturing and supply agreement
with BI to provide supplemental production capability for Synagis, a
humanized monoclonal antibody product. BI is currently the primary
manufacturer of Synagis. BI also fills and packages Synagis produced at
their facility. The BI facility is subject to inspection and approval by
the appropriate regulatory authorities in connection with maintaining
its FDA licensure as well as for obtaining and maintaining approval from
certain ex-U.S. countries. Should BI be unable to supply Synagis to the
Company for any reason, there can be no assurance that the Company would
be able to secure an alternate manufacturer in a timely basis or without
increased cost. If and when the Company's Frederick manufacturing
facility is licensed for production by the FDA, the Company would
continue for the foreseeable future to rely upon BI for production of
additional quantities of Synagis in order to meet expected worldwide
demand for the product. There can be no assurances that BI will be
licensed by the appropriate regulatory authorities to manufacture the
product for sale outside the U.S.
The Company has completed construction of its manufacturing facility in
Frederick, Maryland. The facility, currently undergoing start-up and
validation activities, is a multi-use biologics facility intended to
provide production capability for the manufacture of immune globulins
and by-products from human plasma. In addition, the facility contains a
cell culture production area for the manufacture of recombinant
products, such as Synagis, MEDI-501 and MEDI-507, if and when MEDI-501
and MEDI-507 are cleared for marketing by the FDA. The Company is
currently planning to submit in 1999 an amendment to its BLA for
approval of the facility for production of Synagis. There can be no
assurances that the facility will receive regulatory approval for its
intended purposes. Any resulting sales of product from this facility
would not commence for at least the next 12 months. The Company has no
experience in commercial manufacturing. Accordingly, even if the
necessary approvals were obtained, the Company would encounter new risks
associated with
26
<PAGE>
commercial manufacturing, including potential scale-up issues, cost
overruns, product defects and environmental problems. Furthermore, there
can be no assurance that the Company will be able to manufacture
products at a cost that is competitive with third party manufacturing
operations or that the production yields will be comparable or better
than those achieved at third party manufacturing operations.
The Company's pilot plant facility in Gaithersburg, Maryland was
licensed by the FDA for the commercial production of Synagis in June
1998. Due to the small capacity at the facility, only limited
quantities of Synagis are produced at this site. In addition, this site
produces materials for the Company's clinical trials. Materials
currently being used in clinical trials for MEDI-501, MEDI-507, and
MEDI-491 have been produced at the Company's pilot plant.
The Company entered into an agreement with Chiron Corporation ("Chiron")
in 1997, pursuant to which Chiron fills and packages Synagis produced at
the Gaithersburg pilot plant and Frederick manufacturing plant. The
term of the agreement is for three years.
Patents, Licenses and Proprietary Rights
Products currently being developed or considered for development by the
Company are in the area of biotechnology, an area in which there are
extensive patent filings. The Company relies on patent protection
against use of proprietary products and technologies by competitors.
The patent position of biotechnology firms generally is highly uncertain
and involves complex legal and factual questions. To date, no
consistent policy has emerged regarding the breadth of claims allowed in
biotechnology patents. Accordingly, there can be no assurance that
patent applications owned or licensed by the Company will result in
patents being issued or that, if issued, such patents will afford
protection against competitors with similar technology.
The Company believes that there are other patents issued to third
parties and/or patent applications filed by third parties which could
have applicability to each of the Company's products and product
candidates
27
<PAGE>
and could adversely affect the Company's freedom to make, have made, use
or sell such products or use certain processes for their manufacture.
The Company is unable to predict whether it will ultimately be necessary
to seek a license from such third parties or, if such a license were
necessary, whether such a license would be available on terms acceptable
to the Company. The necessity for such a license could have a material
adverse effect on the Company's business.
There has been substantial litigation regarding patent and other
intellectual property rights in the biotechnology industry. Litigation
may be necessary to enforce certain intellectual property rights of the
Company. Any such litigation could result in substantial cost to and
diversion of effort by the Company.
Government Regulation
The production and marketing of the Company's products and research and
development activities are subject to regulation for safety and efficacy
by numerous governmental authorities in the United States and other
countries. In the United States, vaccines, biologics, drugs and certain
diagnostic products are subject to FDA review and licensure. The federal
Food, Drug and Cosmetics Act, the Public Health Service Act and other
federal statutes and regulations govern or influence the testing,
manufacture, safety, labeling, storage, record keeping, licensure,
advertising and promotion of such products. No assurances can be given
that any products under development will be licensed for marketing by
the FDA or, if approved, that the product would be successfully
commercialized or maintained in the marketplace. Non-compliance with
applicable requirements could result in fines, recall or seizure of
products, total or partial suspension of production, refusal of the
government to approve product license applications, restrictions on the
Company's ability to enter into supply contracts and criminal
prosecution. The FDA also has the authority to revoke product licenses
and establishment licenses previously granted.
The FDA may designate a drug as an Orphan Drug for a particular use, in
28
<PAGE>
which event the developer of the drug may be entitled to a seven year
marketing exclusivity period. CytoGam, RespiGam and MEDI-507 have been
designated as Orphan Drugs for certain indications by the FDA.
Accordingly, RespiGam has market exclusivity for its currently licensed
indication through January 17, 2003. Marketing exclusivity for
CytoGam's originally licensed indication for use in kidney
transplantation expired in 1997. MEDI-507 would have market exclusivity
for seven years from the date of FDA approval if it is the first product
approved by the FDA for treatment of GvHD.
The Company is also subject to regulation by the Occupational Safety and
Health Administration ("OSHA") and the Environmental Protection Agency
("EPA") and to regulation under the Toxic Substances Control Act, the
Resources Conservation and Recovery Act and other regulatory statutes,
and may in the future be subject to other federal, state or local
regulations. OSHA and/or the EPA may promulgate regulations concerning
biotechnology that may affect the Company's research and development
programs. The Company is unable to predict whether any agency will adopt
any regulation which would have a material adverse effect on the
Company's operations. The Company voluntarily attempts to comply with
guidelines of the National Institutes of Health regarding research
involving recombinant DNA molecules. Such guidelines, among other
things, restrict or prohibit certain recombinant DNA experiments and
establish levels of biological and physical containment that must be met
for various types of research.
Sales of pharmaceutical and biopharmaceutical products outside the
United States are subject to foreign regulatory requirements that vary
widely from country to country. Whether or not FDA licensure has been
obtained, licensure of a product by comparable regulatory authorities of
foreign countries must be obtained prior to the commencement of
marketing the product in those countries. The time required to obtain
such licensure may be longer or shorter than that required for FDA
approval, and no
assurances can be given that such approval will be obtained.
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Competition
The biotechnology and pharmaceutical industries are characterized by
rapidly evolving technology and intense competition. The Company's
competitors include pharmaceutical, chemical and biotechnology
companies, many of which have financial, technical and marketing
resources significantly greater than those of the Company. In addition,
many specialized biotechnology companies have formed collaborations with
large, established companies to support research, development and
commercialization of products that may be competitive with those of the
Company. Academic institutions, governmental agencies and other public
and private research organizations are also conducting research
activities and seeking patent protection and may commercialize products
on their own or through joint ventures.
The Company is aware of certain products manufactured by competitors
that are used for the prevention or treatment of certain diseases the
Company has targeted for product development, including CMV, RSV, Lyme
disease, HPV infections and organ graft rejection. In the prevention of
CMV disease, the Company's CytoGam competes with several other products
including other antiviral drugs, standard immune globulin preparations
and intravenous and oral ganciclovir, marketed by Hoffmann-La Roche Inc.
The Company is aware that a number of physicians have prescribed CytoGam
in combination with ganciclovir for the prevention of CMV disease in
certain patients.
The Company believes that for the prevention of RSV disease, the
Company's second generation RSV product, Synagis, and its first
generation product, RespiGam, which has largely been replaced by
Synagis, do not compete directly with any product; however, the Company
is aware of one product in the U.S., ribivirin, which is indicated for
the treatment of RSV disease. The existence of these products, or other
products or treatments of which the Company is not aware, or products or
treatments that may be developed in the future, may adversely affect the
marketability of products developed by the Company.
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The Company expects its products to compete primarily on the basis of
product efficacy, safety, patient convenience, reliability, price and
patent position. In addition, the first product to reach the market in a
therapeutic or preventive area is often at a significant competitive
advantage relative to later entrants to the market. The Company's
competitive position will also depend on its ability to attract and
retain qualified scientific and other personnel, develop effective
proprietary products, implement product and marketing plans, obtain
patent protection and secure adequate capital resources.
<TABLE>
EXECUTIVE OFFICERS OF THE COMPANY
<CAPTION>
Officer
Name Age Position Since
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Wayne T. Hockmeyer, Ph.D. 54 Chairman and Chief Executive 1988
Officer
Melvin D. Booth 53 President and Chief Operating 1998
Officer
David M. Mott 33 Vice Chairman and Chief 1992
Financial Officer
David P. Wright 51 Executive Vice President- 1990
Sales and Marketing
Franklin H. Top, Jr., 63 Executive Vice President and 1988
M.D. Medical Director
Bogdan Dziurzynski 50 Senior Vice President 1994
Regulatory Affairs and
Quality Assurance
James F. Young, Ph.D. 46 Senior Vice President 1989
Research and Development
</TABLE>
Dr. Hockmeyer founded the Company in April 1988 as President and Chief
Executive Officer and was elected to serve on the Board of Directors in
May 1988. He became Chairman of the Board of Directors in May 1993.
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From 1986 to 1988, Dr. Hockmeyer served as Vice President, Research and
Development, of Praxis Biologics, Inc. ("Praxis"). From 1980 to 1986,
Dr. Hockmeyer served as Chairman, Department of Immunology, Walter Reed
Army Institute of Research. Dr. Hockmeyer is a member of the Maryland
Economic Development Commission, a member of the Board of Directors of
Digene Corporation, serves on the Advisory Board of the University of
Maryland Biotechnology Institute, is a member of Board of Advisors of
the Institute of Human Virology, is a member of the Board of Directors
of the High Technology Council of Maryland, is Chairman of the Maryland
Bioscience Alliance and a member of the University of Maryland
University College Graduate School Advisory Board, Executive Programs.
Dr. Hockmeyer received a Bachelor of Science degree from Purdue
University and a doctorate from the University of Florida.
Mr. Booth joined the Company in October 1998 as President and Chief
Operating Officer and was elected to serve on the Board of Directors in
November 1998. Prior to joining the Company, he was President, Chief
Operating Officer and a member of the Board of Directors of Human Genome
Sciences, Inc. from July 1995 until October 1998. Prior to this time,
Mr. Booth was employed at Syntex Corporation from 1975 to 1995, where he
held a variety of positions, including President of Syntex Laboratories,
Inc. from 1993 to 1995 and Vice President of Syntex Corporation from
1992 to 1995. From 1992 to 1993, he served as the President of Syntex
Pharmaceuticals Pacific. From 1991 to 1992, he served as an area Vice
President of Syntex, Inc. From 1986 to 1991 he served as the President
of Syntex, Inc., Canada. Mr. Booth is a past Chairman of the
Pharmaceutical Manufacturers Association of Canada and currently is a
member of the Board of Directors of Neoprobe Corporation. Mr. Booth
graduated from Northwest Missouri State University and holds a Certified
Public Accountant Certificate.
Mr. Mott joined the Company in April 1992 as Vice President, with
responsibility for business development, strategic planning and investor
relations. In 1994, Mr. Mott assumed additional responsibility for the
medical and regulatory groups, and in 1995 was appointed Executive Vice
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<PAGE>
President and Chief Financial Officer. In November 1995, Mr. Mott was
appointed to the position of President and Chief Operating Officer and
was elected to the Board of Directors. In October 1998, Mr. Mott was
appointed Vice Chairman and Chief Financial Officer. Prior to joining
the Company, he was a Vice President in the Health Care Investment
Banking Group at Smith Barney, Harris Upham & Co., Inc. At Smith Barney,
where he was employed from July 1986 to April 1992, Mr. Mott's
activities included public and private equity and debt financings as
well as merger and acquisition work for biotechnology, healthcare
services, and medical product and device companies. Mr. Mott is a
member of the Board of Directors of Conceptis Technologies. He holds a
Bachelor of Arts degree in economics and government from Dartmouth
College.
Dr. Top joined the Company in June 1988 as Executive Vice President. He
was elected to the Board of Directors in July 1988 and became the
Company's Medical Director in 1990. From 1987 to 1988, Dr. Top served
as Senior Vice President for Clinical and Regulatory Affairs at Praxis.
Prior to 1987, Dr. Top served for 22 years in the U.S. Army Medical
Research and Development Command, where he was appointed Director,
Walter Reed Army Institute of Research in 1983. Dr. Top holds a
doctorate of medicine cum laude and a Bachelor of Science degree in
biochemistry from Yale University.
Mr. Wright, prior to joining the Company in 1990, was President of
Pediatric Pharmaceuticals, Inc. (1989-1990) and Vice President of the
Gastrointestinal Business Group at Smith, Kline and French Laboratories.
Mr. Dziurzynski, prior to joining the Company in 1994, was Vice
President of Regulatory Affairs and Quality Assurance at Immunex
Corporation.
Dr. Young, prior to joining the Company in 1989, was Director,
Department of Molecular Genetics at Smith, Kline and French
Laboratories.
33
<PAGE>
EMPLOYEES
As of February 15, 1999, the Company had 438 full time employees. These
include 101 marketing and sales personnel, 45 clinical and regulatory
affairs personnel, 128 manufacturing facility personnel, and 88 research
and development personnel. The Company considers relations with its
employees to be good.
RISK FACTORS
In addition to the other information included in this report, you should
consider the following risk factors. This report contains forward-
looking statements covered by the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements involve risks and uncertainties that may affect our business
and prospects. Our results may differ significantly from the results
discussed in the forward-looking statements as a result of certain
factors which are listed below or discussed elsewhere in this report and
our other filings with the Securities and Exchange Commission.
Product sales may vary: The amount we receive from sales of our products
may vary from period to period for several reasons, including: seasonal
demand for our principal product, general market demand for our
products, which may fluctuate, availability of other competitive
products in the market, availability of third-party reimbursement for
the cost of treatment with our products, effectiveness and safety of our
products, rate of adoption and use of our products for approved
indications and possible additional indications, likelihood and timing
of FDA and other regulatory approvals.
We do not expect any of the products we have under development to be
commercially available prior to 2002 and they may never become
commercially available.
Increased work force could result in substantial costs and time delays:
Recent increases in the size of our work force and scope of operations
could be harmful to us. In connection with our increased marketing
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<PAGE>
efforts for Synagis, and in preparation for commencement of
manufacturing in our new Frederick, Maryland facility, we have
substantially increased the size of our work force. This rapid growth
and increased scope of operations present new risks we have not
previously encountered and could result in unanticipated and substantial
costs and time delays which could materially and adversely affect the
Company.
Significant costs could result from our new manufacturing facility: Our
new manufacturing facility could result in significant costs to us. We
completed construction of the facility, located in Frederick, Maryland,
in early 1998. We are currently in the process of validating the
manufacturing process and beginning production. We expect to submit to
the FDA in 1999 an amendment to our Biologics License Application for
approval of the facility for the production of Synagis. We cannot sell
any Synagis or CytoGam manufactured in the facility unless and until the
FDA inspects the facility and approves our application. We cannot
guarantee that our facility will be approved on a timely basis, or at
all. Even if the approval process goes according to our expectations,
we anticipate that sales of product manufactured in the facility will
not begin for at least the next nine to 18 months. Until approval is
received, all costs of operating our manufacturing facility must be
borne by us without being offset by revenue from sales of Synagis or
CytoGam that we manufacture. If approval were substantially delayed, or
we were unable to obtain approval at all, we could be forced to continue
to incur these costs and to seek alternative sources of supply for
Synagis or CytoGam, which could have a material adverse effect on our
business, financial condition or results of operations.
We have limited experience in commercial manufacturing. Even if our
facility were approved for the manufacture of Synagis, we would
encounter many new risks associated with commercial manufacturing, such
as: manufacturing processes appropriate for low-volume production may
not be suitable for higher-volume production; costs of operating and
maintaining the production facility may be in excess of our
expectations; product defects may result; our production process may
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<PAGE>
result in environmental problems; we may not be able to manufacture
products at a cost that is competitive with third party manufacturing
operations. If we were to experience any one or more of these problems,
there could be a material adverse effect on our business, financial
condition or results of operations.
We are dependent on third party manufacturers and suppliers: We are
currently, and for the foreseeable future expect to be, dependent on a
limited number of contract manufacturers for some or all of the
manufacture of our current and future products (if any). We depend on
Boehringer Ingleheim Pharma KG ("BI") to produce virtually all the
Synagis we sell. BI's facility is subject to inspection and approval by
both U.S. and foreign regulatory authorities in order to obtain and
maintain its license to manufacture our products. Should BI be unable
to supply Synagis to us for any reason, there can be no assurance that
we would be able to secure an alternate manufacturer on a timely basis
or without increased cost.
We also depend on the University of Massachusetts, Massachusetts
Biologics Laboratories (the "State Lab") to produce all the CytoGam and
RespiGam we sell. The State Lab holds the sole product and
establishment licenses from the FDA for the manufacture of CytoGam and
RespiGam. Our manufacturing arrangements with the State Lab are
renegotiated annually. We cannot guarantee that any new arrangements
will be on terms favorable to us. In addition, we rely on a limited
number of suppliers to obtain substantially all of the plasma used as
raw material for the production of CytoGam and RespiGam. The State Lab
or these suppliers of raw material could fail to meet our requirements
for the production of CytoGam and RespiGam. If we were unable to obtain
these products on reasonable terms or at all, we could be unable to
secure alternative suppliers or manufacturers without unduly disrupting
our operations. Such a disruption could have a materially adverse
effect on our business, financial condition or results of operations.
We have previously experienced shortages of CytoGam and RespiGam, which
has limited sales of these products without reducing our sales and
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<PAGE>
marketing costs.
We are dependent on strategic alliances: We depend on strategic
alliances with our corporate partners to accomplish many of our goals.
If those corporate partners fail to devote sufficient effort and
attention to achieving those goals, we would be adversely affected.
Patent protection for our products may be inadequate or costly to
enforce: We may not be able to obtain effective patent protection for
products we develop. We are currently developing, or considering
developing, products in the biotechnology industry, an industry in which
there are extensive patent filings. The patent position of
biotechnology firms generally is highly uncertain and involves complex
legal and factual questions. To date, no consistent policy has emerged
regarding the breadth of claims allowed in biotechnology patents.
Accordingly, there can be no assurance that our patent applications will
result in patents being issued or that, if issued, such patents will
afford protection against competitors with similar technology.
Litigation could be necessary from time to time in order to enforce our
intellectual property rights. There has been substantial litigation
regarding patent and other intellectual property rights in the
biotechnology industry. If we were required to litigate, there could be
substantial cost involved and significant diversion of our business
efforts.
We may be required to seek patent licenses from third parties: We
believe that there are patents issued to third parties and/or patent
applications filed by third parties which could apply to each of our
products and product candidates. These patents and/or applications
could limit our ability to manufacture, use or sell our products. In
such a case, we may be required to seek to purchase a patent license in
order to avoid infringing a third party's intellectual property rights.
If such a license were necessary, there can be no assurance that it
would be available on terms acceptable to us or at all, which could have
a material adverse effect on our business, financial condition or
37
<PAGE>
results of operations.
Technological developments by our competitors may render our products
obsolete: If our competitors were to develop superior products or
technologies, our products or technologies could be rendered
noncompetitive or obsolete. Biotechnology and pharmaceuticals are
evolving fields in which developments are expected to continue at a
rapid pace. Our success depends upon achieving and maintaining a
competitive position in the development of products and technologies.
Competition from other biotechnology and pharmaceutical companies is
intense. Many of our competitors have substantially greater research
and development capabilities, marketing, financial and managerial
resources and experience in the industry. Were a competitor to develop a
better product or technology, our products or technologies could be
rendered obsolete, decreasing our product sales and resulting in a
material adverse effect on our business, financial condition or results
of operations.
Compliance with government regulations is costly and time-consuming:
Substantially all of our products require costly and time-consuming
regulatory approval by governmental agencies. In particular, human
therapeutic and vaccine products are subject to rigorous preclinical and
clinical testing for safety and efficacy and approval processes by the
FDA in the United States, as well as regulatory authorities in foreign
countries. There can be no assurance that required approvals will be
obtained. If we were unable to obtain these approvals on a timely basis
or at all, our ability to successfully market products directly and
through our collaborators, and to generate revenues from sales or
royalties, would be impaired.
Any approved products are subject to continuing regulation. If we were
to fail to comply with applicable requirements, we could be subject to
fines, recall or seizure of products, total or partial suspension of
production, refusal by the government to approve our product license
applications, restrictions on our ability to enter into supply
38
<PAGE>
contracts, and criminal prosecution.
The FDA also has the authority to revoke product licenses and
establishment licenses previously granted to us. Further, the
regulation of recombinant DNA technologies and the regulation of
manufacturing facilities by state, local and other authorities is
subject to change. Any changes to existing regulations would obligate
us to comply, which could entail additional cost, time and risk of non-
compliance.
Product liability claims may result from sales of our products: As a
developer, tester, manufacturer, marketer and seller of health care
products, we are potentially subject to product liability claims. Our
blood products, such as CytoGam and RespiGam, involve heightened risks
of claims, including the risk of claims resulting from the transmission
of blood-borne diseases. Defending a product liability claim could be
costly and divert our focus from business operations. There can be no
assurance that we will be able to maintain our current product liability
insurance at a reasonable cost, or at all. If a claim were successful,
there is no guarantee that the amount of the claim would not exceed the
limit of our insurance coverage. Further, a successful claim could
result in the recall of some or all of our products. Any of these
occurrences could have a material adverse effect on our business,
financial condition or results of operations.
Additionally, blood products like CytoGam and RespiGam are occasionally
recalled from the market because of risks of contamination from
infectious agents or for other reasons. Any such recall of our products
could have a material adverse effect on our business, financial
condition or results of operations.
We depend on key personnel: Our success depends upon the continued
contributions of our executive officers and scientific and technical
personnel. Many key responsibilities have been assigned to a relatively
small number of individuals. The competition for qualified personnel is
intense, and the loss of services or certain key personnel could
39
<PAGE>
adversely affect our business. We do not maintain or intend to purchase
"key man" life insurance on any of our personnel.
The price of our common stock could fluctuate significantly over time:
The market price of our common stock has fluctuated significantly over
time, and it is likely that the price will fluctuate in the future.
Investors and analysts have been and will continue to be, interested in
our reported earnings, as well as how we perform compared to their
expectations. Announcements by us or others regarding operating results,
existing and future collaborations, results of clinical trials,
scientific discoveries, commercial products, patents or proprietary
rights or regulatory actions may have a significant effect on the market
price of our common stock. In addition, the stock market has
experienced extreme price and volume fluctuations that have particularly
affected the market price for many high technology companies and that
have often been unrelated to the operating performance of these
companies. These broad market fluctuations may adversely affect the
market price of our common stock.
Changes in foreign currency exchange rates or interest rates could cause
us losses: We have entered into foreign exchange forward contracts which
could result in losses. Because we have contracts for the future
purchase of inventory which are denominated in foreign currencies, there
is a chance that the foreign currency exchange rate could change between
the time those contracts become due and the time when our payments are
actually made, resulting in increases or decreases in the actual cost of
our purchases. To reduce the risk of unpredictable changes in the cost
of our purchases, we enter into forward foreign exchange contracts,
which allow us to purchase, for a fixed price on a specific date in the
future, the amount of foreign currency necessary to pay for our
contractual purchase of inventory. Fluctuations in the anticipated
payment date for the inventory could require us to adjust the date of
the contract, which could result in a change in the foreign currency
exchange rate, which could have a material adverse effect on our
financial condition.
40
<PAGE>
A discussion of our accounting policies for financial instruments
and further disclosure relating to financial instruments is included in
the Notes to Financial Statements, located in Part II, Item 8 of this
report.
The success of our products may be limited by government and third-party
payors: The continuing efforts of government and third party payors to
contain or reduce the costs of health care through various means may
negatively affect sales of our products. In some foreign markets,
pricing and profitability of pharmaceutical products is subject to
governmental control. In the United States, there have been, and we
expect there will continue to be, various Federal and state proposals to
implement similar government controls over pricing and profitability.
The adoption by Federal or state governments of any such proposals could
limit the commercial success of our existing or any future products.
Both in the United States and elsewhere, sales of pharmaceutical
products depend on the availability of reimbursement to the consumer
from third party payors, such as government and private insurance plans.
Third party payors are increasingly challenging the prices charged for
products, and are limiting reimbursement levels offered to consumers for
these products. To the extent that third party payors focus their
efforts on our products, sales of our products could be negatively
impacted.
Our business may be harmed by the year 2000 issue: See Part II, Item 7,
under the caption "Year 2000" for a discussion of the risks associated
with Year 2000 readiness.
ITEM 2. PROPERTIES
The Company occupies, under a lease expiring in 2006, a facility in
Gaithersburg, Maryland, that contains approximately 85,000 square feet
of research, development and administrative space. In 1996, the Company
acquired a 27 acre parcel of land in Frederick, Maryland. The Company
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<PAGE>
has completed construction of a 91,000 square foot multi-use biologics
facility on this site to provide for the manufacture of immune globulins
and by-products from human plasma and a cell culture production area for
manufacture of products such as Synagis. The Company also purchased in
December 1998, administrative and warehouse space on approximately a six
acre parcel of land adjacent to the existing Frederick facility. The
structure contains approximately 56,000 square feet.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR MEDIMMUNE, INC.'S COMMON STOCK
AND RELATED SHAREHOLDER MATTERS
The Company's common stock trades on The Nasdaq Stock Market under the
symbol "MEDI". At February 28, 1999, the Company had 327 common
stockholders of record. This figure does not represent the actual
number of beneficial owners of common stock because shares are
generally held in "street name" by securities dealers and others for the
benefit of individual owners who may vote the shares. The number of
beneficial shareholders as of February 28, 1999 was over 15,000.
The following table shows the range of high and low closing prices and
year end closing prices for the common stock for the two most recent
fiscal years, adjusted for the effect of a two-for-one stock split
effective December 31, 1998.
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<PAGE>
<TABLE>
<CAPTION>
1997 1998
---- ----
High Low High Low
---- ---- ---- ----
<S> <C> <C> <C> <C>
First Quarter $8 3/4 $6 11/16 $29 1/8 $19 3/8
Second Quarter 9 7/8 5 11/16 32 15/16 22 11/16
Third Quarter 18 5/8 8 1/4 34 7/8 21
Fourth Quarter 21 7/8 15 1/2 50 11/16 25 5/8
Year End Close $21 7/16 $49 11/16
</TABLE>
The Company has never declared or paid any dividends on its common stock
and does not anticipate paying any cash dividends in the foreseeable
future. The Company currently intends to retain any earnings to fund
future growth, product development, and operations.
ITEM 6. SELECTED FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
RESULTS FOR THE YEAR 1998 1997* 1996* 1995* 1994*
----- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C>
Product sales $163,440 $65,271 $35,782 $16,173 $12,054
Other 37,268 15,693 5,317 11,263 6,804
------- ------- ------- -------- -------
Total revenues 200,708 80,964 41,099 27,436 18,858
Research and develop-
ment expenses 25,775 40,669 32,192 26,417 21,939
Net earnings/(loss) 56,240<F1> (36,895) (29,544) (22,671) (18,828)
Earning/(Loss) per
Share*
Earnings
Basic 1.06 (0.80) (0.70) (0.71) (0.64)
Diluted 0.91 (0.80) (0.70) (0.71) (0.64)
YEAR END POSITION
Cash and marketable
Securities $134,882 $50,326 $114,765 $38,039 $22,527
Total assets 353,120 170,336 163,971 57,332 44,724
Long term debt 83,195 85,363 70,874 1,984 2,090
Shareholders' equity 209,833 40,536 72,865 43,779 34,194
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*Note: loss per share data have been restated to give effect for the two-
for-one stock split on December 31, 1998.
<FN>
<F1>
Includes deferred income tax benefit of $47,428.
</FN>
</TABLE>
<TABLE>
QUARTERLY FINANCIAL DATA (UNAUDITED)
(thousands, except per share amounts)
<CAPTION>
1998 Quarter Ended
Dec. 31 Sept. 30 June 30 March 31
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $92,939 $23,840 $24,591 $59,338
Gross profit 66,364 16,937 10,108 37,063
Net income/(loss) 72,655 <F1> (11,052) (18,568) 13,205
Earnings/(loss) per share *:
Basic 1.34 (.21) (.35) .25
Diluted 1.13 (.21) (.35) .22
1997 Quarter Ended
Dec. 31 Sept. 30 June 30 March 31
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $53,757 $10,659 $6,411 $10,138
Gross Profit 33,227 5,401 2,981 4,923
Net income/(loss) 3,294 (13,657) (12,209) (14,322)
Earnings/(loss) per share *:
Basic .07 (.29) (.27) (.33)
Diluted .06 (.29) (.27) (.33)
*Amounts have been restated to give effect for the two-for-one stock
split on December 31, 1998.
<FN>
<F1>
Includes deferred income tax benefit of $47,428.
</FN>
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This review contains management's discussion of the Company's
operational results and financial condition and should be read in
conjunction with the accompanying financial statements.
OVERVIEW
MedImmune commenced operations in April 1988 and, through 1990,
revenue was generated solely from research and development agreements
and research grants. In 1991, contract revenues rose substantially and
the Company began selling its first product, CytoGam, to an exclusive
distributor. In December 1992, the Company reacquired the CytoGam
marketing rights from its distributor and launched an expanded marketing
program for this product through its own sales force in January 1993.
On January 18, 1996, the Company's second product, RespiGam, was
licensed for marketing by the U.S. Food and Drug Administration ("FDA")
for the prevention of serious lower respiratory tract infection caused
by RSV in children under 24 months of age with BPD or a history of pre-
maturity.
On June 18, 1998, the Company's second generation RSV drug,
Synagis, was approved for marketing by the FDA and the Company's
Gaithersburg pilot plant facility was licensed for production of
Synagis. Synagis is approved in the U.S. for the prevention of serious
lower respiratory tract disease caused by RSV in pediatric patients at
high risk for RSV disease. Because of the seasonal nature of RSV,
limited sales, if any, are expected during the second and third quarters
of any calendar year, causing results to vary significantly from quarter
to quarter.
On November 11, 1998, the Company's Board of Directors authorized a
two-for-one stock split effected in the form of a 100% stock dividend
payable December 31, 1998. Accordingly, all share and per share amounts
have been restated to reflect this stock split.
RESULTS OF OPERATIONS
1998 Compared to 1997
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Product sales increased 150% for the year ended December 31, 1998
over the year ended December 31, 1997 due primarily to demand for
Synagis, launched in 1998. Sales of Synagis generally will be expected
to occur each year in proximity to the RSV season, from September
through March. Synagis sales, commenced in September 1998 and were
$109.8 million for the year. Of those sales, $2.3 million were sales to
Abbott International, the Company's exclusive distributor outside the
U.S., for "named patient" sales of Synagis. As of December 31, 1998.
The Company and Abbott International have filed international
registrations in 25 countries for approval of Synagis. There can be no
assurance that approval by the appropriate regulatory authorities will
be granted. RespiGam sales decreased 56% to $19.8 million in 1998 from
$45.0 million in 1997. RespiGam sales in 1998 primarily reflect sales
for the end of the 1997/1998 season, as most customers had switched to
Synagis for the beginning of the 1998/1999 season. Net sales for
RespiGam in 1998 include an adjustment of $12.5 million recorded in the
fourth quarter reflecting actual and expected product returns as a
result of the shift in demand from RespiGam to Synagis. The Company
estimates that there will be limited usage of RespiGam over the
remainder of the 1998/1999 RSV season and that usage in the 1999/2000
RSV season will be limited. Sales of CytoGam increased 62% to $32.9
million in 1998 from $20.3 million in 1997. Domestic units sold
increased by 41% and international units sold increased by 264%.
CytoGam is sold at a lower selling price to international distributors
than domestic units. The increase in domestic units sold reflects both
an increase in the core business for CytoGam and substitution occurring
as a result of the worldwide shortage of standard intravenous immune
globulin ("IVIG") products. The duration of this shortage and continued
impact, if any, on CytoGam sales cannot be determined at this time. The
Company also received in December 1998, FDA approval for the use of
CytoGam in kidney, lung, liver, pancreas and heart transplants. The
Company does not expect the approval to significantly affect future
sales in the U.S. as many physicians have already been prescribing
CytoGam's use in the settings of solid organ transplantation. The
increase in international CytoGam sales reflects a greater focus on this
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<PAGE>
market as well as the effects of the worldwide shortage of IVIG
products. The level of future product sales will be dependent on several
factors, including, but not limited to, the timing and extent of future
regulatory approvals of the Company's products and product candidates,
availability of finished product inventory, approval and
commercialization of competitive products and the degree of acceptance
of the Company's products in the marketplace.
Other revenue increased 137% to $37.3 million in 1998 from $15.7
million in 1997. Revenues in 1998 include a $15.0 million milestone
payment from Abbott Laboratories ("Abbott") received upon FDA approval
of Synagis, and $20.9 million of funding from SmithKline Beecham ("SB")
in connection with the HPV vaccine development collaboration, including
a $15.0 million milestone payment that was due upon signing of the
agreement. Other revenues in 1997 consist primarily of a $15.0 million
payment made by Abbott in connection with the signing of the
international distribution agreement. The Company would also become
entitled to receive an additional $15.0 million from Abbott if marketing
approval for Synagis is obtained in Europe. The level of contract
revenues in future periods will depend primarily upon the extent to
which the Company enters into other collaborative contractual
arrangements, if any, and the extent to which the Company achieves
certain milestones provided for in its existing agreements.
Cost of sales of $70.2 million was recorded in 1998 versus $34.4 million
in 1997, an increase of 104%. Factors impacting 1998 cost of sales
include a charge of $11.2 million related to the writedown of RespiGam
inventory and by-product inventory, offset by credits for the reversal
of previously recorded RespiGam royalties expected to be due to
Massachusetts Health Research Institute ("MHRI"). Excluding the RespiGam
inventory writedown and the royalty adjustments from cost of sales and
excluding the RespiGam returns from product sales, gross margins
improved to 65% in 1998 from 49% in 1997, reflecting the change in
product mix towards Synagis, which has a lower cost than CytoGam and
RespiGam. The Company's products are primarily manufactured by third
parties and future per-unit cost of sales could increase if the Company
is unable to negotiate favorable pricing. The Company has completed
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<PAGE>
construction of its own manufacturing facility intended for the
production of some portion of two of its approved products as well as
potentially for other product candidates if approved for marketing.
This facility is subject to inspection and approval by the FDA and any
resulting sales of product from this facility would not commence for at
least the next 9 to 18 months.
Research and development expenses decreased to $25.8 million in 1998
from $40.7 million in 1997, or 37%, reflecting primarily $14.5 million
of expenses in 1997 for conducting the Company's 1,502 patient Phase 3
Synagis clinical trial. No large Phase 3 trials were conducted in 1998.
The level of research and development spending in future periods will
fluctuate depending on the extent of clinical trial spending and the
level of investment in new or existing programs. The Company expects
higher clinical trial expenses in 1999, as it continues to move new
product candidates into the clinic, and continues testing of products
already in clinical trials.
Selling, general and administrative expenses increased 95% to $62.0
million in 1998 from $31.7 million in 1997. A significant portion of
the increase in expenses in 1998 reflects payments expected to be due to
the Ross Products Division of Abbott for co-promotion of Synagis and
approximately $9.3 million of marketing expenses for the launch of
Synagis. Additionally, 1998 SG&A reflects increased spending over 1997
for increased distribution costs resulting from Synagis sales as well as
for added headcount and facilities needed to handle growth in the
Company's operations. Selling, general, and administrative expenses in
1999 will be significantly impacted by the level of Synagis sales, due
to the nature of the threshold-based co-promotion agreement with Abbott.
Other operating expenses were $36.5 million in 1998 versus $11.5
million in 1997, an increase of 216%. This increase is primarily a
result of 1)increased wages and supply costs as the Frederick
manufacturing facility increased staffing levels in 1998, 2)increased
consulting costs for plant validation and start-up activities, and 3)a
$10.3 million charge for the buydown of certain Synagis royalty
48
<PAGE>
obligations prior to FDA approval in June 1998. Other operating
expenses are expected to continue to be significant in 1999 and into
2000 as the Company continues start-up and validation activities at the
Frederick plant.
Interest income increased to $6.7 million for 1998 from $4.0
million in 1997 reflecting higher cash balances available for
investment, including the proceeds from the Company's private placement
of stock in January 1998 resulting in net proceeds of $66.3 million,
offset by a decrease in interest rates which lowered the overall
portfolio yield.
Interest expense of $4.0 million was recorded in 1998 versus $3.5
million in 1997, reflecting primarily interest on the Company's
convertible debt (net of amounts capitalized) and interest on equipment
financing beginning in June 1997. Interest expense in 1998 and 1997 is
net of $2.9 million and $2.2 million, respectively, of interest
capitalized for the manufacturing facility and the pilot plant
expansion. The Company's convertible debt is callable in July 1999. If
the convertible debt is called or converted, interest expense is
expected to decrease substantially in the second half of 1999.
The Company recorded an overall net income tax benefit of $47.4
million in 1998 as a result of a reversal of the Company's valuation
allowance against its deferred tax assets. The Company believes that it
is now more likely than not that such benefit will ultimately be
utilized.
The 1998 net income of $56.2 million compared to a 1997 net loss of
$36.9 million. Basic earnings per share in 1998 were $1.06 on 53.1
million shares. Diluted earnings per share were $0.91 on 63.4 million
shares. Basic and diluted loss per share was $0.80 in 1997 on 46.3
million shares. The Company does not believe inflation had a material
effect on its financial statements.
These results were consistent with the Company's objectives for the
year and with the continued development of its immunotherapeutic and
vaccine products. The factors that affected 1998 results may continue
to affect near-term future financial results.
49
<PAGE>
1997 Compared to 1996
Product sales increased 82% for the year ended December 31, 1997,
over the year ended December 31, 1996, due to increased demand for
RespiGam in the first half of the product's second full season of sales,
as well as a 10% increase in CytoGam sales. RespiGam sales were $45.0
million in 1997 versus $17.3 million in 1996, a 159% increase,
reflecting an increase in vials sold. Supply constraints limited 1996
sales. CytoGam product sales increased to $20.3 million from $18.4
million in 1996 due primarily to a 4% increase in units sold, and two
price increases that took effect in mid-1996 and mid-1997. In 1996
CytoGam product sales were reduced by a $0.7 million reserve for trade
receivables due from a pharmaceutical wholesaler that filed Chapter 11
bankruptcy in August 1996; $0.1 million was recovered against this loss
in 1997 as a result of a sale of the receivables to a third party.
Other revenues increased to $15.7 million in 1997 from $5.3 million
in 1996. Other revenues in 1997 reflect primarily fees paid by Abbott
Laboratories for the right to distribute Synagis outside the U.S. Other
revenues in 1996 reflect the completion of milestone and research
funding payments under the Company's strategic alliance with AHP,
formerly American Cyanamid Company. Under the terms of the alliance, the
Company and AHP share in the profits or losses of RespiGam;
reimbursements or payments under this arrangement are deducted from or
added to operating expenses and are included in selling, general and
administrative expenses.
Cost of sales increased 75% to $34.4 million in 1997 from $19.7
million in 1996, due to a 68% increase in vials sold. Gross margins in
1997 improved to 47% versus 45% in 1996, reflecting the increased sales
of RespiGam in the product mix, which has a lower royalty rate than
CytoGam. 1997 margins were adversely impacted by a charge for an
estimate of additional royalties due to MHRI as part of a possible
settlement of an ongoing inquiry by the Inspector General of the
Commonwealth of Massachusetts. The charges were reversed in 1998 as the
matter was substantially resolved without financial impact to the
Company.
50
<PAGE>
Research, development and clinical costs of $40.7 million were
incurred in 1997 compared to $32.2 million in 1996, an increase of 26%.
Expenditures in 1997 and 1996 include approximately $14.5 million and
$10 million, respectively, for the clinical studies performed for
Synagis, including a 1,502-patient Phase 3 clinical trial that began in
the fourth quarter of 1996 and was substantially completed by the end of
the 1997 second quarter. 1997 expenses also include $1.3 million in
license fees relating to Synagis and MEDI-507, a monoclonal antibody
that inhibits T cell responses.
Selling, general and administrative expenses increased to $31.7
million in 1997 from $22.2 million in 1996. The increase in 1997
reflects primarily AHP's share of RespiGam's profits, which resulted in
a charge of $3.0 million to selling expenses as calculated under the
terms of the strategic alliance. This compared to $4.3 million in
reimbursement from AHP in 1996 for its share of RespiGam product line
loss, as calculated under the terms of the strategic alliance. Other
selling and marketing expenses increased by $1.7 million, reflecting
increased commission and product distribution costs resulting from the
increased product sales. This was offset by a $1.1 million decrease in
sales detailing costs to AHP as a result of the Company's decision to
not use AHP's sales force to detail RespiGam in the 1997/1998 RSV
season. General and administrative expenses increased by $0.6 million
reflecting increased headcount, legal and other costs.
Expenses in 1997 include $11.5 million of other operating expenses,
which include the costs of start-up of the Frederick manufacturing
facility and scale-up of production of Synagis at the Gaithersburg pilot
plant and at a third-party manufacturer, Boehringer Ingelheim Pharma KG
("BI") in Biberach, Germany.
Interest income decreased to $4.0 million in 1997 compared to $5.7
million in 1996. The decrease reflects lower cash balances available
for investment, partially offset by an increase in interest rates that
increased the overall portfolio yield.
Interest expense increased to $3.5 million in 1997 from $2.3
million in 1996, reflecting primarily interest on the convertible
subordinated notes of the Company issued in July 1996 (net of amounts
51
<PAGE>
capitalized) and interest on equipment financing, primarily in the
second half of 1997. Interest expense in 1997 and 1996 is net of $2.2
and $0.3 million, respectively, of interest capitalized for the
manufacturing facility and the pilot plant expansion.
The 1997 net loss of $36.9 million, or $0.80 basic and diluted per
common share, compared to a 1996 net loss of $29.5 million, or $0.70
basic and diluted per common share. Shares used in computing basic and
diluted loss per share were 46.3 million and 42.0 million, respectively,
in 1997 and 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash and marketable securities were $134.9 million at 1998 year end
compared to $50.3 million at 1997 year end. Working capital was $158.4
million at 1998 year end versus $56.6 million at 1997 year end.
Net cash provided by 1998 operating activities was $12.7 million
compared to $47.7 million used in 1997. The cash inflow from operations
in 1998 reflected the net income of $56.2 million adjusted for non-cash
items and working capital changes. The non-cash items consisted
primarily of the reversal of the valuation allowance for the deferred
tax asset, offset by trade accounts receivable allowances, primarily the
allowance for RespiGam product returns, and the RespiGam and by-product
inventory reserves. The working capital changes consisted of: 1)a $33.6
million increase in trade accounts receivable reflecting the high volume
of Synagis product sales in November and December; 2) an $8.7 million
increase in royalties payable due to the level of Synagis sales; and 3)a
$5.2 million increase in accounts payable and accrued expenses
reflecting primarily amounts expected to be due to Abbott for Synagis co-
promotion.
The cash outflow from operations in 1997 reflected the net loss of
$36.9 million adjusted for depreciation and amortization and working
capital changes. Working capital changes included: 1) a $25.2 million
increase in inventory reflecting build-up of CytoGam and RespiGam to
support increased sales; 2) an $8.1 million increase in trade
receivables as a result of the increased fourth quarter sales, primarily
52
<PAGE>
RespiGam; and 3) a $17.4 million increase in accounts payable and
accrued expenses reflecting primarily accruals for plasma inventories,
contract manufacturing activities, amounts due to AHP for its share of
RespiGam product line profit and increased sales commission accruals.
Most of the working capital increase in 1997 resulted from growth in
accounts receivable, reflecting an 117% increase in product sales in the
fourth quarter 1997 versus the fourth quarter 1996, and growth in
inventory in anticipation of increased first quarter 1998 sales compared
to first quarter 1997. Inventory growth was also impacted by an
increase in plasma collections in 1997 as more plasmapheresis centers
were added to increase the volume of collections.
Cash flows from financing activities were $81.2 million in 1998
compared to $20.9 million in 1997. In January 1998, the Company
completed a private placement of 3.4 million shares of common stock
resulting in net proceeds to the Company of $66.3 million. In addition,
in January 1998, SmithKline Beecham purchased 166,820 shares of common
stock for net proceeds of $5.0 million in connection with the
collaborative agreement signed in December 1997 related to HPV
development. In 1998 and 1997, the Company drew down $0.6 million and
$14.4 million respectively of $15.0 million of available equipment
financing. Also in 1997, the Company received the remaining $2.8 million
of financing available from the state and local governments to fund the
construction of the manufacturing plant.
Capital expenditures in 1998 were $10.1 million compared to $36.7
million in 1997 excluding capitalized interest of $2.9 million and $2.2
million, respectively. Expenditures in 1998 consist primarily of $3.2
million for the purchase of warehouse and administrative space in
Frederick, Maryland, administrative expansion at the Gaithersburg
headquarters and manufacturing, laboratory and office equipment. The
1997 expenditures include $33.2 million (excluding capitalized interest)
for the construction, equipment and validation of the Company's
manufacturing facility and the completion of its pilot plant expansion
at the Gaithersburg headquarters. Additional 1997 expenditures were for
laboratory and office equipment.
Capital expenditures in 1999 are expected to approximate $15.0
53
<PAGE>
million, due mostly to expansion at the Frederick manufacturing facility
to provide additional capacity for Synagis and the Company's other cell
culture product candidates. Construction of the manufacturing facility
is completed and start-up activities will be on-going in 1999. There
can be no assurance that appropriate regulatory approvals will be
obtained to enable the use of the facility for production of the
Company's products or product candidates. Any resulting sales of
product from this facility would not commence for at least the next 9 to
18 months, subject to regulatory approvals.
The Company is obligated in 1999 to provide $8.8 million in
funding for various clinical trials, research and development and
license agreements with certain institutions. The Company's existing
funds, together with funds contemplated to be generated from product
sales and investment income, are expected to provide sufficient
liquidity to meet the anticipated needs of the business for the
foreseeable future, absent the occurrence of any unforeseen events.
In February 1999, the Company formed an alliance with Ixsys, Inc.
("Ixsys") to develop four monoclonal antibodies. The first of these
products, Vitaxin, was developed by Ixsys using its proprietary Directed
Evolution technology and is currently being tested in a Phase 2 trial
for cancer treatment by inhibition of angiogenesis. The Company will
provide three additional target antibodies to be optimized by Ixsys.
Under the terms of the alliance, Ixsys will use its Directed Evolution
protein engineering technology to optimize antibodies identified by the
Company. The Company will be responsible for clinical development,
manufacturing, and commercialization of any resulting products.
Concurrent with the signing of the agreements, the Company made a $6.4
million equity investment in Ixsys. The company is also obligated to
fund certain research to be performed by Ixsys and would make future
milestone and royalty payments on sales, if any, of any resulting
products.
Year 2000
54
<PAGE>
The Company has established a Year 2000 Project Team comprised of
representatives from key functional areas to complete a review of its
internal and external systems for Year 2000 readiness. The Year 2000
issue is expected to affect the systems of the Company and various
entities with which the Company interacts, including the Company's
marketing partners, suppliers and various vendors. The Year 2000
Project is designed to address three major areas: (1) information
technology systems, (2) hardware, equipment and instrumentation,
including embedded systems, and (3) third party relationships. The
Company's plan involves inventorying, assessing and prioritizing those
items which have Year 2000 implications; remediating (repairing,
replacing or upgrading) non-compliant items; testing items with major
exposure to ensure compliance; and developing contingency plans to
minimize potential business interruption. The inventory, assessment and
prioritization phases of the project are substantially complete.
With regard to the Company's information technology systems, hardware,
equipment and instrumentation, the Company has identified mission
critical and non-critical items and is in the process of updating and/or
replacing items that are non-compliant. The Company believes that it
should be able to substantially complete implementation of critical
aspects of its Year 2000 plan prior to the commencement of the year
2000. Because the Company has relied primarily on off-the-shelf
software for its information technology needs and because much of the
hardware, equipment and instrumentation is currently compliant, the
Company does not anticipate that the costs for internal remediation
efforts will be significant. The Company does not separately track the
internal costs of its Year 2000 compliance efforts and therefore these
costs are unknown. As of December 31, 1998, the Company estimates that
it has spent no more than $50,000 replacing, upgrading or repairing the
systems and/or equipment that are non-compliant and expects the cost to
complete these efforts should not exceed $300,000. The Company presently
anticipates that its remediation efforts will be substantially complete
by June 1, 1999. Testing of certain business critical items is expected
to be completed by the third quarter 1999.
55
<PAGE>
In addition to the risks associated with the Company's own computer
systems and equipment, the Company has relationships with, and is in
varying degrees dependent upon, a large number of third parties that
provide information, goods and services to the Company. These include,
but are not limited to, third party manufacturers, suppliers, customers,
and distributors. The Company has identified those third parties with
which the Company has material relationships to assess their Year 2000
readiness. The Company has distributed surveys and/or contacted these
parties to aid in this assessment. For mission critical functions, the
Company intends to visit third parties to assess their Year 2000
readiness. The Company may also be affected by the failure of other
third parties to be Year 2000 compliant even if they do not do business
directly with the Company. For example, the failure of state, federal
and private payors or reimbursers to be Year 2000 compliant and thus
unable to make timely, proper or complete payments to sellers and users
of the Company's products, could have a material adverse effect on the
Company. The Government Accounting Office has stated that the Health
Care Financing Administration, the principal federal reimburser for the
Company's marketed products, may not become fully year 2000 compliant on
a timely basis.
The Company does not currently have a Year 2000 contingency plan
established. The Company expects by mid-1999 to have finalized a
contingency plan which will address the most likely worst case Year 2000
scenario. The Company believes that its most likely worst case scenario
would be delays in product shipments due to a complete or partial
manufacturing shutdown. To mitigate this risk, the Company plans, among
other things, to stock extra inventory.
With regard to the Company's Year 2000 readiness plan, there can be no
assurances: 1) that the Company will be able to identify all aspects
of its business that are subject to Year 2000 problems, including issues
of its customers or suppliers, 2) that the Company's software vendors,
third parties and others will be correct in their assertions that they
56
<PAGE>
are Year 2000 ready, 3) that the Company's estimate of the cost of Year
2000 readiness will prove ultimately to be accurate, 4) that the Company
will be able to successfully address its Year 2000 issues and that this
could result in interruptions in, or failures of, certain normal
business activities or operations that may have a material adverse
effect on the Company's business, results of operations and financial
condition.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion about the Company's risk-management activities
includes "forward-looking statements" that involve risks and
uncertainties. Actual results could differ materially from those
projected in the forward-looking statements.
The Company did not have significant exposure to changing interest rates
on invested cash at December 31, 1998. The Company invests primarily in
money market funds, investment grade commercial paper and short-term
notes. The interest rates on these securities are primarily fixed, the
maturities are relatively short and the Company generally holds the
securities until maturity.
The Company has issued debt in the form of Notes in the amount of $85.9
million at December 31, 1998, which bear interest at fixed rates. The
Company does not have significant exposure to changing interest rates
related to the Notes because the interest rate on these notes is fixed.
The Company's contract for the purchase of Synagis from BI is
denominated in German Marks. In an effort to reduce the impact of
fluctuations in the rate of exchange between the U.S. Dollar and the
German Mark on the cost of the Company's purchases of Synagis, the
Company periodically enters into foreign exchange forward contracts.
These contracts permit the Company to purchase German Marks, in an
amount the Company believes will be sufficient to fund its inventory
purchase obligations, at a fixed exchange rate. Each contract
57
<PAGE>
terminates on the day the Company expects to make payment for a shipment
of Synagis. The Company does not enter into foreign exchange forward
contracts for speculative or trading purposes.
The table below provides information about the Company's foreign
exchange forward contracts. The anticipated purchase amount is the
amount, in German Marks ("DM"), that the Company is contractually
obligated to pay BI. The contract amount is the sum of all of the
Company's forward contracts during the period indicated. The forward
contract exchange rate is the rate at which the Company has agreed to
purchase German Marks upon termination of the contract.
1999
----
Anticipated purchase amount (DM 000's) 54,789
Related foreign currency forward
Contracts:
Contract Amount (DM 000's) 56,692
Average forward contract exchange
Rate for German marks per U.S.
Dollar 1.66
58
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
BALANCE SHEETS
(in thousands, except share data)
December 31, December 31,
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $37,959 $29,984
Marketable securities 96,923 20,342
Trade receivables, net 31,682 15,236
Contract receivables, net 3,155 3,064
Inventory, net 19,760 28,857
Deferred tax assets 22,595 --
Other current assets 4,292 2,740
---------- ----------
Total Current Assets 216,366 100,223
Property and equipment, net 74,822 65,254
Deferred tax assets, net 54,923 --
Other assets 7,009 4,859
---------- ----------
Total Assets $353,120 $170,336
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, trade $4,052 $4,535
Accrued expenses 33,397 27,682
Accrued interest 2,580 2,583
Product royalties payable 14,948 6,227
Other current liabilities 2,993 2,633
---------- ----------
Total Current Liabilities 57,970 43,660
Long-term debt 83,195 85,363
Other liabilities 2,122 777
---------- ----------
Total Liabilities 143,287 129,800
---------- ----------
Commitments and contingencies
SHAREHOLDERS' EQUITY
Preferred Stock, $.01 par value; -- --
Authorized 5,524,525 shares; none
59
<PAGE>
Issued or outstanding
Common Stock, $.01 par value;
Authorized 120,000,000 shares;
Issued and outstanding 54,654,842
And 24,444,745 at
December 31, 1998 and 1997,
respectively 547 244
Paid-in capital 289,318 176,564
Accumulated deficit (80,032) (136,272)
---------- ----------
Total Shareholders' Equity 209,833 40,536
---------- ----------
Total Liabilities and $353,120 $170,336
Shareholders' Equity ========== ==========
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<TABLE>
Statements of Operations
(in thousands, except per share data)
<CAPTION>
For the year ended December 31,
---------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Product sales $163,440 $65,271 $35,782
Other revenue 37,268 15,693 5,317
-------- -------- --------
Total revenues 200,708 80,964 41,099
-------- -------- --------
COSTS AND EXPENSES
Cost of sales 70,236 34,433 19,678
Research and development 25,775 40,669 32,192
Selling, administrative
And general 62,008 31,735 22,165
Other operating expenses 36,495 11,543 --
-------- -------- --------
Total expenses 194,514 118,380 74,035
-------- -------- --------
Operating income (loss) 6,194 (37,416) (32,936)
Interest income 6,659 4,004 5,655
60
<PAGE>
Interest expense (4,041) (3,483) (2,263)
-------- -------- --------
Income (loss) before income taxes 8,812 (36,895) (29,544)
Deferred income tax benefit 47,428 -- --
-------- -------- --------
Net earnings (loss) $56,240 ($36,895) ($29,544)
======== ======== ========
Basic earnings (loss) per share $1.06 ($0.80) ($0.70)
======== ======== ========
Shares Used in calculation of basic
Earnings(loss) per share 53,130 46,264 42,038
======== ======== ========
Diluted earnings (loss) per share $0.91 ($0.80) ($0.70)
======== ======== ========
Shares used in calculation of
diluted earnings (loss) per share 63,401 46,264 42,038
======== ======== ========
The accompanying notes are an integral part of these financial
statements.
</TABLE>
61
<PAGE>
<TABLE>
Statements of Cash Flows
(in thousands)
<CAPTION>
For the year ended December 31,
--------------------------------
1998 1997 1996
-------- -------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $56,240 $(36,895) $(29,544)
Adjustments to reconcile net earnings
(loss) to net cash provided by (used
in) operating activities:
Deferred taxes (47,428) -- --
Depreciation and amortization 3,455 2,749 1,843
Capitalized interest (2,901) (2,188) (273)
Amortization of (discount) premium on
Marketable securities (785) 937 447
Allowance for trade accounts
Receivable 17,153 984 1,839
Provision for inventory reserve 9,672 (8) (409)
Amortization of debt issuance costs 358 330 155
Other 67 325 96
Increase(decrease) in cash due to
Changes in assets and liabilities:
Trade receivables (33,599) (8,097) (7,275)
Contract receivables (91) (1,144) (954)
Inventory (3,078) (25,235) 376
Other assets (1,551) (990) (641)
Accounts payable and accrued expenses 5,232 17,351 5,595
Product royalties payable 8,721 3,668 783
Accrued interest (3) 526 2,057
Other liabilities 1,229 (4) 119
-------- -------- --------
Net cash provided by (used in)
operating activities 12,691 (47,691) (25,786)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in securities available
for sale (158,591) -- (131,908)
Maturities of securities available
for sale 82,795 80,857 53,199
Capital expenditures (10,122) (36,728) (22,402)
-------- -------- --------
Net cash (used in) provided by
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<PAGE>
investing activities (85,918) 44,129 (101,111)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 82,965 4,566 58,630
Proceeds from issuance of long-term debt 613 17,187 69,000
Deferred costs from debt
issuance (6) (306) (2,172)
Repayments on long-term debt (2,370) (530) (97)
--------- -------- --------
Net cash provided by
financing activities 81,202 20,917 125,361
--------- -------- --------
Net increase (decrease) in cash and cash
Equivalents 7,975 17,355 (1,536)
Cash and cash equivalents at beginning
Of year 29,984 12,629 14,165
-------- -------- --------
Cash and cash equivalents at end of
Year $37,959 $29,984 $12,629
========= ======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
63
<PAGE>
<TABLE>
Statements of Shareholders' Equity
(in thousands, except share data)
<CAPTION>
Common Stock,
$.01 par
--------------- Paid-in Accum
Shares Amount Capital Deficit Total
--------- ------ ------- --------- -------
<S> <C> <C> <C> <C> <C>
Balance,
December 31, 1995 17,706,137 $177 $113,435 $(69,833) $43,779
Common stock options
exercised 288,484 3 700 -- 703
Sale of common stock,
February 1996 public
offering, net of under
writing commissions
and expenses of $4,173 3,450,000 34 57,893 -- 57,927
Conversion of Series A
Convertible Preferred
Stock 392,142 4 (4) -- --
Net loss -- -- -- (29,544) (29,544)
-------- ------ -------- -------- -------
Balance,
December 31, 1996 21,836,763 218 172,024 (99,377) 72,865
Common stock options
exercised 614,629 6 4,560 -- 4,566
Conversion of Series A
Convertible Preferred
Stock 1,993,353 20 (20) -- --
Net loss -- -- -- (36,895) (36,895)
-------- ----- -------- -------- --------
Balance,
December 31, 1997 24,444,745 244 176,564 (136,272) 40,536
Common stock options
exercised 1,099,266 12 11,729 -- 11,741
Private placement of
Common stock, January
1998, net of
underwriting
commissions and
expenses of $74 1,700,000 17 66,209 -- 66,226
Private placement of
common stock, January
1998 83,410 1 4,999 5,000
Tax benefit associated
with the exercise of
64
<PAGE>
stock options -- -- 30,090 -- 30,090
Two-for-one stock split 27,327,421 273 (273) -- --
Net earnings -- -- -- 56,240 56,240
---------- ----- -------- --------- --------
Balance,
December 31, 1998 $54,654,842 $547 $289,318 $(80,032)$209,833
========== ===== ======== ========== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
65
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
2. ORGANIZATION
MedImmune, Inc. ("the Company"), a Delaware corporation, is a
biotechnology company headquartered in Gaithersburg, Maryland with three
products on the market and a diverse product development portfolio. The
Company is focused on using advances in immunology and other biological
sciences to develop important new products that address significant
medical needs in areas such as infectious diseases, transplantation
medicine, autoimmune diseases and cancer.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies applied in the preparation of
these financial statements are as follows:
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with
an original maturity of three months or less to be cash equivalents.
Marketable Securities
Marketable securities include investments with original maturities
of greater than three months having a remaining maturity of less than 24
months. The Company's securities are held for an unspecified period of
time and may be sold to meet liquidity needs. The securities included
as marketable securities are considered available-for-sale as defined by
Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities."
Amortized cost of marketable securities approximates market; therefore,
no adjustment has been made to shareholders' equity as a result of
changes in market value to these securities. Interest income is accrued
as earned.
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<PAGE>
Concentration of Credit Risk
The Company has invested its excess cash generally in securities
of the U.S. Treasury, U.S. government agencies, corporate debt
securities, commercial paper and money market funds with strong credit
ratings and deposits with a major bank. The Company has not experienced
any significant losses on its investments. The Company sells its
products primarily to a limited number of pharmaceutical wholesalers and
distributors without requiring collateral. The Company periodically
assesses the financial strength of these customers and establishes
allowances for anticipated losses when necessary.
Inventory
Inventory is stated at the lower of cost or market. Cost is
determined using a weighted-average approach that approximates the first-
in, first-out method. Where the Company has a firm contract for their
puchase, by-products that result from production of the Company's
principal products are accounted for as a reduction of the cost of the
principal products.
Product Sales
Product sales are recognized upon shipment of the product to
customers. Product sales are recorded net of reserves for estimated
chargebacks, returns, discounts, and Medicaid rebates. The Company
maintains reserves at a level that management believes is sufficient to
cover estimated future requirements. Allowances for discounts, returns,
bad debts, chargebacks and Medicaid rebates, which are netted against
accounts receivable, totaled $20,189 and $3,037 at December 31, 1998 and
1997, respectively. Product royalty expense is recognized concurrently
with the recognition of product revenue. Royalty expense, included in
cost of sales, was $19,921, $8,504 and $4,282 for the years ended
December 31, 1998, 1997 and 1996, respectively.
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<PAGE>
Contract Revenues
Contract revenues are recognized over the fixed term of the
contract or, where appropriate, as the related expenses are incurred.
Non-refundable fees or milestone payments in connection with research
and development or commercialization agreements are recognized when they
are earned in accordance with the applicable performance requirements
and contractual terms. Payments received that are related to future
performance are deferred and recorded as revenues as they are earned
over specified future performance periods.
Co-promotion Expense
In connection with the agreement the Company signed with Abbott
Laboratories to co-promote Synagis in the United States, the Company is
required to pay to Abbott an increasing percentage of net domestic sales
based on reaching certain sales thresholds over the annual contract
year, which runs from July to June and coincides with the annual
respiratory syncytial virus ("RSV") season, which occurs primarily in
the fourth and first quarters (See Note 13). The Company estimates its
net sales and resulting co-promotion expense for the entire contract
year to determine a proportionate percentage of expense to apply across
all Synagis sales during the season.
Property and Equipment
Property and equipment are stated at cost. Interest cost incurred
during the period of construction of plant and equipment and prior to
FDA licensure is capitalized. Depreciation and amortization is computed
using the straight-line method based upon the following estimated useful
lives:
Years
-----
Building and improvements 30
Manufacturing, laboratory, and facility equipment 5-15
Office furniture, computers and equipment 3-7
Amortization of leasehold improvements is computed on the straight-line
method based on the shorter of the estimated useful life of the
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<PAGE>
improvement or the term of the lease. Upon the disposition of assets,
the costs and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is included in the statements of
operations. Repairs and maintenance costs are expensed as incurred and
were $1,849, $1,002, and $537 for the years ended December 31, 1998,
1997 and 1996, respectively.
Long-Lived Assets
The Company evaluates the recoverability of the carrying value of
property and equipment and intangible assets in accordance with the
provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets to be Disposed Of." The Company considers historical performance
and anticipated future results in its evaluation of the potential
impairment. Accordingly, when the indicators of impairment are present,
the Company evaluates the carrying value of these assets in relation to
the operating performance of the business and future undiscounted cash
flows expected to result from the use of these assets. Impairment
losses are recognized when the sum of the expected future cash flows are
less than the assets' carrying value. To date, the Company has recorded
no impairment losses.
Forward Exchange Contracts
The Company is obligated to make certain payments to a foreign
supplier in its local currency. To hedge the effect of fluctuating
foreign currencies in its financial statements, the Company may enter
into foreign forward exchange contracts. Gains or losses associated
with the forward contracts are computed as the difference between the
foreign currency contract amount at the spot rate on the balance sheet
date and the forward rate on the contract date. Unrealized gains or
losses are deferred until the obligation date and are then offset
against the gains or losses on the foreign currency transaction. See
Note 14 for information regarding the fair value of the Company's
foreign forward exchange contracts.
Fair Value of Financial Instruments
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<PAGE>
The carrying amount of financial instruments, including cash and
cash equivalents, trade accounts and contracts receivable, other current
assets, accounts payable, and accrued expenses, approximate fair value
as of December 31, 1998 and 1997 due to the short maturities of these
instruments. See Note 8 for information regarding the fair value of the
Company's long-term debt and notes payable and Note 14 for information
regarding the fair value of the Company's foreign forward exchange
contracts.
Income Taxes
Deferred income taxes are recognized for the tax consequences in
future years of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each year end based
on enacted tax laws and statutory tax rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets
to the amount expected to be realized. Income tax expense is the tax
payable for the period and the change during the period in deferred tax
assets and liabilities.
Earnings (Loss) Per Share
Basic earnings/loss per share is computed by dividing the net
earnings/loss available to common shareholders by the weighted average
number of common shares outstanding during the period. Diluted earnings
per share is computed by dividing net earnings available to common
shareholders by the weighted average number of common shares outstanding
after giving effect to all dilutive potential common shares that were
outstanding during the period. Potential common shares are not included
in the computation of diluted earnings per share if they are
antidilutive.
Comprehensive Income
The Company adopted SFAS No. 130, "Reporting Comprehensive Income"
on December 31, 1998. Under SFAS No. 130 the Company is required to
display comprehensive income and its components as part of the financial
statements. Comprehensive income is comprised of net earnings (loss)
and other comprehensive income, which includes certain changes in equity
that are excluded from net income. SFAS No. 130 requires unrealized
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<PAGE>
holding gains and losses on available-for-sale securities to be included
in other comprehensive income. For the years ended December 31, 1998,
1997 and 1996, comprehensive income was equal to net earnings (loss).
New Accounting Standard
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities". SFAS No. 133
establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. SFAS No. 133 requires companies
to recognize all derivatives as either assets or liabilities, with the
instruments measured at fair value. The accounting for changes in fair
value, gains or losses depends on the intended use of the derivative and
its resulting designation. The statement is effective for all fiscal
quarters of fiscal years beginning after June 15, 1999. The Company
will adopt SFAS No. 133 by January 1, 2000. Because of the Company's
minimal use of derivatives, management does not anticipate that the
adoption of SFAS No. 133 will have a material effect on the earnings or
financial position of the Company.
Stock Split
On November 11, 1998, the Company's Board of Directors authorized a
two-for-one stock split effected in the form of a 100% stock dividend
payable December 31, 1998 to shareholders of record on December 15,
1998. This resulted in the issuance of 27,327,421 additional shares of
common stock. All share, per share and weighted average share amounts
have been restated to reflect this stock split.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities at the
financial statement date and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
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<PAGE>
3. SEGMENT INFORMATION
The Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", at December 31, 1998. SFAS No. 131
establishes annual and interim reporting standards for an enterprise's
operating segments and related disclosures about its products, services,
geographic areas and major customers. Under SFAS No. 131, the Company's
operations are considered one operating segment as only aggregate profit
and loss information is reported to the chief operating decision makers
of the Company.
The Company sells its products primarily to a limited number of
pharmaceutical wholesalers and distributors. Customers individually
accounting for at least ten percent of the Company's product sales over
the past three years are as follows:
1998 1997 1996
---- ---- ----
Company A 23% 19% 19%
Company B 20% 27% 26%
Company C 18% 20% 24%
Company D 12% 15% 17%
------ ------ ------
Total % of product sales 73% 81% 86%
==== ==== ====
The Company relies on a limited number of distributor agents to
sell CytoGam internationally and has a contractual agreement with Abbott
for international distribution of Synagis. The breakdown of product
sales by geographic region is as follows:
1998 1997 1996
---- ---- ----
United States $ 153,607 $ 63,032 $ 35,495
All other 9,833 2,239 287
------ ------ ------
Total product sales $ 163,440 $ 65,271 $ 35,782
====== ====== ======
Other revenue of $37,268, $15,693 and $5,317 in 1998, 1997 and 1996,
respectively, consists mainly of United States licensing and milestone
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<PAGE>
revenues and corporate funding.
4. INVENTORY
Inventory at December 31, is comprised of the following:
1998 1997
------ ------
Raw materials $ 9,794 $14,503
Work in process 9,188 12,990
Finished goods 5,727 3,810
------ ------
24,709 31,303
Less non current (4,949) (2,446)
------ ------
$19,760 $28,857
========= =========
The Company has purchased plasma and other raw materials for use in
production in the Company's Frederick manufacturing facility, which is
subject to FDA licensure and approval. Due to the uncertainty
surrounding the likelihood and timing of FDA approval, this inventory
has been classified as noncurrent in the accompanying balance sheet.
As a result of the June 1998 FDA approval of the Company's second
generation RSV product, Synagis, and the market acceptance of Synagis,
the Company reserved approximately $9.2 million against its RespiGam
inventory, as minimal product sales are expected to result from this
inventory in the foreseeable future. The remaining RespiGam plasma
inventory of $2.9 million has been written down to the value the Company
expects to recover upon sale to third parties.
Finished goods at December 31, 1998 and 1997 include approximately
$1.6 million and $0.8 million, respectively, of by-products that result
from the production of the Company's principal products at one of its
contract manufacturers and are held for resale. As of December 31,
1998, minimal sales of these by-products have occurred. The December
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<PAGE>
31, 1998 and 1997 balances are net of reserves of $1.6 million and $0.8
million, respectively.
5. PROPERTY AND EQUIPMENT
Property and equipment, stated at cost at December 31, is comprised
of the following:
<TABLE>
<S> <C> <C>
1998 1997
----- -----
Land $ 2,147 $ 1,521
Buildings and building improvements 7,085 -
Leasehold improvements 12,736 11,042
Laboratory, manufacturing and facilities 10,841 9,355
equipment
Office furniture, computers, and equipment 5,739 4,377
Construction in progress 48,067 49,040
------- -------
86,615 75,335
Less accumulated depreciation and
Amortization (11,793) (10,081)
------- -------
$74,822 $65,254
======= =======
</TABLE>
Construction in progress includes costs incurred in connection with
the design and construction of the Company's manufacturing facility and
includes capitalized interest costs of $5,324 and $2,423 at December 31,
1998 and 1997, respectively.
Buildings includes the purchase in December 1998 of a new facility
in Frederick, Maryland. This facility will provide additional warehouse
and administrative space. Buildings also includes costs associated with
the portions of the Company's manufacturing facility placed in service
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<PAGE>
during 1998. Construction of the manufacturing facility is complete and
validation and start-up activities are ongoing. The Company will
continue to capitalize costs, primarily capitalized interest related to
the facility until placed in service. The portions of the facility that
are subject to inspection and approval by the FDA will be placed in
service and depreciation will commence upon receipt of such approval.
6. ACCRUED EXPENSES
Accrued expenses at December 31, is comprised of the following:
1998 1997
------- -------
Accrued contracts $ 1,492 $14,959
Accrued manufacturing 6,607 8,792
Accrued sales and marketing 22,337 2,299
Accrued other 2,961 1,632
------- -------
$33,397 $27,682
======= =======
7. FACILITIES LEASES
The Company entered into a 15-year lease beginning in November
1991, as amended, for administrative and laboratory facilities in
Gaithersburg, Maryland. Under the lease, the Company is obligated to
pay a basic monthly rent which will increase 3% each lease year and in
1998 totaled $1,158. The lease also requires the Company to pay for
utilities and its proportionate share of taxes, assessments, insurance
and maintenance costs. Rent expense for the years ended December 31,
1998, 1997 and 1996 was $1,454, $1,328, and $1,113, respectively.
The Company's future minimum lease payments under the facility
operating lease are as follows:
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<PAGE>
Year ending December 31,
--------------------------
1999 1,236
2000 1,274
2001 1,312
2002 1,352
2003 1,392
Thereafter 4,315
--------
$ 10,881
========
8. LONG-TERM DEBT
Long-term debt at December 31, is comprised of the following:
<TABLE>
<S> <C> <C>
1998 1997
----- -----
7% convertible subordinated notes, due
2003 $60,000 $60,000
Notes payable to Transamerica Business
Credit Corporation due through 2004,
interest 9.95%-10.6% 12,868 13,975
7.53% note due to Maryland Industrial
Development Finance Authority, due 2007 4,744 5,000
4% notes due to Maryland Department of
Business and Economic Development, due
2016 6,538 6,800
Notes payable to landlord, due through
2006, interest 11.5%-13% 1,742 1,874
------- -------
85,892 87,649
Less current portion included in other
current liabilities (2,697) (2,286)
------- -------
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<PAGE>
$83,195 $85,363
======= =======
</TABLE>
<PAGE>
The convertible subordinated notes were issued in July 1996 and are
convertible at the option of the holders into 6,097,560 shares of the
Company's common stock at a conversion price of $9.84 per share, subject
to adjustments in certain events. The notes are redeemable by the
Company after July 7, 1999 with 30 days notice at a declining premium
until the due date, plus accrued interest. The notes are subordinated
to all senior debts of the Company including the state and local loans,
the Transamerica loans, and the loans from the landlord. The Company may
be required to redeem the notes at amounts up to 105% of the principal
amount in the event of a change in control of the Company.
Principal and interest payments on the state and local notes began
in 1998. Pursuant to the terms of the agreements, the Company is
required to meet certain financial and non-financial covenants including
maintaining minimum cash balances and net worth ratios. The Company
maintains a $400 compensating balance related to the notes, which is
included in other assets. The notes are collateralized by the land,
buildings and building fixtures of the manufacturing facility. The
agreements include a provision for early retirement of the notes by the
Company.
Loans from Transamerica Business Credit Corporation issued in 1997
and 1998 are collateralized by manufacturing, laboratory, and office
equipment of the Company. The agreements include a provision for early
retirement of the loans by the Company.
Subsequent to December 31, 1998, the Company paid the remaining
principal balance on the landlord loans.
Maturities of long-term debt for the next five years are as
follows: 1999, $2,697; 2000, $2,961; 2001, $3,254; 2002, $3,576; and
2003, $64,644. Interest paid was $6,352, $4,817 and $304, for the years
ended December 31, 1998, 1997 and 1996, respectively.
The fair value of the Company's long-term debt at December 31,
1998, based on quoted market prices or discounted cash flows based on
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<PAGE>
currently available borrowing rates, was $330,000 compared to its
carrying value of $85,892.
9. SHAREHOLDERS' EQUITY
In connection with the closing of the Company's initial public
offering in 1991, the holders of the Series A Convertible Preferred
Stock warrants agreed that if such warrants were exercised, the holders
thereof would simultaneously exercise their right to convert the Series
A Convertible Preferred Stock received upon exercise of the warrants
into 5,049,050 shares of common stock. Pursuant to an amendment to the
warrant agreement in which the holders could elect a cashless exercise
of the warrants for a reduced number of common shares based on a
calculation of the fair market value of the common stock on the exercise
date, 2,108,652 and 415,873 of the Series A Convertible Preferred Stock
warrants were exercised and converted through a cashless exercise into
3,986,706 and 784,284 shares of common stock in 1997 and 1996,
respectively. As of December 31, 1997, all warrants were exercised and
converted.
In July 1997, the Company's Board of Directors adopted a
Stockholder Rights Plan. Pursuant to the terms of the Plan, common
stock purchase Rights were distributed as a dividend at the rate of one
Right for each share of common stock of the Company held by stockholders
of record as of the close of business on July 21, 1997. The Rights will
be exercisable only if a person or group acquires beneficial ownership
of 20 percent or more of the Company's common stock or commences a
tender or exchange offer upon consummation of which such a person or
group would beneficially own 20 percent or more of the Company's stock.
The Rights will expire on July 9, 2007.
In January 1998, the Company closed the private placement of 3.4
million new shares of common stock to institutional investors for net
proceeds of $66.3 million, and sold 166,820 shares of common stock to
SmithKline Beecham for net proceeds of $5.0 million.
10. EARNINGS PER SHARE
The following is a reconciliation of the numerator and denominator
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<PAGE>
of the diluted EPS computation for the year ended December 31, 1998.
<TABLE>
<S> <C>
1998
------
Numerator:
Net earnings $56,240
Interest on 7% convertible notes, net of
amounts capitalized and related taxes 1,468
-------
Numerator for diluted EPS $57,708
=======
Denominator:
Weighted average shares outstanding 53,130
Effect of dilutive securities:
Stock options 4,173
7% convertible notes 6,098
-------
Denominator for diluted EPS 63,401
=======
</TABLE>
Options to purchase 830,600 shares of common stock with prices ranging
from $29.75 to $48.50 per share were outstanding during 1998, but were
not included in the computation of diluted earnings per share. The
exercise prices for these options were greater than the average market
price of the common stock for 1998, and therefore would be antidilutive.
No reconciliation of the numerator and denominator is necessary for 1997
or 1996, as losses were reported and inclusion of potential common
shares would be antidilutive.
11. COMMON STOCK OPTIONS
In April 1991 and as subsequently amended, the Board of Directors
adopted the 1991 Plan, under which 11,000,000 shares of common stock
were reserved for issuance upon exercise of options granted to
employees, consultants and advisors of the Company. In May 1993, a Non-
Employee Directors Stock Option Plan was approved by the shareholders
under which 500,000 shares of common stock were reserved for issuance
upon exercise of options granted to non-employee directors. The 1991
Plan provides for the grant of incentive and nonqualified stock options
and the Non-Employee Directors Plan provides for the grant of
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<PAGE>
nonqualified stock options. The maximum term of each option granted is
10 years. The option prices under the 1991 Plan and the Non-Employee
Directors Plan are equal to the closing market price on the day prior to
the date of grant. Options normally vest on the anniversary date of the
grant over a three to five year period.
The Company has reserved a total of 9,043,670 shares of common
stock for issuance under these plans as of December 31, 1998. Related
stock option activity, is as follows:
<TABLE>
<CAPTION>
Options Granted
Prior to
Establishment of Non-Employee
the 1991 Plan 1991 Plan Directors Plan
------------------ ------------------ -----------------
Wtd. Wtd. Wtd.
Avg. Avg. Avg.
Exercise Exercise Exercise
Price Price Price
Per Per Per
Shares Share Shares Share Shares Share
<S> <C> <C> <C> <C> <C> <C>
Balance,
Dec. 31, 1995 1,580,330 $ 1.55 4,585,492 $ 5.63 140,000 $5.38
Granted - - 1,628,800 8.51 30,000 8.50
Exercised (465,608) .32 (111,360) 4.98 - -
Canceled (4,000) 25.50 (218,814) 6.54 - -
-------- --------- -------
Balance,
Dec. 31,1996 1,110,722 1.98 5,884,118 6.41 170,000 5.93
Granted - - 1,593,300 8.93 40,000 9.32
Exercised (334,718) 1.46 (869,540) 4.48 (25,000) 7.27
Canceled - - (220,206) 8.38 - -
-------- -------- -------
Balance,
Dec. 31, 1997 776,004 2.20 6,387,672 7.21 185,000 12.96
Granted - - 2,410,600 27.30 40,000 31.19
Exercised (466,800) 2.08 (1,731,732) 6.22 - -
Canceled (4,000) 8.94 (118,524) 10.97 - -
-------- -------- --------
Balance,
Dec. 31, 1998 305,204 $2.29 6,948,016 $14.35 225,000 $10.87
======== ========= =======
</TABLE>
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<PAGE>
Additional information related to the plans as of December 31, 1998
is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------- --------------------
Wtd Avg
Range of remaining Wtd Avg Wtd Avg
exercise Options contractual Exercise Options Exercise
prices outstanding life (yrs) Price Exercisable Price
<S> <C> <C> <C> <C> <C>
$0.01- $7.00 2,271,356 5.3 $4.76 1,557,008 $4.81
$7.01-$13.50 2,444,802 7.7 $8.09 717,408 $8.18
$13.51-$20.00 310,262 5.2 $16.92 206,135 $17.17
$20.01-$48.50 2,451,800 9.3 $27.34 9,200 $27.98
----------- ----------
$0.01-$48.50 7,478,220 7.4 $13.76 2,489,751 $6.89
495,284 236,525
========== ==========
</TABLE>
There were 1,315,450 and 250,000 shares available for future option
grants at December 31, 1998 under the 1991 Plan and the Non-Employee
Directors Plan, respectively.
The Company has adopted the disclosure only provisions of SFAS No.
123 as they pertain to financial statement recognition of compensation
expense attributable to option grants. As such, no compensation cost has
been recognized for the Company's option plans. If the Company had
elected to recognize compensation cost for the 1991 Plan and the Non-
Employee Directors Plan consistent with SFAS No. 123, the Company's net
income and earnings/(loss) per share on a pro forma basis would be:
1998 1997 1996
------- ------- -------
Net earnings/(loss) - as reported $56,240 ($36,895) ($29,544)
Net earnings/(loss) - pro forma $49,128 ($45,208) ($36,556)
Basic earnings/(loss) per share-as reported $ 1.06 $ (.80) $ (.70)
-pro forma $ .92 $ (.98) $ (.87)
Diluted earnings/(loss) per share-as reported $ .91 $ (.80) $ (.70)
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-pro forma $ .80 $ (.98) $ (.87)
The pro forma expense related to the stock options is recognized
over the vesting period, generally five years. The fair value of each
option grant was estimated using the Black-Scholes option pricing model
with the following weighted average assumptions for each year:
1998 1997 1996
----- ----- -----
Risk-free interest rate 5.28% 6.21% 6.09%
Expected life of options - years 7 7 7
Expected stock price volatility 75% 75% 75%
Expected dividend yield N/A N/A N/A
The weighted average fair value of options granted during 1998, 1997 and
1996 was $19.82, $12.94, and $12.63, respectively.
12. INCOME TAXES
The components of the provision (benefit) for income taxes are as
follows:
Year ended December 31, 1998 1997 1996
---- ---- ----
Current:
Federal $ -- $ -- $ --
State -- -- --
______ ______ ______
Total current benefit -- -- --
Deferred:
Federal (47,428) -- --
State -- -- --
______ ______ ______
Total deferred benefit (47,428) -- --
______ ______ ______
$(47,428) $ -- $ --
====== ====== ======
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Deferred income taxes reflect the net tax effects of the temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax assets
at December 31, are as follows:
1998 1997
------ ------
Net operating loss carryforwards $58,887 $61,225
General business credit 4,718 3,191
Accrued expenses not currently 7,960 2,484
deductible
Accounts receivable allowances 11,257 1,376
and reserves
Other 4,545 1,375
------- -------
87,367 69,651
Valuation allowance (9,849) (69,651)
------- -------
Net deferred taxes $77,518 $ --
======== ========
The provision (benefit) for income taxes varies from the income
taxes provided based on the federal statutory rate (34%) as follows:
Year ended December 31, 1998 1997 1996
------ ------ ------
Tax at U.S. federal statutory rate $ 2,996 $(12,544) $(10,045)
State taxes, net of federal benefit 405 (1,697) (1,359)
Change in valuation allowance (59,802) 22,150 13,394
Research and development credits (1,527) (1,172) (627)
Other 10,500 (6,737) (1,363)
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______ ______ ______
$(47,428) $ -- $ --
====== ====== ======
At December 31, 1998 the Company had net operating loss carryforwards
for federal tax reporting purposes of approximately $153 million
expiring from 2003 to 2013. The net operating loss includes the tax
benefit related to the exercise of stock options, which benefit was
recorded to paid-in capital. The utilization of net operating losses
will be limited to approximately $37 million per year under Internal
Revenue Code Section 382. The Company also has federal research and
development credit carryforwards of approximately $4.7 million at
December 31, 1998 expiring through 2013.
Based on its 1998 pre-tax profit and its estimates of future
taxable income, the Company believes that it is more likely than not
that certain of its deferred tax assets (comprised mostly of federal net
operating loss carryforwards and research and development credits) will
be realized, and has therefore recorded a tax benefit of its deferred
tax assets arising from federal income taxes as of December 31, 1998.
Because management is uncertain of the utilization of the net operating
losses in the states in which they were generated, a full valuation
allowance remains for these assets at December 31, 1998.
13. COLLABORATIVE ARRANGEMENTS
Abbott Laboratories
In December 1997, the Company signed two agreements with Abbott
Laboratories ("Abbott"). The first agreement calls for Abbott to co-
promote Synagis in the U.S. The second agreement allows Abbott to
exclusively distribute Synagis outside the U.S., if and when cleared for
marketing by the appropriate regulatory authorities. Under the terms of
the U.S. co-promotion agreement, Abbott will receive a percentage of net
U.S. sales based on defined annual sales thresholds. Expenses
associated with the co-promotion agreement are included in selling,
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<PAGE>
general and administrative expenses on the accompanying statements of
operations. The Company received a $15 million milestone payment as
part of this agreement in 1998, which is included in other revenue.
Each company is responsible for its own selling expenses. Under the
terms of the distribution agreement, the Company will manufacture and
sell Synagis to Abbott at a price based on end-user sales. The Company
received a $15 million milestone payment as part of this agreement in
1997, which is included in other revenue. The Company could receive up
to an additional $30 million based on the achievement of certain
milestones, including European marketing clearance of Synagis.
SmithKline Beecham
In December 1997, the Company and SmithKline Beecham ("SB") entered
into a strategic alliance to develop and commercialize human
papillomavirus (HPV) vaccines for prevention of cervical cancer and
genital warts. In exchange for exclusive worldwide rights to the
Company's HPV technology, SB agreed to provide the Company with an up-
front payment, future funding and potential developmental and sales
milestones which together could total over $85 million, as well as
royalties on any product sales. Under the terms of the agreement, the
companies will collaborate on research and development activities.
MedImmune will conduct Phase 1 and Phase 2 clinical trials and
manufacture clinical material for those studies. SB is responsible for
the final development of the product, as well as regulatory,
manufacturing, and marketing activities. In January 1998, the Company
received a $15 million payment from SB and completed the sale of 166,820
shares of common stock to SB resulting in net proceeds to the Company of
$5.0 million. Additionally $5.7 million of research funding associated
with the agreement has been included in other revenues for the year
ended December 31, 1998.
American Home Products
On November 8, 1993, the Company signed definitive agreements with
American Cyanamid Company to form an alliance in the United States for
the development and marketing of three generations of products to
prevent and treat respiratory syncytial virus (RSV) and for the
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marketing of a new anti-infective product, ZOSYN, developed by American
Cyanamid. The parties agreed to co-promote and share profits or losses
on the Company's RSV product, RespiGam, which was licensed for marketing
by the United States Food and Drug Administration (FDA) on January 18,
1996. In 1994, AHP acquired American Cyanamid. In 1995 , the Company
and AHP agreed to amend certain terms of their agreements entered into
concurrently with the formation of their 1993 alliance. Pursuant to
these amendments, AHP's funding obligations and co-promotion rights with
respect to the second generation RSV monoclonal product developed by the
Company were terminated, the Company returned its right to co-promote
ZOSYN to AHP and AHP received a right to receive a royalty on any sales
of the RSV monoclonal product. In addition, the Company's right to co-
fund and to co-promote an RSV vaccine being developed by AHP was
converted into the right to receive royalties on any sales of the
vaccine. Revenue of $4.8 million in 1996 associated with these
agreements is included as other revenue in the accompanying statements
of operations. Additionally, $0.9 million of expense, $3.0 million of
expense and $4.3 million of reimbursement for co-promotion activity has
been added to and netted against selling, general and administrative
expense for the years ended December 31, 1998, 1997 and 1996,
respectively.
Zosyn is a registered trademark of American Home Products
BioTransplant Incorporated
In October 1995, the Company and BioTransplant, Incorporated
("BTI") formed a strategic alliance for the development of products to
treat and prevent organ transplant rejection. The alliance is based
upon the development of products derived from BTI's anti-CD2 antibody
BTI-322, the Company's anti-T cell receptor antibody MEDI-500 and future
generations of products derived from these two molecules, including, but
not limited to, MEDI-507. Pursuant to the alliance, the Company
received an exclusive worldwide license to develop and commercialize BTI-
322 and any products based on BTI-322, with the exception of the use of
BTI-322 in kits for xenotransplantation or allotransplantation. The
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<PAGE>
Company has paid BTI $4.5 million in license fees and research support
through December 31, 1997. No payments were made in 1998. The Company
has assumed responsibility for clinical testing and commercialization of
any resulting products. BTI may receive milestone payments that could
total up to an additional $11.0 million, as well as royalties on any
sales of BTI-322, MEDI-500, MEDI-507 and future generations of these
products, if any.
Other Agreements
The Company has entered into research, development and license
agreements with various federal and academic laboratories and other
institutions to further develop its products and technology and to
perform clinical trials. Under these agreements, the Company is
obligated to provide funding of approximately $8.8 million and $0.5
million in 1999 and 2000, respectively. The Company has also agreed to
make milestone payments in the aggregate amount of $11.2 million on the
occurrence of certain events such as the granting by the FDA of a
license for product marketing in the U.S. for some of the product
candidates covered by these agreements. In exchange for the licensing
rights for commercial development of proprietary technology, the Company
has agreed to pay royalties on sales using such licensed technologies.
14. FORWARD EXCHANGE CONTRACTS
Beginning in 1997, the Company entered into foreign forward
exchange contracts to hedge against foreign exchange rate fluctuations
that may occur on the Company's foreign currency denominated
obligations. As of December 31, 1998 the Company had outstanding forward
Deutsche mark contracts in the amount of $34.1 million, all expiring
within one year. Fair value of the outstanding contracts at December
31, 1998 was $34.0 million, resulting in an unrealized loss of $0.1
million. Unrealized gains and losses on foreign forward exchange
contracts that are designated and effective as hedges are deferred and
recognized in the same period that the hedged obligation is recognized.
The notional principal amounts for off-balance sheet instruments provide
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<PAGE>
one measure of the transaction volume outstanding as of year end, and
does not represent the amount of the Company's exposure to credit or
market loss. The Company's exposure to market risk will vary over time
as a function of currency rates.
15. COMMITMENTS AND CONTINGENCIES
Manufacturing, Supply and Purchase Agreements
The Company has entered into manufacturing, supply and purchase
agreements in order to provide production capability for CytoGam and
RespiGam, and to provide a supply of human plasma for production of both
products. No assurances can be given that an adequate supply of plasma
will be available from the Company's suppliers. Human plasma for
CytoGam and RespiGam is converted to an intermediate raw material
(Fraction II+III paste) under two supply agreements with two vendors.
This intermediate material is then supplied to the manufacturer of the
bulk product, the State Lab. Pursuant to the agreements with the State
Lab, the Company paid $12.9 million in 1998, $10.2 million in 1997, and
$9.7 million in 1996 for production and process development. The
Company has an informal arrangement with the State Lab for planned
production of CytoGam through June 1999 for $8.0 million, subject to
production level adjustments. Currently, no production of RespiGam is
planned for the foreseeable future due to existing inventories and the
market acceptance of Synagis. If the State Lab, which holds the sole
product and establishment licenses from the FDA for the manufacture of
CytoGam and RespiGam, is unable to satisfy the Company's requirements
for CytoGam on a timely basis or is prevented for any reason from
manufacturing CytoGam, the Company may be unable to secure an
alternative manufacturer without undue and materially adverse
operational disruption and increased cost. The Company also has an
agreement with Connaught Laboratories to fill and package CytoGam
through 2000.
In December 1997, the Company entered into an agreement with
Boehringer Ingelheim Pharma KG ("BI"), to provide supplemental
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<PAGE>
manufacturing of the Company's second generation RSV product, Synagis.
The Company paid $16.0 million in 1998 and $2.2 million in 1997 related
to production and scale-up of production as part of this agreement. The
Company has firm commitments with BI for planned production through 2001
for approximately 59.1 million Deutsche marks. Should the manufacturer
be unable to supply Synagis to the Company for any reason, there can be
no assurances that the Company will be able to secure an alternate
manufacturer in a timely basis or without increased cost.
16. OTHER OPERATING EXPENSES
Other operating expenses in 1998 include the costs of start-up of
the Frederick manufacturing facility and scale-up of production of
Synagis at the Gaithersburg pilot plant and at a third-party
manufacturer, BI, prior to the licensure of Synagis by the FDA.
Expenses in 1998 also include $10.3 million for the buydown of certain
Synagis royalty obligations prior to FDA approval in June 1998. The
Company expects to incur significant start-up and scale-up costs
throughout 1999, primarily for ongoing start-up activities at the
Frederick manufacturing facility.
17. PENSION PLAN
The Company has a defined contribution 401(k) pension plan
available to all full-time employees. Employee contributions are
voluntary and are determined on an individual basis subject to the
maximum allowable under federal tax regulations. Participants are always
fully vested in their contributions. The Company began employer
contributions as of April 1, 1997. During 1998 and 1997, the Company
contributed $222 and $122 respectively, in cash to the plan.
18. SUBSEQUENT EVENT - COLLABORATIVE ARRANGEMENT
In February 1999, the Company entered into an alliance with Ixsys,
Inc. ("Ixsys"), to develop four monoclonal antibodies. The first of
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<PAGE>
these products, Vitaxin, is currently being tested in a Phase 2 trial
for cancer treatment by inhibition of angiogensis. The Company will
provide three additional target antibodies to be optimized by Ixsys.
The Company would be responsible for clinical development,
manufacturing, and commercialization of any resulting products.
Concurrent with the signing of the agreements, the Company made a $6.4
million equity investment in Ixsys. The Company is obligated to provide
research funding of $0.5 million in 1999. Ixsys may receive milestone
payments that could total up to $35.0 million, as well as royalties on
any sales, if any, of the products and future generation of such
products, included in the agreement. Milestone payments due under the
agreement, at the Company's option, may be made in the form of a
purchase of the common stock of Ixsys, subject to certain terms and
limitations.
Report of Independent Accountants
To the Board of Directors and Shareholders of MedImmune, Inc.
In our opinion, the financial statements listed in the index appearing
under Item 14(a)(1) and (2) present fairly, in all material respects,
the financial position of MedImmune, Inc. at December 31, 1998 and 1997,
and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. These financial statements
are the responsibility of the Company's management; our responsibility
is to express an opinion on these financial statements based on our
audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
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<PAGE>
that our audits provide a reasonable basis for the opinion expressed
above.
/s/PRICEWATERHOUSECOOPERS LLP
McLean, Virginia
January 25, 1999, except for Note 18 which is as of February 24, 1999
Report of Management
The management of the Company is responsible for the preparation of
the financial statements and related financial information included in
this annual report. The statements were prepared in conformity with
generally accepted accounting principles, and accordingly, include
amounts that are based on informed estimates and judgments.
Management maintains a system of internal controls to provide
reasonable assurance that assets are safeguarded and that transactions
are properly authorized and accurately recorded. The concept of
reasonable assurance is based on the recognition that there are inherent
limitations in all systems of internal accounting control and that the
costs of such systems should not exceed the benefits expected to be
derived. The Company continually reviews and modifies these systems,
where appropriate, to maintain such assurance. The system of internal
controls includes careful selection, training and development of
operating and financial personnel, well-defined organizational
responsibilities and communication of Company policies and procedures
throughout the organization.
The selection of the Company's independent accountants,
PricewaterhouseCoopers LLP, has been approved by the Board of Directors
and ratified by the shareholders. The Audit Committee of the Board of
Directors, composed solely of outside directors, meets periodically with
the Company's independent accountants and management to review the
financial statements and related information and to confirm that they
are properly discharging their responsibilities. In addition, the
independent accountants and the Company's legal counsel meet with the
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<PAGE>
Audit Committee, without the presence of management, to discuss their
findings and their observations on other relevant matters.
Recommendations made by PricewaterhouseCoopers LLP are considered and
appropriate action is taken to respond to these recommendations.
/s/Wayne T. Hockmeyer, Ph.D. /s/David M. Mott
Chairman and Chief Executive Vice Chairman and Chief
Officer Financial Officer
/s/Lawrence C. Hoff
Chairman of the Audit Committee
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF MEDIMMUNE, INC.
Information with respect to directors is included in the Company's
Proxy Statement to be filed pursuant to Regulation 14A (the "Proxy
Statement") under the caption "Election of Directors," and such
information is incorporated herein by reference. Set forth in Part I,
Item 1, are the names and ages (as of February 6, 1999), the positions
and offices held by, and a brief account of the business experience
during the past five years of each executive officer.
All directors hold office until the next annual meeting of
shareholders and until their successors are elected and qualified.
Officers are elected to serve, subject to the discretion of the Board of
Directors, until their successors are appointed.
ITEM 11. EXECUTIVE COMPENSATION
The section entitled "Executive Compensation" and the information
set forth under the caption "Election of Directors-Director
Compensation" included in the Proxy Statement are incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The common stock information in the section entitled "Principal
Shareholders" of the Proxy Statement is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section entitled "Certain Transactions" of the Proxy Statement
is incorporated herein by reference.
PART IV
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
The following documents or the portions thereof indicated are filed
as a part of this report.
a) Documents filed as part of the Report
1. Financial Statements and Supplemental Data
a. Balance Sheets at December 31, 1998 and 1997
b. Statements of Operations for the years ended
December 31, 1998, 1997 and 1996
c. Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996
d. Statements of Shareholders' Equity for the years
ended December 31, 1998, 1997 and 1996
e. Notes to Financial Statements
f. Report of Independent Accountant
g. Report of Management
2. Supplemental Financial Statement Schedule
Schedule I - Valuation and Qualifying Accounts Page S-1
b) Reports on Form 8-K
Date Filed Event Reported
10/9/98 BioTransplant and MedImmune Announce Issuance of
Second U.S. Patent Covering Medi-507 and BTI-322
Antibodies
10/23/98 MedImmune Revenues Increase Nearly Four-Fold in
First Three Quarters of 1998
11/13/98 MedImmune's Board of Directors Authorizes Two-For-
One Stock Split
11/13/98 MedImmune Announces Issuance of U.S. Patent for
Synagis
12/3/98 MedImmune and Pasteur Merieux Connaught Enter
Agreement to Develop Second Generation Vaccine
for Lyme Disease
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<PAGE>
12/10/98 MedImmune Reports CytoGam Receives FDA Approval
for Expanded Indication
12/16/98 MedImmune and Biotransplant Announce Initiation
of Two New Clinical Studies and Orphan Drug
Designation of MEDI-507
12/23/98 MedImmune Announces Synagis Publication
Pediatric Data Presented in the December Edition
of the Journal of Infectious Diseases
C) ITEM 601 EXHIBITS
Those exhibits required to be filed by Item 601 of Regulation S-K are
listed in the Exhibit Index immediately preceding the exhibits filed
herewith and such listing is incorporated by reference.
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.
MEDIMMUNE, INC.
/s/ Wayne T. Hockmeyer
Date: March 23, 1999 By: Wayne T. Hockmeyer
Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons in the
capacities and on the dates indicated.
/s/ Wayne T. Hockmeyer
Date: March 23, 1999 Wayne T. Hockmeyer
Chairman and
Chief Executive Officer
(Principal executive officer)
/s/ David M. Mott
Date: March 23, 1999 David M. Mott
Vice Chairman and Chief
Financial Officer (Principal
financial and accounting officer)
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<PAGE>
/s/ M. James Barrett
Date: March 23, 1999 M. James Barrett, Director
Date: March 23, 1999 /s/ Melvin D. Booth
Melvin D. Booth, Director
/s/ James H. Cavanaugh
Date: March 23, 1999 James H. Cavanaugh, Director
/s/ Barbara Hackman Franklin
Date: March 23, 1999 Barbara Hackman Franklin,
Director
/s/ Lawrence C. Hoff
Date: March 23, 1999 Lawrence C. Hoff, Director
/s/ Gordon S. Macklin
Date: March 23, 1999 Gordon S. Macklin , Director
/s/ Franklin H. Top, Jr.
Date: March 23, 1999 Franklin H. Top, Jr., Director
96
<PAGE>
<TABLE>
Schedule I
MedImmune, Inc.
Valuation and Qualifying Accounts
(in thousands)
<CAPTION>
Balance
at Balance
beginning at end
of of
Description period Additions Deductions period
- -------------------------- --------- ---------- ---------- -------
<S> <C> <C> <C> <C>
For the year ended
December 31, 1998
Trade and Contract
Receivables Allowance $3,294 $36,689 ($11,085) $28,898
Trade Receivables Bad
Debt Reserve 104 402 (238) 268
Inventory Reserve -- 12,374 (2,702) 9,672
------ ------ ------- ------
$3,398 $49,465 ($14,025) $38,838
====== ====== ====== ======
For the year ended
December 31, 1997
Trade and Contract
Receivables Allowance $1,425 $4,036 ($2,167) $3,294
Trade Receivables Bad
Debt Reserve 745 -- (641) 104
Inventory Reserve 8 -- (8) --
------ ------ ------- ------
$2,178 $4,036 ($2,816) $3,398
====== ====== ======= ======
For the year ended
December 31, 1996
Trade and Contract
Receivables Allowance $309 $2,136 ($1,020) $1,425
Trade Receivables Bad
Debt Reserve 21 724 -- 745
Inventory Reserve 417 249 (658) 8
------ ------ ------ ------
$747 $3,109 ($1,678) $2,178
====== ====== ====== ======
</TABLE>
S-1
c) Item 601 Exhibits
3.1(4) Restated Certificate of Incorporation, dated May 14, 1991
3.2(3) By-Laws, as amended
4.1 (19) Amended and Restated Rights Agreement, dated as of October
31, 1998, between MedImmune, Inc., and American Stock
Transfer and Trust Company, as Rights Agent
10.1(1)(3) License Agreement dated November 15, 1990 between the
Company and Merck & Co., Inc. ("Merck")
10.1(3) Plasma Supply Agreement dated May 31, 1990 between the
Company and Plasma Alliance, Inc.
10.2(3) Termination Agreement dated June 29, 1990 between the
Company and Pediatric Pharmaceuticals, Inc. ("PPI") (formerly
MedImmune, Inc.)
10.3(3) RSV Research Agreement dated August 1, 1989 between the
Company, PPI and the Massachusetts Health Research Institute, Inc.
("MHRI")
10.4(3) RSV License Agreement dated August 1, 1989 between the
Company, PPI and MHRI
10.5(3) RSV Supply Agreement dated August 1, 1989 between the
Company, PPI, MHRI and the Massachusetts Public Health Biologic
Laboratory ("MPHBL")
10.6(3) CMV License Agreement dated April 23, 1990 between the
Company and MHRI
10.7(3) First Amendment to CMV License Agreement dated May 3,
1991 between the Company and MHRI
10.8(3) CMV Research Agreement dated April 23, 1990 between the
Company, MHRI and MPHBL
10.9(3) License Agreement dated November 8, 1989 between the
Company, PPI, and the Henry M. Jackson Foundation for the
Advancement of Military Medicine ("HMJ")
10.11(1)(3) License Agreement dated November 15, 1990 between Company
and Merek & Co., Inc.
10.10(3) Research Agreement dated November 8, 1989 between the
Company, PPI and HMJ
10.11(1)(3) Research and License Agreement dated April 1, 1990 between
the Company and New York University
10.12(1)(3) Research and License Agreement dated January 2, 1991 between
the Company and the University of Pittsburgh
10.13(3) Patent License Agreement between the Company and the
National Institutes of Health regarding parvovirus
10.14(3) License Agreement dated September 1, 1988 between the
Company and Albany Medical College of Union College
10.15(3) License Agreement dated July 5, 1989 between the Company,
Albert Einstein College of Medicine of Yeshiva University, The
Whitehead Institute and Stanford University
10.16(3) License Agreement dated July 1, 1989 between the Company
and the National Technical Information Service ("NTIS")
10.17(3) License Agreement dated September 1, 1989 between the
Company and NTIS
10.18(5) Form of Stock Option Agreement, as amended
E-1
10.19(3) Convertible Preferred Stock and Warrant Purchase Agreement
between HCV, Everest Trust and the Company dated January 12, 1990
with form of Warrant
10.20(3) Restated Stockholders' Agreement dated May 15, 1991
10.21(3) Lease Agreement between Clopper Road Associates and the
Company dated February 14, 1991
10.22(7) 1991 Stock Option Plan
10.23(3) Sublease between the Company and Pharmavene, Inc.
10.24(4) Agreement between New England Deaconess Hospital
Corporation and the Company, dated as of August 1, 1991
10.25(1)(4) Research Collaboration Agreement between Merck and the
Company effective as of November 27, 1991
10.26(1)(4) Co-promotion Agreement between Merck and the Company
effective as of November 27, 1991
10.27(1)(4) License Agreement between Merck and the Company effective
as of November 27, 1991
10.28(1)(5) Letter Agreement between Merck and the Company, dated
January 26, 1993
10.29(1)(5) Termination, Purchase and Royalty Agreement between CLI
and the Company, dated December 24, 1992
10.29.1(1)(12) Amendment to Termination, Purchase and Royalty
Agreement between Connaught Technology Corporation and MedImmune,
Inc. dated December 31, 1995
10.30(1)(5) Research and License Agreement between Cell Genesys, Inc.
and the Company, dated April 29, 1992
10.31(a)(5) Unredacted pages 2-5 of Exhibit 10.31
10.31(5) Form of 1993 Non-Employee Director Stock Option Plan
10.32(1)(8) Sponsored Research and License Agreement between
Georgetown University and the Company dated February 25, 1993
10.33(1)(8) License Agreement between Roche Diagnostic Systems, Inc.
and the Company dated March 8, 1993
10.34(1)(8) Pip/Tazo Co-Promotion Agreement between American Cyanamid
Company and the Company dated November 8, 1993
10.34.1(12) Agreement dated October 26, 1995 between American
Cyanamid Company and the Company
10.35(1)(8) RSVIG Co-Development and Co-Promotion Agreement between
American Cyanamid Company and the Company dated November 8, 1993
10.35.1(12) Agreement dated October 26, 1995 between American
Cyanamid Company and the Company
10.36(1)(8) RSV MAB Co-Development and Co-Promotion Agreement between
American Cyanamid Company and the Company dated November 8, 1993
10.36.1(12) Agreement dated October 26, 1995 between American
Cyanamid Company and the Company
10.37(1)(8) RSV Vaccine Co-Development and Co-Promotion Agreement
between American Cyanamid Company and the Company dated November 8,
1993
10.37.1(12) Agreement dated October 26, 1995 between American
Cyanamid Company and the Company
E-2
10.38(1)(10) Fraction II + III Paste Supply Agreement between Baxter
Healthcare Corporation and the Company dated September 1, 1994
10.39(11) Employment Agreement between David P. Wright and the
Company dated January 2, 1995
10.40(11) Employment Agreement between Bogdan Dziurzynski and the
Company dated February 1, 1995
10.41(11) Employment Agreement between Wayne T. Hockmeyer and the
Company dated February 1, 1995
10.42(11) Employment Agreement between David M. Mott and the Company
dated February 1, 1995
10.43(11) Employment Agreement between Franklin H. Top, Jr. and the
Company dated February 1, 1995
10.44(11) Employment Agreement between James F. Young and the Company
dated February 1, 1995
10.45(1)(11) License Agreement between Symbicom AB and the Company
dated May 20, 1994
10.46(1)(11) License Agreement between the University of Kentucky
Research Foundation and the Company effective June 10, 1994
10.47(1)(11) Research and Development Agreement between the University of
Kentucky Research Foundation and the Company effective June 10,
1994
10.48(1)(11) Research and License Agreement between Washington
University and the Company effective July 1, 1994
10.49(1)(11) Research and License Agreement between Washington
University and the Company effective March 1, 1995
10.50(1)(9) License Agreement between Baxter Healthcare Corporation
and MedImmune, Inc. effective June 2, 1995
10.51(1)(9) Stock Purchase Agreement between Baxter Healthcare
Corporation and MedImmune, Inc. dated June 22, 1995
10.52(2)(10) Alliance Agreement between BioTransplant, Inc. and
MedImmune, Inc. dated October 2, 1995
10.53(12) Stock Purchase Agreement dated October 25, 1995 between
MedImmune, Inc. And American Home Products
10.54(2)(12) Collaboration and License Agreement dated as of July 27,
1995 between MedImmune, Inc. And Human Genome Sciences, Inc.
10.55(12) Stipulation of Settlement in reference to MedImmune, Inc.
Securities Litigation, Civil Action No. PJM93-3980
10.56(2)(13) Plasma Supply Agreement dated effective as of February 8,
1996, by and between DCI Management Group, Inc. and MedImmune, Inc.
10.58(2)(13) License and Research Support Agreement dated as of April
16, 1996, between The Rockefeller University and MedImmune, Inc.
10.59(14) First Amendment of Lease Between Clopper Road Associates
and MedImmune, Inc. dated June 8, 1993.
10.60(14) Second Amendment of Lease Between Clopper Road Associates
and MedImmune, Inc. dated June 30, 1993.
E-3
10.61(14) Third Amendment of Lease between Clopper Road Associates
and MedImmune, Inc. effective as of January 1, 1995.
10.62(14) Fourth Amendment of Lease between Clopper Road Associates
and MedImmune, Inc. dated October 3, 1996.
10.63(14) Fifth Amendment of Lease between Clopper Road Associates
and MedImmune, Inc. dated October 3, 1996.
10.64(1)(14) Engineering, Procurement, Construction and Validation
Services Agreement between MedImmune, Inc. and Fluor Daniel, Inc.
effective as of July 31, 1996.
10.65(2)(14) Research and License Agreement between OraVax Merieux Co.
and MedImmune, Inc. effective as of November 1, 1996.
10.66 (15) Employment Agreement between Wayne T. Hockmeyer and
MedImmune, Inc. effective April 1, 1997.
10.67 (15) Employment Agreement between David M. Mott and MedImmune,
Inc. effective April 1, 1997.
10.68 (15) Employment Agreement between Franklin H. Top and
MedImmune, Inc. effective April 1, 1997.
10.69 (15) Employment Agreement between David P. Wright and
MedImmune, Inc. effective April 1, 1997.
10.70 (15) Employment Agreement between James F. Young and
MedImmune, Inc. effective April 1, 1997.
10.71 (15) Employment Agreement between Bogdan Dziurzynski and
MedImmune, Inc. effective April 1, 1997.
10.72 (16) Master Loan & Security Agreement, dated June 16, 1997
by and between Transamerica and MedImmune, Inc.
10.73 (1)(16) Patent License Agreement, (MEDI-493) dated July 17, 1997
by and between Protein Design Labs and MedImmune, Inc.
10.74 (1) Patent License Agreement, (MEDI-507) dated July 17, 1997 by
and between Protein Design Labs and MedImmune, Inc.
10.75 (17) Sixth Amendment of Lease between ARE-QRS Corp. and
MedImmune, Inc. dated September 10, 1997.
10.76(1)(17) Co-Promotion Agreement between Abbott Laboratories and
MedImmune, Inc. dated November 26, 1997
10.77(1)(17) Contract Research and Development Agreement between
MedImmune, Inc. and Dr. Karl Thomae GmbH dated November 27, 1997.
10.78(1)(17) Manufacturing Agreement between MedImmune, Inc. and Dr.
Karl Thomae GmbH dated November 27, 1997.
10.79(1)(17) Distribution Agreement between MedImmune, Inc. and Abbott
International, Ltd. dated November 26, 1997.
10.80(1)(17) License Agreement between Loyola University of Chicago
and MedImmune, Inc. dated December 3, 1997.
10.81(1)(17) Research Collaboration and License Agreement between
SmithKline Beecham and MedImmune, Inc. dated December 10, 1997.
10.82 (18) Termination of MEDI-SB Letter Agreement of October 10, 1996
10.83 (18) Second Amendment between MedImmune, Inc. and Lonza
Biologics PLC of 228 Bath Road, Slough, Berkshire SL1 4DY England
E-4
10.84 Employment Agreement between Wayne T. Hockmeyer and
MedImmune, Inc. effective November 1, 1998.
10.85 Employment Agreement between Melvin Booth and MedImmune,
Inc. effective November 1, 1998.
10.86 Employment Agreement between David M. Mott and MedImmune,
Inc. effective November 1, 1998.
10.87 Employment Agreement between Franklin H. Top and MedImmune,
Inc. effective November 1, 1998.
10.88 Employment Agreement between David P. Wright and MedImmune,
Inc. effective November 1, 1998.
10.89 Employment Agreement between James F. Young and MedImmune,
Inc. effective November 1, 1998.
10.90 Employment Agreement between Bogdan Dziurzynski and
MedImmune, Inc. effective November 1, 1998.
10.91 (2) License Agreement between Connaught Laboratories, Inc.
and MedImmune, Inc. effective November 20, 1998.
10.92 (2) Termination of Purchase and Royalty Agreement Second
Amendment between Connaught Technology Corporation and MedImmune,
Inc. effective September 30, 1998.
10.93 Purchase Contract Agreement between Aid Association and
MedImmune, Inc. effective November 25, 1998.
10.94 Seventh Amendment of Lease between ARE-QRS CORP. and
MedImmune, Inc. effective August 1, 1998.
23.1 Consent of Independent Accountants
______________
(1) Confidential treatment has been granted by the SEC. The copy
filed as an exhibit omits the information subject to the
confidentiality grant.
(2) Confidential treatment has been requested. The copy filed as
an exhibit omits the information subject to the
confidentiality request.
(3) Incorporated by reference to exhibit filed in connection
with the Company's Registration Statement No. 33-39579.
(4) Incorporated by reference to exhibit filed in connection
with the Company's Registration Statement No. 33-43816.
(5) Incorporated by reference to exhibit filed in connection
with the Company's Annual Report on Form 10-K for the year ended
December 31, 1992.
(6) Incorporated by reference to exhibit filed in connection
with the Company's Annual Report on Form 10-K for the year ended
December 31, 1991.
(7) Incorporated by reference to exhibit filed in connection
with the Company's Registration Statement No. 33-46165.
(8) Incorporated by reference to exhibit filed in connection
with the Company's Annual Report on Form 10-K for the year ended
December 31, 1993.
(9) Incorporated by reference to exhibit filed in connection with the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995.
E-5
(10) Incorporated by reference to exhibit filed in connection
September 30, 1995.
(11) Incorporated by reference to exhibit filed with the
Company's Annual Report on Form 10-K for December 31, 1994.
(12) Incorporated by reference to exhibit filed with the
Company's Annual Report on Form 10-K for December 31, 1995.
(13) Incorporated by reference to exhibit filed with the
Company's Quarterly Report on Form 10-Q for the Quarter ended June
30, 1996.
(14) Incorporated by reference to exhibit filed with the
Company's Annual Report on Form 10-K for December 31, 1996.
(15) Incorporated by reference to exhibit filed with the
Company's Quarterly Report on Form 10-Q for the Quarter ended March
31, 1997.
(16) Incorporated by reference to exhibit filed with the
Company's Quarterly Report on Form 10-Q for the Quarter ended
September 30, 1997.
(17) Incorporated by reference to exhibit filed with the
Company's annual Report on Form 10-K for December 31, 1997.
(18) Incorporated by reference to exhibit filed with the Company's
Quarterly Report on Form 10-Q for the Quarter ended June 30, 1998.
(19) Incorporated by reference to Exhibit 99.2 filed with the
Company's Registration Statement on Form 8A/A, filed with
the Securities and Exchange Commission on December 1, 1998.
E-6
EXHIBIT No. 10.84
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, dated as of November 1,
1998, is by and between WAYNE T. HOCKMEYER (the "Employee")
and MEDIMMUNE, INC., a Delaware corporation (the "Company")
and supercedes the Employment Agreement between them dated
as of April 1, 1997.
The Company and the Employee hereby agree as
follows:
1. Employment. The Company hereby employs the
Employee, and the Employee hereby accepts employment by the
Company, upon the terms and conditions hereinafter set
forth.
2. Term. Subject to the provisions for earlier
termination as herein provided, the employment of the
Employee hereunder will be for the period commencing on the
date hereof and ending on the second anniversary of such
date. Such period may be extended, with the consent of the
Employee, for one or more one-year periods by resolution
adopted by the Compensation and Stock Committee (the
"Compensation Committee") of the Board of Directors of the
Company (the "Board"). The period of the Employee's
employment under this Agreement, as it may be terminated or
extended from time to time as provided herein, is referred
to hereafter as the "Employment Period."
3. Duties and Responsibilities. The Employee
will be employed by the Company in the position set forth on
Annex A, a copy of which is attached hereto and the terms of
which are incorporated herein by reference. The Employee
will faithfully perform the duties and responsibilities of
such office, as they may be assigned from time to time by
the Board or the Board's designee.
4. Time to be Devoted to Employment. Except for
vacation in accordance with the Company's policy in effect
from time to time and absences due to temporary illness, the
Employee shall devote full time, attention and energy during
the Employment Period to the business of the Company.
During the Employment Period, the Employee will not be
engaged in any other business activity which, in the
reasonable judgment of the Board or its designee, conflicts
with the duties of the Employee hereunder, whether or not
such activity is pursued for gain, profit or other pecuniary
advantage.
5. Compensation; Reimbursement.
(a) Base Salary. The Company (or, at the
Company's option, any subsidiary or affiliate thereof) will
pay to the Employee an annual base salary of not less than
the amount specified as the Initial Base Salary on Annex A,
payable semi-monthly. The Employee's base salary shall be
reviewed annually by the Compensation Committee and shall be
subject to increase at the option and sole discretion of the
Compensation Committee.
(b) Bonus. The Employee shall be eligible to
receive, at the sole discretion of the Compensation
Committee, an annual cash bonus based on pre-determined
performance standards of the Company.
(c) Benefits; Stock Options. In addition to the
salary and cash bonus referred to above, the Employee shall
be entitled during the Employment Period to participate in
such employee benefit plans or programs of the Company, and
shall be entitled to such other fringe benefits, as are from
time to time made available by the Company generally to
employees of the Employee's position, tenure, salary, age,
health and other qualifications. Without limiting the
generality of the foregoing, the Employee shall be eligible
for such awards, if any, under the Company's stock option
plan as shall be granted to the Employee by the Compensation
Committee or other appropriate designee of the Board acting
in its sole discretion. Except to the extent provided in
the next paragraph, the Employee acknowledges and agrees
that the Company does not guarantee the adoption or
continuance of any particular employee benefit plan or
program or other fringe benefit during the Employment
Period, and participation by the Employee in any such plan
or program shall be subject to the rules and regulations
applicable thereto.
As the founder of the Company, the Employee shall
be entitled to lifetime continuation of Company-provided
medical and dental benefits coverage for himself and his
eligible dependants with such coverage to be provided at the
same level and subject to the same terms and conditions
(including, without limitation, any applicable co-pay
obligations) as in effect from time to time for officers of
the Company generally. Such coverage shall remain in effect
for the lifetime of the Employee and for each of his
eligible dependants and shall not be affected by any
termination of his employment relationship with the Company
at any time for any reason. The foregoing coverage shall be
secondary to any Medicare coverage that the Employee or his
dependants become eligible to receive. The Company may
provide the foregoing coverage outside the terms of the
applicable benefits plan for employees, provided that
coverage for the Employee is identical and the tax
consequences to the Employee are neutral.
(d) Expenses. The Company will reimburse the
Employee, in accordance with the practices in effect from
time to time for other officers or staff personnel of the
Company, for all reasonable and necessary traveling expenses
and other disbursements incurred by the Employee for or on
behalf of the Company in the performance of the Employee's
duties hereunder, upon presentation by the Employee to the
Company of appropriate vouchers.
6. Death; Disability. If the Employee dies or
is incapacitated or disabled by accident, sickness or
otherwise, so as to render the Employee mentally or
physically incapable of performing the services required to
be performed by the Employee under this Agreement for a
period that would entitle the Employee to qualify for long-
term disability benefits under the Company's then-current
long-term disability insurance program or, in the absence of
such a program, for a period of 90 consecutive days or
longer (such condition being herein referred to as a
"Disability"), then (i) in the case of the Employee's death,
the Employee's employment shall be deemed to terminate on
the date of the Employee's death or (ii) in the case of a
Disability, the Company, at its option, may terminate the
employment of the Employee under this Agreement immediately
upon giving the Employee notice to that effect. Disability
shall be determined by the Board or the Board's designee.
In the case of a Disability, until the Company shall have
terminated the Employee's employment hereunder in accordance
with the foregoing, the Employee shall be entitled to
receive compensation provided for herein notwithstanding any
such physical or mental disability.
7. Termination For Cause. The Company may, with
the approval of a majority of the Board, terminate the
employment of the Employee hereunder at any time during the
Employment Period for "cause" (such termination being
hereinafter called a "Termination for Cause") by giving the
Employee notice of such termination, upon the giving of
which such termination will take effect immediately. For
purposes of this Agreement, "cause" means (i) the Employee's
willful and substantial misconduct, (ii) the Employee's
repeated, after written notice from the Company, neglect of
duties or failure to act which can reasonably be expected to
affect materially and adversely the business or affairs of
the Company or any subsidiary or affiliate thereof, (iii)
the Employee's material breach of any of the agreements
contained in Sections 13, 14 or 15 hereof, (iv) the
commission by the Employee of any material fraudulent act
with respect to the business and affairs of the Company or
any subsidiary or affiliate thereof or (v) the Employee's
conviction of (or plea of nolo contendere to) a crime
constituting a felony.
8. Termination Without Cause. The Company may
terminate the employment of the Employee hereunder at any
time without "cause" (such termination being hereinafter
called a "Termination Without Cause") by giving the Employee
notice of such termination, upon the giving of which such
termination will take effect not later than 30 days from the
date such notice is given.
9. Voluntary Termination. Any termination of
the employment of the Employee hereunder, otherwise than as
a result of death or Disability, a Termination For Cause, a
Termination Without Cause or a termination for Good Reason
(as defined below) following a Change in Control (as defined
below), will be deemed to be a "Voluntary Termination." A
Voluntary Termination will be deemed to be effective
immediately upon such termination.
10. Effect of Termination of Employment.
(a) Voluntary Termination; Termination For Cause.
Upon the termination of the Employee's employment hereunder
pursuant to a Voluntary Termination or a Termination For
Cause, neither the Employee nor the Employee's beneficiaries
or estate will have any further rights or claims against the
Company under this Agreement except the right to receive (i)
the unpaid portion of the base salary provided for in
Section 5(a) hereof, computed on a pro rata basis to the
date of termination, (ii) payment of his accrued but unpaid
rights in accordance with the terms of any incentive
compensation, stock option, retirement, employee welfare or
other employee benefit plans or programs of the Company in
which the Employee is then participating in accordance with
Sections 5(b) and 5(c) hereof, (iii) reimbursement for any
expenses for which the Employee shall not have theretofore
been reimbursed as provided in Section 5(d) hereof, and (iv)
continuation of his rights in accordance with the second
paragraph of Section 5(c) hereof.
(b) Termination Without Cause. Upon the
termination of the Employee's employment as a Termination
Without Cause, neither the Employee nor the Employee's
beneficiaries or estate will have any further rights or
claims against the Company under this Agreement except the
right to receive (i) the payments and other rights provided
for in Section 10(a) hereof and (ii) severance payments in
the form of semi-monthly payment of the Employee's base
salary (as in effect immediately prior to such termination)
and of the Pro-Rata Bonus Amount (as defined below) for a
period of 24 months following the effective date of such
termination. For the purposes of this Agreement, "Pro-Rata
Bonus Amount" shall mean one-twenty-fourth (1/24th) of the
greater of (a) the most recent annual cash bonus paid to the
Employee prior to the date of his termination, or (b) the
average of the three most recent annual cash bonuses paid to
the Employee prior to the date of his termination. The
rights of the Employee and the obligations of the Company
under this Section 10(b) shall remain in full force and
effect notwithstanding the expiration of the Employment
Period, whether by failure of the Compensation Committee to
extend such period or otherwise.
(c) Death and Disability. Upon the termination
of the Employee's employment hereunder as a result of death
or Disability, neither the Employee nor the Employee's
beneficiaries or estate will have any further rights or
claims against the Company under this Agreement except the
right to receive (i) the payments and other rights provided
for in Section 10(a) hereof and (ii) a lump-sum payment,
within 15 days after the effective date of such termination,
equal to the aggregate amount of the Employee's base salary
as in effect immediately prior to such termination that
would be payable over a period of 12 months following the
effective date of such termination.
(d) Forfeiture of Rights. In the event that,
subsequent to termination of employment hereunder, the
Employee (i) breaches any of the provisions of Section 13,
14 or 15 hereof or (ii) directly or indirectly makes or
facilitates the making of any adverse public statements or
disclosures with respect to the business or securities of
the Company, all payments and benefits to which the Employee
may otherwise have been entitled pursuant to Section 10(a),
10(b) or 11 hereof shall immediately terminate and be
forfeited, and any portion of such amounts as may have been
paid to the Employee shall forthwith be returned to the
Company.
11. Change in Control Provisions.
(a) Effect of Change in Control. In the event of
a Change in Control during the Employment Period, all
options held by the Employee to purchase shares of the
Company's stock that are not then vested and exercisable
shall become immediately and fully vested and exercisable as
of the effective date of the Change in Control.
(b) Effect of Termination Following Change in
Control. In the event of a Change in Control during the
Employment Period and a subsequent termination of the
Employee's employment, either by the Company as a
Termination Without Cause or by the Employee for Good
Reason, whether or not such termination is during the
Employment Period, the Employee shall be entitled to receive
(i) the payments and other rights provided in Section 10(a)
hereof and (ii) a severance payment in the form a cash lump
sum, which shall be paid within 15 days of the date of
termination, equal to the sum of the Employee's semi-monthly
base salary (as in effect immediately prior to such
termination) and the Pro-Rata Bonus Amount (as determined
under Section 10(b) above) multiplied by 72 (i.e., that
would have been payable on a semi-monthly basis during the
36 months following such termination), but discounted to
present value from the dates such payments would be made if
paid on a semi-monthly basis for such 36 month period, based
on the 100% short-term Applicable Federal Rate (compounded
annually) under Section 1274(d) of the Internal Revenue Code
of 1986, as amended (the "Code") as in effect at the time of
payment. In addition, upon any such Termination Without
Cause or for Good Reason that occurs within six months
following the effective date of a Change in Control, the
Employee shall retain the right to exercise any options to
purchase shares of the Company's stock until the earlier of
(a) 36 months following the date of such termination or (b)
the expiration of the original full term of each such
option.
(c) Definition of Change in Control. For
purposes of this Agreement, a "Change in Control" shall be
deemed to have occurred upon:
(i) an acquisition subsequent to the date hereof
by any person, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) (a "Person"), of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 30% or more of either
(A) the then outstanding shares of common stock of the
Company ("Common Stock") or (B) the combined voting power of
the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); excluding,
however, the following: (1) any acquisition directly from
the Company, other than an acquisition by virtue of the
exercise of a conversion privilege unless the security being
so converted was itself acquired directly from the Company,
(2) any acquisition by the Company and (3) any acquisition
by an employee benefit plan (or related trust) sponsored or
maintained by the Company;
(ii) a change in the composition of the Board such
that during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board,
and any new director (other than a director designated by a
person who has entered into an agreement with the Company to
effect a transaction described in clause (i), (iii), or (iv)
of this paragraph) whose election by the Board or nomination
for election by the Company's stockholders was approved by a
vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the
period or whose election or nomination for election was
previously so approved, cease for any reason to constitute
at least a majority of the members thereof;
(iii) the approval by the stockholders of the
Company of a merger, consolidation, reorganization or
similar corporate transaction, whether or not the Company is
the surviving corporation in such transaction, in which
outstanding shares of Common Stock are converted into (A)
shares of stock of another company, other than a conversion
into shares of voting common stock of the successor
corporation (or a holding company thereof) representing 80%
of the voting power of all capital stock thereof outstanding
immediately after the merger or consolidation or (B) other
securities (of either the Company or another company) or
cash or other property;
(iv) the approval by stockholders of the Company
of the issuance of shares of Common Stock in connection with
a merger, consolidation, reorganization or similar corporate
transaction in an amount in excess of 40% of the number of
shares of Common Stock outstanding immediately prior to the
consummation of such transaction;
(v) the approval by the stockholders of the
Company of (A) the sale or other disposition of all or
substantially all of the assets of the Company or (B) a
complete liquidation or dissolution of the Company; or
(vi) the adoption by the Board of a resolution to
the effect that any person has acquired effective control of
the business and affairs of the Company.
(d) Good Reason Following Change in Control. For
purposes of this Agreement, termination for "Good Reason"
shall mean termination by the Employee of his employment
with the Company, within six months immediately following a
Change in Control, based on:
(i) any diminution in the Employee's position,
title, responsibilities or authority from those in effect
immediately prior to such Change in Control; or
(ii) the breach by the Company of any of its
material obligations under this Agreement.
12. Parachute Tax Indemnity
(a) If it shall be determined that any amount paid,
distributed or treated as paid or distributed by the Company
to or for the Employee's benefit (whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any
additional payments required under this Section 12) (a
"Payment") would be subject to the excise tax imposed by
Section 4999 of the Code, or any interest or penalties are
incurred by the Employee with respect to such excise tax
(such excise tax, together with any such interest and
penalties, being hereinafter collectively referred to as the
"Excise Tax"), then the Employee shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Employee of all
federal, state and local taxes (including any interest or
penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Employee retains an
amount of the Gross-Up Payment equal to the Excise Tax
imposed upon all the Payments.
(b) All determinations required to be made under this
Section 12, including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such
determination, shall be made by a nationally recognized
accounting firm as may be designated by the Employee (the
"Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Employee within 15
business days of the receipt of notice from the Employee
that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual,
entity or group effecting the change in control, the
Employee shall appoint another nationally recognized
accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to
as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 12,
shall be paid by the Company to the Employee within five
days of the receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be binding
upon the Company and the Employee. As a result of the
uncertainty in the application of Section 4999 of the Code
at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required
to be made hereunder. In the event that the Company
exhausts its remedies pursuant to this Section 12 and the
Employee thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for
the Employee's benefit.
(c) The Employee shall notify the Company in writing
of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the
Gross-Up Payment. Such notification shall be given as soon
as practicable but no later then ten business days after the
Employee is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid. The Employee
shall not pay such claim prior to the expiration of the 30-
day period following the date on which it gives such notice
to the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is
due). If the Company notifies the Employee in writing prior
to the expiration of such period that it desires to contest
such claim, the Employee shall:
(i) give the Company any information reasonably requested
by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in
writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
to effectively contest such claim, and
(iv) permit the Company to participate in any
proceeding relating to such claim; provided, however, that
the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify
and hold the Employee harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expense. Without
limitation on the foregoing provisions of this Section 12,
the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole
option, either direct the Employee to pay the tax claimed
and sue for a refund or contest the claim in any permissible
manner, and the Employee agrees to prosecute such contest to
a determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however,
that if the Company directs the Employee to pay such claim
and sue for a refund, the Company shall advance the amount
of such payment to the Employee, on an interest-free basis,
and shall indemnify and hold the Employee harmless, on an
after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further
provided that any extension of the statute of limitations
relating to payment of taxes for the Employee's taxable year
with respect to which such contested amount is claimed to be
due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Employee shall be
entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the Employee's receipt of an amount
advanced by the Company pursuant to this Section 12, the
Employee becomes entitled to receive any refund with respect
to such claim, the Employee shall (subject to the Company's
complying with the requirements of this Section 12) promptly
pay to the Company the amount of such refund (together with
any interest paid or credited thereon after taxes applicable
thereto). If, after the Employee's receipt of an amount
advanced by the Company pursuant to this Section 12, a
determination is made that the Employee shall not be
entitled to any refund with respect to such claim and the
Company does not notify the Employee in writing of its
intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to
be paid.
(e) The foregoing provisions of this Section 12
are intended to supersede the provisions of Section 7(d) of
the Company's 1991 Stock Option Plan as applied to the
Employee.
13. Disclosure of Information. The Employee will
not, at any time during or after the Employment Period,
disclose to any person, firm, corporation or other business
entity, except as required by law, any non-public
information concerning the business, products, clients or
affairs of the Company or any subsidiary or affiliate
thereof for any reason or purpose whatsoever, nor will the
Employee make use of any of such non-public information for
personal purposes or for the benefit of any person, firm,
corporation or other business entity except the Company or
any subsidiary or affiliate thereof.
14. Restrictive Covenant. (a) The Employee
hereby acknowledges and recognizes that, during the
Employment Period, the Employee will be privy to trade
secrets and confidential proprietary information critical to
the Company's business and the Employee further acknowledges
and recognizes that the Company would find it extremely
difficult or impossible to replace the Employee and,
accordingly, the Employee agrees that, in consideration of
the benefits to be received by the Employee hereunder, the
Employee will not, from and after the date hereof until the
first anniversary of the termination of the Employment
Period (or six months after the termination of the
Employment Period if such termination is as a result of a
termination for Good Reason following a Change in Control),
(i) directly or indirectly engage in the development,
production, marketing or sale of products that compete (or,
upon commercialization, would compete) with products of the
Company being developed (so long as such development has not
been abandoned), marketed or sold at the time of the
Employee's termination (such business or activity being
hereinafter called a "Competing Business") whether such
engagement shall be as an officer, director, owner,
employee, partner, affiliate or other participant in any
Competing Business, (ii) assist others in engaging in any
Competing Business in the manner described in the foregoing
clause (i), or (iii) induce other employees of the Company
or any subsidiary thereof to terminate their employment with
the Company or any subsidiary thereof or engage in any
Competing Business. Notwithstanding the foregoing, the term
"Competing Business" shall not include any business or
activity that was not conducted by the Company prior to the
effective date of a Change in Control.
(b) The Employee understands that the foregoing
restrictions may limit the ability of the Employee to earn a
livelihood in a business similar to the business of the
Company, but nevertheless believes that the Employee has
received and will receive sufficient consideration and other
benefits, as an employee of the Company and as otherwise
provided hereunder, to justify such restrictions which, in
any event (given the education, skills and ability of the
Employee), the Employee believes would not prevent the
Employee from earning a living.
15. Company Right to Inventions. The Employee
will promptly disclose, grant and assign to the Company, for
its sole use and benefit, any and all inventions,
improvements, technical information and suggestions relating
in any way to the business of the Company which the Employee
may develop or acquire during the Employment Period (whether
or not during usual working hours), together with all patent
applications, letters patent, copyrights and reissues
thereof that may at any time be granted for or upon any such
invention, improvement or technical information. In
connection therewith:
(i) the Employee shall, without charge, but at
the expense of the Company, promptly at all times hereafter
execute and deliver such applications, assignments,
descriptions and other instruments as may be necessary or
proper in the opinion of the Company to vest title to any
such inventions, improvements, technical information, patent
applications, patents, copyrights or reissues thereof in the
Company and to enable it to obtain and maintain the entire
right and title thereto throughout the world; and
(ii) the Employee shall render to the Company, at
its expense (including a reasonable payment for the time
involved in case the Employee is not then in its employ),
all such assistance as it may require in the prosecution of
applications for said patents, copyrights or reissues
thereof, in the prosecution or defense of interferences
which may be declared involving any said applications,
patents or copyrights and in any litigation in which the
Company may be involved relating to any such patents,
inventions, improvements or technical information.
16. Enforcement. It is the desire and intent of
the parties hereto that the provisions of this Agreement be
enforceable to the fullest extent permissible under the laws
and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, to the extent that a
restriction contained in this Agreement is more restrictive
than permitted by the laws of any jurisdiction where this
Agreement may be subject to review and interpretation, the
terms of such restriction, for the purpose only of the
operation of such restriction in such jurisdiction, will be
the maximum restriction allowed by the laws of such
jurisdiction and such restriction will be deemed to have
been revised accordingly herein.
17. Remedies; Survival. (a) The Employee
acknowledges and understands that the provisions of the
covenants contained in Sections 13, 14 and 15 hereof, the
violation of which cannot be accurately compensated for in
damages by an action at law, are of crucial importance to
the Company, and that the breach or threatened breach of the
provisions of this Agreement would cause the Company
irreparable harm. In the event of a breach or threatened
breach by the Employee of the provisions of Section 13, 14
or 15 hereof, the Company will be entitled to an injunction
restraining the Employee from such breach. Nothing herein
contained will be construed as prohibiting the Company from
pursuing any other remedies available for any breach or
threatened breach of this Agreement.
(b) Notwithstanding anything contained in this
Agreement to the contrary, the provisions of the second
paragraph of Section 5(c) hereof and of Sections 10(b), 13,
14, 15, 16 and 17 hereof will survive the expiration or
other termination of this Agreement until, by their terms,
such provisions are no longer operative.
18. Notices. Notices and other communications
hereunder will be in writing and will be delivered
personally or sent by air courier or first class certified
or registered mail, return receipt requested and postage
prepaid, addressed as follows:
if to the Employee: as specified in Annex A
and if to the Company: MedImmune, Inc.
35 West Watkins Mill Road
Gaithersburg, Maryland 20878
Attention: Chief Executive Officer
with a copy to: Frederick W. Kanner, Esq.
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, NY 10019
All notices and other communications given to any party
hereto in accordance with the provisions of this Agreement
will be deemed to have been given on the date of delivery,
if personally delivered; on the business day after the date
when sent, if sent by air courier; and on the third business
day after the date when sent, if sent by mail, in each case
addressed to such party as provided in this Section 18 or in
accordance with the latest unrevoked direction from such
party.
19. Binding Agreement; Benefit. The provisions
of this Agreement will be binding upon, and will inure to
the benefit of, the respective heirs, legal representatives
and successors of the parties hereto.
20. Governing Law. This Agreement will be
governed by, and construed and enforced in accordance with,
the laws of the State of Maryland.
21. Waiver of Breach. The waiver by either party
of a breach of any provision of this Agreement by the other
party must be in writing and will not operate or be
construed as a waiver of any subsequent breach by such other
party.
22. Entire Agreement; Amendments. This Agreement
(including Annex A) contains the entire agreement between
the parties with respect to the subject matter hereof and
supersedes all prior agreements or understandings among the
parties with respect thereof including, without limitation,
that certain employment agreement between the parties dated
as of April 1, 1997. This Agreement may be amended only by
an agreement in writing signed by the parties hereto.
23. Headings. The section headings contained in
this Agreement are for reference purposes only and will not
affect in any way the meaning or interpretation of this
Agreement.
24. Severability. Any provision of this
Agreement that is prohibited or unenforceable in any
jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction
will not invalidate or render unenforceable such provision
in any other jurisdiction.
25. Assignment. This Agreement is personal in
its nature and the parties hereto shall not, without the
consent of the other, assign or transfer this Agreement or
any rights or obligations hereunder; provided, that the
provisions hereof (including, without limitation, Sections
13, 14 and 15) will inure to the benefit of, and be binding
upon, each successor of the Company, whether by merger,
consolidation, transfer of all or substantially all of its
assets or otherwise.
IN WITNESS WHEREOF, the parties have duly executed
this Agreement as of the date first above written.
EMPLOYEE MEDIMMUNE, INC.
/s/ Wayne T. Hockmeyer /s/ James H. Cavanaugh
Wayne T. Hockmeyer James H. Cavanaugh
EXHIBIT No. 10.85
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, dated as of November 1,
1998, is by and between MELVIN D. BOOTH (the "Employee") and
MEDIMMUNE, INC., a Delaware corporation (the "Company") and
supercedes the Employment Agreement between them dated as of
October 5, 1998.
The Company and the Employee hereby agree as
follows:
1. Employment. The Company hereby employs the
Employee, and the Employee hereby accepts employment by the
Company, upon the terms and conditions hereinafter set
forth.
2. Term Subject to the provisions for earlier
termination as herein provided, the employment of the
Employee hereunder will be for the period commencing on the
date hereof and ending on the second anniversary of such
date. Such period may be extended, with the consent of the
Employee, for one or more one-year periods by resolution
adopted by the Compensation and Stock Committee (the
"Compensation Committee") of the Board of Directors of the
Company (the "Board"). The period of the Employee's
employment under this Agreement, as it may be terminated or
extended from time to time as provided herein, is referred
to hereafter as the "Employment Period."
3. Duties and Responsibilities. The Employee
will be employed by the Company in the position set forth on
Annex A, a copy of which is attached hereto and the terms of
which are incorporated herein by reference. The Employee
will faithfully perform the duties and responsibilities of
such office, as they may be assigned from time to time by
the Board or the Board's designee.
4. Time to be Devoted to Employment. Except for
vacation in accordance with the Company's policy in effect
from time to time and absences due to temporary illness, the
Employee shall devote full time, attention and energy during
the Employment Period to the business of the Company.
During the Employment Period, the Employee will not be
engaged in any other business activity which, in the
reasonable judgment of the Board or its designee, conflicts
with the duties of the Employee hereunder, whether or not
such activity is pursued for gain, profit or other pecuniary
advantage.
5. Compensation; Reimbursement.
(a) Base Salary. The Company (or, at the
Company's option, any subsidiary or affiliate thereof) will
pay to the Employee an annual base salary of not less than
the amount specified as the Initial Base Salary on Annex A,
payable semi-monthly. The Employee's base salary shall be
reviewed by the Compensation Committee early in 1999 at the
time of reviews of other senior executives of the Company
and annually thereafter and shall be subject to increase at
the option and sole discretion of the Compensation
Committee.
(b) Bonus. The Employee shall be eligible to
receive, at the sole discretion of the Compensation
Committee, an annual cash bonus based on pre-determined
performance standards of the Company.
(c) Benefits; Stock Options. In addition to the
salary and cash bonus referred to above, the Employee shall
be entitled to four weeks vacation in each calendar year
during the Employment Period and shall also be eligible
during the Employment Period to participate in such employee
benefit plans or programs of the Company, and shall be
entitled to such other fringe benefits, as are from time to
time made available by the Company generally to employees of
the Employee's position, tenure, salary, age, health and
other qualifications. Without limiting the generality of
the foregoing, the Employee shall be eligible for such
awards, if any, under the Company's stock option plan as
shall be granted to the Employee by the Compensation
Committee or other appropriate designee of the Board acting
in its sole discretion. The Employee acknowledges and
agrees that the Company does not guarantee the adoption or
continuance of any particular employee benefit plan or
program or other fringe benefit during the Employment
Period, and participation by the Employee in any such plan
or program shall be subject to the rules and regulations
applicable thereto. Notwithstanding anything in this
Agreement to the contrary, any option held by the Employee
to purchase shares of the Company's common stock shall be
subject to the loan and note agreement entered into between
the Company and the Employee dated October 30, 1998 (the "
Loan and Note Agreement").
(d) Expenses. The Company will reimburse the
Employee, in accordance with the practices in effect from
time to time for other officers or staff personnel of the
Company, for all reasonable and necessary traveling expenses
and other disbursements incurred by the Employee for or on
behalf of the Company in the performance of the Employee's
duties hereunder, upon presentation by the Employee to the
Company of appropriate vouchers.
6. Death; Disability. If the Employee dies or
is incapacitated or disabled by accident, sickness or
otherwise, so as to render the Employee mentally or
physically incapable of performing the services required to
be performed by the Employee under this Agreement for a
period that would entitle the Employee to qualify for long-
term disability benefits under the Company's then-current
long-term disability insurance program or, in the absence of
such a program, for a period of 90 consecutive days or
longer (such condition being herein referred to as a
"Disability"), then (i) in the case of the Employee's death,
the Employee's employment shall be deemed to terminate on
the date of the Employee's death or (ii) in the case of a
Disability, the Company, at its option, may terminate the
employment of the Employee under this Agreement immediately
upon giving the Employee notice to that effect. Disability
shall be determined by the Board or the Board's designee.
In the case of a Disability, until the Company shall have
terminated the Employee's employment hereunder in accordance
with the foregoing, the Employee shall be entitled to
receive compensation provided for herein notwithstanding any
such physical or mental disability.
7. Termination For Cause. The Company may, with
the approval of a majority of the Board, terminate the
employment of the Employee hereunder at any time during the
Employment Period for "cause" (such termination being
hereinafter called a "Termination for Cause") by giving the
Employee notice of such termination, upon the giving of
which such termination will take effect immediately. For
purposes of this Agreement, "cause" means (i) the Employee's
willful and substantial misconduct, (ii) the Employee's
repeated, after written notice from the Company, neglect of
duties or failure to act which can reasonably be expected to
affect materially and adversely the business or affairs of
the Company or any subsidiary or affiliate thereof, (iii)
the Employee's material breach of any of the agreements
contained in Sections 13, 14 or 15 hereof, (iv) the
commission by the Employee of any material fraudulent act
with respect to the business and affairs of the Company or
any subsidiary or affiliate thereof or (v) the Employee's
conviction of (or plea of nolo contendere to) a crime
constituting a felony.
8. Termination Without Cause. The Company may
terminate the employment of the Employee hereunder at any
time without "cause" (such termination being hereinafter
called a "Termination Without Cause") by giving the Employee
notice of such termination, upon the giving of which such
termination will take effect not later than 30 days from the
date such notice is given.
9. Voluntary Termination. Any termination of
the employment of the Employee hereunder, otherwise than as
a result of death or Disability, a Termination For Cause, a
Termination Without Cause or a termination for Good Reason
(as defined below) following a Change in Control (as defined
below), will be deemed to be a "Voluntary Termination." A
Voluntary Termination will be deemed to be effective
immediately upon such termination.
10. Effect of Termination of Employment.
(a) Voluntary Termination; Termination For Cause.
Upon the termination of the Employee's employment hereunder
pursuant to a Voluntary Termination or a Termination For
Cause, neither the Employee nor the Employee's beneficiaries
or estate will have any further rights or claims against the
Company under this Agreement except the right to receive (i)
the unpaid portion of the base salary provided for in
Section 5(a) hereof, computed on a pro rata basis to the
date of termination, (ii) payment of his accrued but unpaid
rights in accordance with the terms of any incentive
compensation, stock option, retirement, employee welfare or
other employee benefit plans or programs of the Company in
which the Employee is then participating in accordance with
Sections 5(b) and 5(c) hereof and (iii) reimbursement for
any expenses for which the Employee shall not have
theretofore been reimbursed as provided in Section 5(d)
hereof. Notwithstanding the foregoing, the Employee's
rights to any payments under this Section 10(a) shall be
subject to the terms of the Loan and Note Agreement.
(b) Termination Without Cause. Upon the
termination of the Employee's employment as a Termination
Without Cause, neither the Employee nor the Employee's
beneficiaries or estate will have any further rights or
claims against the Company under this Agreement except the
right to receive (i) the payments and other rights provided
for in Section 10(a) hereof, (ii) severance payments in the
form of semi-monthly payment of the Employee's base salary
(as in effect immediately prior to such termination) and of
the Pro-Rata Bonus Amount (as defined below) for a period of
24 months following the effective date of such termination,
and (iii) continuation of the medical benefits coverage to
which the Employee is entitled under Section 5(c) hereof
over the 24 month period provided in clause (ii) above, with
such coverage to be provided at the same level and subject
to the same terms and conditions (including, without
limitation, any applicable co-pay obligations of the
Employee, but excluding any applicable tax consequences for
the Employee) as in effect from time to time for officers of
the Company generally. For the purposes of this Agreement,
"Pro-Rata Bonus Amount" shall mean one-twenty-fourth
(1/24th) of the greater of (a) the most recent annual cash
bonus paid to the Employee prior to the date of his
termination, or (b) the average of the three most recent
annual cash bonuses paid to the Employee prior to the date
of his termination. The rights of the Employee and the
obligations of the Company under this Section 10(b) shall
remain in full force and effect notwithstanding the
expiration of the Employment Period, whether by failure of
the Compensation Committee to extend such period or
otherwise.
(c) Death and Disability. Upon the termination
of the Employee's employment hereunder as a result of death
or Disability, neither the Employee nor the Employee's
beneficiaries or estate will have any further rights or
claims against the Company under this Agreement except the
right to receive (i) the payments and other rights provided
for in Section 10(a) hereof, (ii) a lump-sum payment, within
15 days after the effective date of such termination, equal
to the aggregate amount of the Employee's base salary as in
effect immediately prior to such termination that would be
payable over a period of 12 months following the effective
date of such termination and (iii) in the case of Disability
only, continuation of the medical benefits coverage to which
the Employee is entitled under Section 5(c) hereof over the
same period with respect to which the lump-sum payment is
calculated under clause (ii) above, with such coverage to be
provided at the same level and subject to the same terms and
conditions (including, without limitation, any applicable co-
pay obligations of the Employee, but excluding any
applicable tax consequences for the Employee) as in effect
from time to time for officers of the Company generally.
(d) Forfeiture of Rights. In the event that,
subsequent to termination of employment hereunder, the
Employee (i) breaches any of the provisions of Section 13,
14 or 15 hereof or (ii) directly or indirectly makes or
facilitates the making of any adverse public statements or
disclosures with respect to the business or securities of
the Company, all payments and benefits to which the Employee
may otherwise have been entitled pursuant to Section 10(a),
10(b) or 11 hereof shall immediately terminate and be
forfeited, and any portion of such amounts as may have been
paid to the Employee shall forthwith be returned to the
Company.
11. Change in Control Provisions.
(a) Effect of Change in Control. In the event of
a Change in Control during the Employment Period, all
options held by the Employee to purchase shares of the
Company's stock that are not then vested and exercisable
shall become immediately and fully vested and exercisable as
of the effective date of the Change in Control.
(b) Effect of Termination Following Change in
Control. In the event of a Change in Control during the
Employment Period and a subsequent termination of the
Employee's employment, either by the Company as a
Termination Without Cause or by the Employee for Good
Reason, whether or not such termination is during the
Employment Period, the Employee shall be entitled to receive
(i) the payments and other rights provided in Section 10(a)
hereof, (ii) a severance payment in the form a cash lump
sum, which shall be paid within 15 days of the date of
termination, equal to the sum of the Employee's semi-monthly
base salary (as in effect immediately prior to such
termination) and the Pro-Rata Bonus Amount (as determined
under Section 10(b) above) multiplied by 72 (i.e., that
would have been payable on a semi-monthly basis during the
36 months following such termination), but discounted to
present value from the dates such payments would be made if
paid on a semi-monthly basis for such 36 month period, based
on the 100% short-term Applicable Federal Rate (compounded
annually) under Section 1274(d) of the Internal Revenue Code
of 1986, as amended (the "Code") as in effect at the time of
payment, and (iii) continuation of the medical benefits
coverage to which the Employee is entitled under Section
5(c) hereof for a period of 36 months from the date of the
Employee's termination of employment, with such coverage to
be provided at the same level and subject to the same terms
and conditions (including, without limitation, any
applicable co-pay obligations of the Employee, but excluding
any applicable tax consequences for the Employee) as in
effect from time to time for officers of the Company
generally. In addition, upon any such Termination Without
Cause or for Good Reason that occurs within six months
following the effective date of a Change in Control, the
Employee shall retain the right to exercise any options to
purchase shares of the Company's stock until the earlier of
(a) 36 months following the date of such termination or (b)
the expiration of the original full term of each such
option. Notwithstanding the foregoing, the Employee's
rights to any payments under this Section 11(b) shall be
subject to the terms of the Loan and Note Agreement.
(c) Definition of Change in Control. For
purposes of this Agreement, a "Change in Control" shall be
deemed to have occurred upon:
(i) an acquisition subsequent to the date hereof
by any person, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) (a "Person"), of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 30% or more of either
(A) the then outstanding shares of common stock of the
Company ("Common Stock") or (B) the combined voting power of
the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); excluding,
however, the following: (1) any acquisition directly from
the Company, other than an acquisition by virtue of the
exercise of a conversion privilege unless the security being
so converted was itself acquired directly from the Company,
(2) any acquisition by the Company and (3) any acquisition
by an employee benefit plan (or related trust) sponsored or
maintained by the Company;
(ii) a change in the composition of the Board such
that during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board,
and any new director (other than a director designated by a
person who has entered into an agreement with the Company to
effect a transaction described in clause (i), (iii), or (iv)
of this paragraph) whose election by the Board or nomination
for election by the Company's stockholders was approved by a
vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the
period or whose election or nomination for election was
previously so approved, cease for any reason to constitute
at least a majority of the members thereof;
(iii) the approval by the stockholders of the
Company of a merger, consolidation, reorganization or
similar corporate transaction, whether or not the Company is
the surviving corporation in such transaction, in which
outstanding shares of Common Stock are converted into (A)
shares of stock of another company, other than a conversion
into shares of voting common stock of the successor
corporation (or a holding company thereof) representing 80%
of the voting power of all capital stock thereof outstanding
immediately after the merger or consolidation or (B) other
securities (of either the Company or another company) or
cash or other property;
(iv) the approval by stockholders of the Company
of the issuance of shares of Common Stock in connection with
a merger, consolidation, reorganization or similar corporate
transaction in an amount in excess of 40% of the number of
shares of Common Stock outstanding immediately prior to the
consummation of such transaction;
(v) the approval by the stockholders of the
Company of (A) the sale or other disposition of all or
substantially all of the assets of the Company or (B) a
complete liquidation or dissolution of the Company; or
(vi) the adoption by the Board of a resolution to
the effect that any person has acquired effective control of
the business and affairs of the Company.
(d) Good Reason Following Change in Control. For
purposes of this Agreement, termination for "Good Reason"
shall mean termination by the Employee of his employment
with the Company, within six months immediately following a
Change in Control, based on:
(i) any diminution in the Employee's position,
title, responsibilities or authority from those in effect
immediately prior to such Change in Control; or
(ii) the breach by the Company of any of its
material obligations under this Agreement.
12. Parachute Tax Indemnity
(a) If it shall be determined that any amount paid,
distributed or treated as paid or distributed by the Company
to or for the Employee's benefit (whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any
additional payments required under this Section 12) (a
"Payment") would be subject to the excise tax imposed by
Section 4999 of the Code, or any interest or penalties are
incurred by the Employee with respect to such excise tax
(such excise tax, together with any such interest and
penalties, being hereinafter collectively referred to as the
"Excise Tax"), then the Employee shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Employee of all
federal, state and local taxes (including any interest or
penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Employee retains an
amount of the Gross-Up Payment equal to the Excise Tax
imposed upon all the Payments.
(b) All determinations required to be made under this
Section 12, including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such
determination, shall be made by a nationally recognized
accounting firm as may be designated by the Employee (the
"Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Employee within 15
business days of the receipt of notice from the Employee
that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual,
entity or group effecting the change in control, the
Employee shall appoint another nationally recognized
accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to
as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 12,
shall be paid by the Company to the Employee within five
days of the receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be binding
upon the Company and the Employee. As a result of the
uncertainty in the application of Section 4999 of the Code
at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required
to be made hereunder. In the event that the Company
exhausts its remedies pursuant to this Section 12 and the
Employee thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for
the Employee's benefit.
(c) The Employee shall notify the Company in writing
of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the
Gross-Up Payment. Such notification shall be given as soon
as practicable but no later then ten business days after the
Employee is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid. The Employee
shall not pay such claim prior to the expiration of the 30-
day period following the date on which it gives such notice
to the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is
due). If the Company notifies the Employee in writing prior
to the expiration of such period that it desires to contest
such claim, the Employee shall:
(i) give the Company any information reasonably requested
by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in
writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
to effectively contest such claim, and
(iv) permit the Company to participate in any
proceeding relating to such claim; provided, however, that
the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify
and hold the Employee harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expense. Without
limitation on the foregoing provisions of this Section 12,
the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole
option, either direct the Employee to pay the tax claimed
and sue for a refund or contest the claim in any permissible
manner, and the Employee agrees to prosecute such contest to
a determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however,
that if the Company directs the Employee to pay such claim
and sue for a refund, the Company shall advance the amount
of such payment to the Employee, on an interest-free basis,
and shall indemnify and hold the Employee harmless, on an
after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further
provided that any extension of the statute of limitations
relating to payment of taxes for the Employee's taxable year
with respect to which such contested amount is claimed to be
due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Employee shall be
entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the Employee's receipt of an amount
advanced by the Company pursuant to this Section 12, the
Employee becomes entitled to receive any refund with respect
to such claim, the Employee shall (subject to the Company's
complying with the requirements of this Section 12) promptly
pay to the Company the amount of such refund (together with
any interest paid or credited thereon after taxes applicable
thereto). If, after the Employee's receipt of an amount
advanced by the Company pursuant to this Section 12, a
determination is made that the Employee shall not be
entitled to any refund with respect to such claim and the
Company does not notify the Employee in writing of its
intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to
be paid.
(e) The foregoing provisions of this Section 12
are intended to supersede the provisions of Section 7(b) of
the Company's 1991 Stock Option Plan as applied to the
Employee.
13. Disclosure of Information. The Employee will
not, at any time during or after the Employment Period,
disclose to any person, firm, corporation or other business
entity, except as required by law, any non-public
information concerning the business, products, clients or
affairs of the Company or any subsidiary or affiliate
thereof for any reason or purpose whatsoever, nor will the
Employee make use of any of such non-public information for
personal purposes or for the benefit of any person, firm,
corporation or other business entity except the Company or
any subsidiary or affiliate thereof.
14. Restrictive Covenant. (a) The Employee
hereby acknowledges and recognizes that, during the
Employment Period, the Employee will be privy to trade
secrets and confidential proprietary information critical to
the Company's business and the Employee further acknowledges
and recognizes that the Company would find it extremely
difficult or impossible to replace the Employee and,
accordingly, the Employee agrees that, in consideration of
the benefits to be received by the Employee hereunder, the
Employee will not, from and after the date hereof until the
first anniversary of the termination of the Employment
Period (or six months after the termination of the
Employment Period if such termination is as a result of a
termination for Good Reason following a Change in Control),
(i) directly or indirectly engage in the development,
production, marketing or sale of products that compete (or,
upon commercialization, would compete) with products of the
Company being developed (so long as such development has not
been abandoned), marketed or sold at the time of the
Employee's termination (such business or activity being
hereinafter called a "Competing Business") whether such
engagement shall be as an officer, director, owner,
employee, partner, affiliate or other participant in any
Competing Business, (ii) assist others in engaging in any
Competing Business in the manner described in the foregoing
clause (i), or (iii) induce other employees of the Company
or any subsidiary thereof to terminate their employment with
the Company or any subsidiary thereof or engage in any
Competing Business. Notwithstanding the foregoing, the term
"Competing Business" shall not include any business or
activity that was not conducted by the Company prior to the
effective date of a Change in Control.
(b) The Employee understands that the foregoing
restrictions may limit the ability of the Employee to earn a
livelihood in a business similar to the business of the
Company, but nevertheless believes that the Employee has
received and will receive sufficient consideration and other
benefits, as an employee of the Company and as otherwise
provided hereunder, to justify such restrictions which, in
any event (given the education, skills and ability of the
Employee), the Employee believes would not prevent the
Employee from earning a living.
15. Company Right to Inventions. The Employee
will promptly disclose, grant and assign to the Company, for
its sole use and benefit, any and all inventions,
improvements, technical information and suggestions relating
in any way to the business of the Company which the Employee
may develop or acquire during the Employment Period (whether
or not during usual working hours), together with all patent
applications, letters patent, copyrights and reissues
thereof that may at any time be granted for or upon any such
invention, improvement or technical information. In
connection therewith:
(i) the Employee shall, without charge, but at
the expense of the Company, promptly at all times hereafter
execute and deliver such applications, assignments,
descriptions and other instruments as may be necessary or
proper in the opinion of the Company to vest title to any
such inventions, improvements, technical information, patent
applications, patents, copyrights or reissues thereof in the
Company and to enable it to obtain and maintain the entire
right and title thereto throughout the world; and
(ii) the Employee shall render to the Company, at
its expense (including a reasonable payment for the time
involved in case the Employee is not then in its employ),
all such assistance as it may require in the prosecution of
applications for said patents, copyrights or reissues
thereof, in the prosecution or defense of interferences
which may be declared involving any said applications,
patents or copyrights and in any litigation in which the
Company may be involved relating to any such patents,
inventions, improvements or technical information.
16. Enforcement. It is the desire and intent of
the parties hereto that the provisions of this Agreement be
enforceable to the fullest extent permissible under the laws
and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, to the extent that a
restriction contained in this Agreement is more restrictive
than permitted by the laws of any jurisdiction where this
Agreement may be subject to review and interpretation, the
terms of such restriction, for the purpose only of the
operation of such restriction in such jurisdiction, will be
the maximum restriction allowed by the laws of such
jurisdiction and such restriction will be deemed to have
been revised accordingly herein.
17. Remedies; Survival. (a) The Employee
acknowledges and understands that the provisions of the
covenants contained in Sections 13, 14 and 15 hereof, the
violation of which cannot be accurately compensated for in
damages by an action at law, are of crucial importance to
the Company, and that the breach or threatened breach of the
provisions of this Agreement would cause the Company
irreparable harm. In the event of a breach or threatened
breach by the Employee of the provisions of Section 13, 14
or 15 hereof, the Company will be entitled to an injunction
restraining the Employee from such breach. Nothing herein
contained will be construed as prohibiting the Company from
pursuing any other remedies available for any breach or
threatened breach of this Agreement.
(b) Notwithstanding anything contained in this
Agreement to the contrary, the provisions of Sections 10(b),
13, 14, 15, 16 and 17 hereof will survive the expiration or
other termination of this Agreement until, by their terms,
such provisions are no longer operative.
18. Notices. Notices and other communications
hereunder will be in writing and will be delivered
personally or sent by air courier or first class certified
or registered mail, return receipt requested and postage
prepaid, addressed as follows:
if to the Employee: as specified in Annex A
and if to the Company: MedImmune, Inc.
35 West Watkins Mill Road
Gaithersburg, Maryland 20878
Attention: Chief Executive Officer
with a copy to: Frederick W. Kanner, Esq.
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, NY 10019
All notices and other communications given to any party
hereto in accordance with the provisions of this Agreement
will be deemed to have been given on the date of delivery,
if personally delivered; on the business day after the date
when sent, if sent by air courier; and on the third business
day after the date when sent, if sent by mail, in each case
addressed to such party as provided in this Section 18 or in
accordance with the latest unrevoked direction from such
party.
19. Binding Agreement; Benefit. The provisions
of this Agreement will be binding upon, and will inure to
the benefit of, the respective heirs, legal representatives
and successors of the parties hereto.
20. Governing Law. This Agreement will be
governed by, and construed and enforced in accordance with,
the laws of the State of Maryland.
21. Waiver of Breach. The waiver by either party
of a breach of any provision of this Agreement by the other
party must be in writing and will not operate or be
construed as a waiver of any subsequent breach by such other
party.
22. Entire Agreement; Amendments. This Agreement
(including Annex A) contains the entire agreement between
the parties with respect to the subject matter hereof and
supersedes all prior agreements or understandings among the
parties with respect thereof, including the employment
agreement between the Company and the Employee dated as of
October 5, 1998; provided, however, that the Loan and Note
Agreement shall remain in full force and effect. This
Agreement may be amended only by an agreement in writing
signed by the parties hereto.
23. Headings. The section headings contained in
this Agreement are for reference purposes only and will not
affect in any way the meaning or interpretation of this
Agreement.
24. Severability. Any provision of this
Agreement that is prohibited or unenforceable in any
jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction
will not invalidate or render unenforceable such provision
in any other jurisdiction.
25. Assignment. This Agreement is personal in
its nature and the parties hereto shall not, without the
consent of the other, assign or transfer this Agreement or
any rights or obligations hereunder; provided, that the
provisions hereof (including, without limitation, Sections
13, 14 and 15) will inure to the benefit of, and be binding
upon, each successor of the Company, whether by merger,
consolidation, transfer of all or substantially all of its
assets or otherwise.
IN WITNESS WHEREOF, the parties have duly executed
this Agreement as of the date first above written.
EMPLOYEE MEDIMMUNE, INC.
/s/ Melvin D. Booth By /s/ Wayne T. Hockmeyer
Melvin D. Booth Wayne T. Hockmeyer
EXHIBIT No. 10.86
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, dated as of November 1,
1998, is by and between DAVID M. MOTT (the "Employee") and
MEDIMMUNE, INC., a Delaware corporation (the "Company") and
supercedes the Employment Agreement between them dated as of
April 1, 1997.
The Company and the Employee hereby agree as
follows:
1. Employment. The Company hereby employs the
Employee, and the Employee hereby accepts employment by the
Company, upon the terms and conditions hereinafter set
forth.
2. Term. Subject to the provisions for earlier
termination as herein provided, the employment of the
Employee hereunder will be for the period commencing on the
date hereof and ending on the second anniversary of such
date. Such period may be extended, with the consent of the
Employee, for one or more one-year periods by resolution
adopted by the Compensation and Stock Committee (the
"Compensation Committee") of the Board of Directors of the
Company (the "Board"). The period of the Employee's
employment under this Agreement, as it may be terminated or
extended from time to time as provided herein, is referred
to hereafter as the "Employment Period."
3. Duties and Responsibilities. The Employee
will be employed by the Company in the position set forth on
Annex A, a copy of which is attached hereto and the terms of
which are incorporated herein by reference. The Employee
will faithfully perform the duties and responsibilities of
such office, as they may be assigned from time to time by
the Board or the Board's designee.
4. Time to be Devoted to Employment. Except for
vacation in accordance with the Company's policy in effect
from time to time and absences due to temporary illness, the
Employee shall devote full time, attention and energy during
the Employment Period to the business of the Company.
During the Employment Period, the Employee will not be
engaged in any other business activity which, in the
reasonable judgment of the Board or its designee, conflicts
with the duties of the Employee hereunder, whether or not
such activity is pursued for gain, profit or other pecuniary
advantage.
5. Compensation; Reimbursement.
(a) Base Salary. The Company (or, at the
Company's option, any subsidiary or affiliate thereof) will
pay to the Employee an annual base salary of not less than
the amount specified as the Initial Base Salary on Annex A,
payable semi-monthly. The Employee's base salary shall be
reviewed annually by the Compensation Committee and shall be
subject to increase at the option and sole discretion of the
Compensation Committee.
(b) Bonus. The Employee shall be eligible to
receive, at the sole discretion of the Compensation
Committee, an annual cash bonus based on pre-determined
performance standards of the Company.
(c) Benefits; Stock Options. In addition to the
salary and cash bonus referred to above, the Employee shall
be entitled during the Employment Period to participate in
such employee benefit plans or programs of the Company, and
shall be entitled to such other fringe benefits, as are from
time to time made available by the Company generally to
employees of the Employee's position, tenure, salary, age,
health and other qualifications. Without limiting the
generality of the foregoing, the Employee shall be eligible
for such awards, if any, under the Company's stock option
plan as shall be granted to the Employee by the Compensation
Committee or other appropriate designee of the Board acting
in its sole discretion. The Employee acknowledges and
agrees that the Company does not guarantee the adoption or
continuance of any particular employee benefit plan or
program or other fringe benefit during the Employment
Period, and participation by the Employee in any such plan
or program shall be subject to the rules and regulations
applicable thereto.
(d) Expenses. The Company will reimburse the
Employee, in accordance with the practices in effect from
time to time for other officers or staff personnel of the
Company, for all reasonable and necessary traveling expenses
and other disbursements incurred by the Employee for or on
behalf of the Company in the performance of the Employee's
duties hereunder, upon presentation by the Employee to the
Company of appropriate vouchers.
6. Death; Disability. If the Employee dies or
is incapacitated or disabled by accident, sickness or
otherwise, so as to render the Employee mentally or
physically incapable of performing the services required to
be performed by the Employee under this Agreement for a
period that would entitle the Employee to qualify for long-
term disability benefits under the Company's then-current
long-term disability insurance program or, in the absence of
such a program, for a period of 90 consecutive days or
longer (such condition being herein referred to as a
"Disability"), then (i) in the case of the Employee's death,
the Employee's employment shall be deemed to terminate on
the date of the Employee's death or (ii) in the case of a
Disability, the Company, at its option, may terminate the
employment of the Employee under this Agreement immediately
upon giving the Employee notice to that effect. Disability
shall be determined by the Board or the Board's designee.
In the case of a Disability, until the Company shall have
terminated the Employee's employment hereunder in accordance
with the foregoing, the Employee shall be entitled to
receive compensation provided for herein notwithstanding any
such physical or mental disability.
7. Termination For Cause. The Company may, with
the approval of a majority of the Board, terminate the
employment of the Employee hereunder at any time during the
Employment Period for "cause" (such termination being
hereinafter called a "Termination for Cause") by giving the
Employee notice of such termination, upon the giving of
which such termination will take effect immediately. For
purposes of this Agreement, "cause" means (i) the Employee's
willful and substantial misconduct, (ii) the Employee's
repeated, after written notice from the Company, neglect of
duties or failure to act which can reasonably be expected to
affect materially and adversely the business or affairs of
the Company or any subsidiary or affiliate thereof, (iii)
the Employee's material breach of any of the agreements
contained in Sections 13, 14 or 15 hereof, (iv) the
commission by the Employee of any material fraudulent act
with respect to the business and affairs of the Company or
any subsidiary or affiliate thereof or (v) the Employee's
conviction of (or plea of nolo contendere to) a crime
constituting a felony.
8. Termination Without Cause. The Company may
terminate the employment of the Employee hereunder at any
time without "cause" (such termination being hereinafter
called a "Termination Without Cause") by giving the Employee
notice of such termination, upon the giving of which such
termination will take effect not later than 30 days from the
date such notice is given.
9. Voluntary Termination. Any termination of
the employment of the Employee hereunder, otherwise than as
a result of death or Disability, a Termination For Cause, a
Termination Without Cause or a termination for Good Reason
(as defined below) following a Change in Control (as defined
below), will be deemed to be a "Voluntary Termination." A
Voluntary Termination will be deemed to be effective
immediately upon such termination.
10. Effect of Termination of Employment.
(a) Voluntary Termination; Termination For Cause.
Upon the termination of the Employee's employment hereunder
pursuant to a Voluntary Termination or a Termination For
Cause, neither the Employee nor the Employee's beneficiaries
or estate will have any further rights or claims against the
Company under this Agreement except the right to receive (i)
the unpaid portion of the base salary provided for in
Section 5(a) hereof, computed on a pro rata basis to the
date of termination, (ii) payment of his accrued but unpaid
rights in accordance with the terms of any incentive
compensation, stock option, retirement, employee welfare or
other employee benefit plans or programs of the Company in
which the Employee is then participating in accordance with
Sections 5(b) and 5(c) hereof and (iii) reimbursement for
any expenses for which the Employee shall not have
theretofore been reimbursed as provided in Section 5(d)
hereof.
(b) Termination Without Cause. Upon the
termination of the Employee's employment as a Termination
Without Cause, neither the Employee nor the Employee's
beneficiaries or estate will have any further rights or
claims against the Company under this Agreement except the
right to receive (i) the payments and other rights provided
for in Section 10(a) hereof, (ii) severance payments in the
form of semi-monthly payment of the Employee's base salary
(as in effect immediately prior to such termination) and of
the Pro-Rata Bonus Amount (as defined below) for a period of
24 months following the effective date of such termination,
and (iii) continuation of the medical benefits coverage to
which the Employee is entitled under Section 5(c) hereof
over the 24 month period provided in clause (ii) above, with
such coverage to be provided at the same level and subject
to the same terms and conditions (including, without
limitation, any applicable co-pay obligations of the
Employee, but excluding any applicable tax consequences for
the Employee) as in effect from time to time for officers of
the Company generally. For the purposes of this Agreement,
"Pro-Rata Bonus Amount" shall mean one-twenty-fourth
(1/24th) of the greater of (a) the most recent annual cash
bonus paid to the Employee prior to the date of his
termination, or (b) the average of the three most recent
annual cash bonuses paid to the Employee prior to the date
of his termination. The rights of the Employee and the
obligations of the Company under this Section 10(b) shall
remain in full force and effect notwithstanding the
expiration of the Employment Period, whether by failure of
the Compensation Committee to extend such period or
otherwise.
(c) Death and Disability. Upon the termination
of the Employee's employment hereunder as a result of death
or Disability, neither the Employee nor the Employee's
beneficiaries or estate will have any further rights or
claims against the Company under this Agreement except the
right to receive (i) the payments and other rights provided
for in Section 10(a) hereof, (ii) a lump-sum payment, within
15 days after the effective date of such termination, equal
to the aggregate amount of the Employee's base salary as in
effect immediately prior to such termination that would be
payable over a period of 12 months following the effective
date of such termination and (iii) in the case of Disability
only, continuation of the medical benefits coverage to which
the Employee is entitled under Section 5(c) hereof over the
same period with respect to which the lump-sum payment is
calculated under clause (ii) above, with such coverage to be
provided at the same level and subject to the same terms and
conditions (including, without limitation, any applicable co-
pay obligations of the Employee, but excluding any
applicable tax consequences for the Employee) as in effect
from time to time for officers of the Company generally.
(d) Forfeiture of Rights. In the event that,
subsequent to termination of employment hereunder, the
Employee (i) breaches any of the provisions of Section 13,
14 or 15 hereof or (ii) directly or indirectly makes or
facilitates the making of any adverse public statements or
disclosures with respect to the business or securities of
the Company, all payments and benefits to which the Employee
may otherwise have been entitled pursuant to Section 10(a),
10(b) or 11 hereof shall immediately terminate and be
forfeited, and any portion of such amounts as may have been
paid to the Employee shall forthwith be returned to the
Company.
11. Change in Control Provisions.
(a) Effect of Change in Control. In the event of
a Change in Control during the Employment Period, all
options held by the Employee to purchase shares of the
Company's stock that are not then vested and exercisable
shall become immediately and fully vested and exercisable as
of the effective date of the Change in Control.
(b) Effect of Termination Following Change in
Control. In the event of a Change in Control during the
Employment Period and a subsequent termination of the
Employee's employment, either by the Company as a
Termination Without Cause or by the Employee for Good
Reason, whether or not such termination is during the
Employment Period, the Employee shall be entitled to receive
(i) the payments and other rights provided in Section 10(a)
hereof, (ii) a severance payment in the form a cash lump
sum, which shall be paid within 15 days of the date of
termination, equal to the sum of the Employee's semi-monthly
base salary (as in effect immediately prior to such
termination) and the Pro-Rata Bonus Amount (as determined
under Section 10(b) above) multiplied by 72 (i.e., that
would have been payable on a semi-monthly basis during the
36 months following such termination), but discounted to
present value from the dates such payments would be made if
paid on a semi-monthly basis for such 36 month period, based
on the 100% short-term Applicable Federal Rate (compounded
annually) under Section 1274(d) of the Internal Revenue Code
of 1986, as amended (the "Code") as in effect at the time of
payment, and (iii) continuation of the medical benefits
coverage to which the Employee is entitled under Section
5(c) hereof for a period of 36 months from the date of the
Employee's termination of employment, with such coverage to
be provided at the same level and subject to the same terms
and conditions (including, without limitation, any
applicable co-pay obligations of the Employee, but excluding
any applicable tax consequences for the Employee) as in
effect from time to time for officers of the Company
generally. In addition, upon any such Termination Without
Cause or for Good Reason that occurs within six months
following the effective date of a Change in Control, the
Employee shall retain the right to exercise any options to
purchase shares of the Company's stock until the earlier of
(a) 36 months following the date of such termination or (b)
the expiration of the original full term of each such
option.
(c) Definition of Change in Control. For
purposes of this Agreement, a "Change in Control" shall be
deemed to have occurred upon:
(i) an acquisition subsequent to the date hereof
by any person, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a
"Person"), of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of
30% or more of either (A) the then outstanding shares
of common stock of the Company ("Common Stock") or (B)
the combined voting power of the then outstanding
voting securities of the Company entitled to vote
generally in the election of directors (the
"Outstanding Company Voting Securities"); excluding,
however, the following: (1) any acquisition directly
from the Company, other than an acquisition by virtue
of the exercise of a conversion privilege unless the
security being so converted was itself acquired
directly from the Company, (2) any acquisition by the
Company and (3) any acquisition by an employee benefit
plan (or related trust) sponsored or maintained by the
Company;
(ii) a change in the composition of the Board such
that during any period of two consecutive years,
individuals who at the beginning of such period
constitute the Board, and any new director (other than
a director designated by a person who has entered into
an agreement with the Company to effect a transaction
described in clause (i), (iii), or (iv) of this
paragraph) whose election by the Board or nomination
for election by the Company's stockholders was approved
by a vote of at least two-thirds of the directors then
still in office who either were directors at the
beginning of the period or whose election or nomination
for election was previously so approved, cease for any
reason to constitute at least a majority of the members
thereof;
(iii) the approval by the stockholders of the
Company of a merger, consolidation, reorganization or
similar corporate transaction, whether or not the
Company is the surviving corporation in such
transaction, in which outstanding shares of Common
Stock are converted into (A) shares of stock of another
company, other than a conversion into shares of voting
common stock of the successor corporation (or a holding
company thereof) representing 80% of the voting power
of all capital stock thereof outstanding immediately
after the merger or consolidation or (B) other
securities (of either the Company or another company)
or cash or other property;
(iv) the approval by stockholders of the Company
of the issuance of shares of Common Stock in connection
with a merger, consolidation, reorganization or similar
corporate transaction in an amount in excess of 40% of
the number of shares of Common Stock outstanding
immediately prior to the consummation of such
transaction;
(v) the approval by the stockholders of the
Company of (A) the sale or other disposition of all or
substantially all of the assets of the Company or (B) a
complete liquidation or dissolution of the Company; or
(vi) the adoption by the Board of a resolution to
the effect that any person has acquired effective
control of the business and affairs of the Company.
(d) Good Reason Following Change in Control. For
purposes of this Agreement, termination for "Good Reason"
shall mean termination by the Employee of his employment
with the Company, within six months immediately following a
Change in Control, based on:
(i) any diminution in the Employee's position,
title, responsibilities or authority from those in
effect immediately prior to such Change in Control; or
(ii) the breach by the Company of any of its
material obligations under this Agreement.
12. Parachute Tax Indemnity
(a) If it shall be determined that any amount
paid, distributed or treated as paid or distributed by the
Company to or for the Employee's benefit (whether paid or
payable or distributed or distributable pursuant to the
terms of this Agreement or otherwise, but determined without
regard to any additional payments required under this
Section 12) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code, or any interest or
penalties are incurred by the Employee with respect to such
excise tax (such excise tax, together with any such interest
and penalties, being hereinafter collectively referred to as
the "Excise Tax"), then the Employee shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Employee of all
federal, state and local taxes (including any interest or
penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Employee retains an
amount of the Gross-Up Payment equal to the Excise Tax
imposed upon all the Payments.
(b) All determinations required to be made under
this Section 12, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such
determination, shall be made by a nationally recognized
accounting firm as may be designated by the Employee (the
"Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Employee within 15
business days of the receipt of notice from the Employee
that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual,
entity or group effecting the change in control, the
Employee shall appoint another nationally recognized
accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to
as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 12,
shall be paid by the Company to the Employee within five
days of the receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be binding
upon the Company and the Employee. As a result of the
uncertainty in the application of Section 4999 of the Code
at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required
to be made hereunder. In the event that the Company
exhausts its remedies pursuant to this Section 12 and the
Employee thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for
the Employee's benefit.
(c) The Employee shall notify the Company in
writing of any claim by the Internal Revenue Service that,
if successful, would require the payment by the Company of
the Gross-Up Payment. Such notification shall be given as
soon as practicable but no later then ten business days
after the Employee is informed in writing of such claim and
shall apprise the Company of the nature of such claim and
the date on which such claim is requested to be paid. The
Employee shall not pay such claim prior to the expiration of
the 30-day period following the date on which it gives such
notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is
due). If the Company notifies the Employee in writing prior
to the expiration of such period that it desires to contest
such claim, the Employee shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with
contesting such claim as the Company shall reasonably
request in writing from time to time, including, without
limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good
faith in order to effectively contest such claim, and
(iv) permit the Company to participate in any
proceeding relating to such claim; provided, however, that
the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties)
incurred in connection with such contest and shall
indemnify and hold the Employee harmless, on an after-tax
basis, from any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and
expense. Without limitation on the foregoing provisions of
this Section 12, the Company shall control all proceedings
taken in connection with such contest and, at its sole
option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its
sole option, either direct the Employee to pay the tax
claimed and sue for a refund or contest the claim in any
permissible manner, and the Employee agrees to prosecute
such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company shall determine;
provided, however, that if the Company directs the Employee
to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to the Employee, on an
interest-free basis, and shall indemnify and hold the
Employee harmless, on an after-tax basis, from any Excise
Tax or income tax (including interest or penalties with
respect thereto) imposed with respect to such advance or
with respect to any imputed income with respect to such
advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for the
Employee's taxable year with respect to which such
contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control
of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the
Employee shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the Employee's receipt of an amount
advanced by the Company pursuant to this Section 12, the
Employee becomes entitled to receive any refund with respect
to such claim, the Employee shall (subject to the Company's
complying with the requirements of this Section 12) promptly
pay to the Company the amount of such refund (together with
any interest paid or credited thereon after taxes applicable
thereto). If, after the Employee's receipt of an amount
advanced by the Company pursuant to this Section 12, a
determination is made that the Employee shall not be
entitled to any refund with respect to such claim and the
Company does not notify the Employee in writing of its
intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to
be paid.
(e) The foregoing provisions of this Section 12
are intended to supersede the provisions of Section 7(b) of
the Company's 1991 Stock Option Plan as applied to the
Employee.
13. Disclosure of Information. The Employee will
not, at any time during or after the Employment Period,
disclose to any person, firm, corporation or other business
entity, except as required by law, any non-public
information concerning the business, products, clients or
affairs of the Company or any subsidiary or affiliate
thereof for any reason or purpose whatsoever, nor will the
Employee make use of any of such non-public information for
personal purposes or for the benefit of any person, firm,
corporation or other business entity except the Company or
any subsidiary or affiliate thereof.
14. Restrictive Covenant. (a) The Employee
hereby acknowledges and recognizes that, during the
Employment Period, the Employee will be privy to trade
secrets and confidential proprietary information critical to
the Company's business and the Employee further acknowledges
and recognizes that the Company would find it extremely
difficult or impossible to replace the Employee and,
accordingly, the Employee agrees that, in consideration of
the benefits to be received by the Employee hereunder, the
Employee will not, from and after the date hereof until the
first anniversary of the termination of the Employment
Period (or six months after the termination of the
Employment Period if such termination is as a result of a
termination for Good Reason following a Change in Control),
(i) directly or indirectly engage in the development,
production, marketing or sale of products that compete (or,
upon commercialization, would compete) with products of the
Company being developed (so long as such development has not
been abandoned), marketed or sold at the time of the
Employee's termination (such business or activity being
hereinafter called a "Competing Business") whether such
engagement shall be as an officer, director, owner,
employee, partner, affiliate or other participant in any
Competing Business, (ii) assist others in engaging in any
Competing Business in the manner described in the foregoing
clause (i), or (iii) induce other employees of the Company
or any subsidiary thereof to terminate their employment with
the Company or any subsidiary thereof or engage in any
Competing Business. Notwithstanding the foregoing, the term
"Competing Business" shall not include any business or
activity that was not conducted by the Company prior to the
effective date of a Change in Control.
(b) The Employee understands that the foregoing
restrictions may limit the ability of the Employee to earn a
livelihood in a business similar to the business of the
Company, but nevertheless believes that the Employee has
received and will receive sufficient consideration and other
benefits, as an employee of the Company and as otherwise
provided hereunder, to justify such restrictions which, in
any event (given the education, skills and ability of the
Employee), the Employee believes would not prevent the
Employee from earning a living.
15. Company Right to Inventions. The Employee
will promptly disclose, grant and assign to the Company, for
its sole use and benefit, any and all inventions,
improvements, technical information and suggestions relating
in any way to the business of the Company which the Employee
may develop or acquire during the Employment Period (whether
or not during usual working hours), together with all patent
applications, letters patent, copyrights and reissues
thereof that may at any time be granted for or upon any such
invention, improvement or technical information. In
connection therewith:
(i) the Employee shall, without charge, but at
the expense of the Company, promptly at all times
hereafter execute and deliver such applications,
assignments, descriptions and other instruments as may
be necessary or proper in the opinion of the Company to
vest title to any such inventions, improvements,
technical information, patent applications, patents,
copyrights or reissues thereof in the Company and to
enable it to obtain and maintain the entire right and
title thereto throughout the world; and
(ii) the Employee shall render to the Company, at
its expense (including a reasonable payment for the
time involved in case the Employee is not then in its
employ), all such assistance as it may require in the
prosecution of applications for said patents,
copyrights or reissues thereof, in the prosecution or
defense of interferences which may be declared
involving any said applications, patents or copyrights
and in any litigation in which the Company may be
involved relating to any such patents, inventions,
improvements or technical information.
16. Enforcement. It is the desire and intent of
the parties hereto that the provisions of this Agreement be
enforceable to the fullest extent permissible under the laws
and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, to the extent that a
restriction contained in this Agreement is more restrictive
than permitted by the laws of any jurisdiction where this
Agreement may be subject to review and interpretation, the
terms of such restriction, for the purpose only of the
operation of such restriction in such jurisdiction, will be
the maximum restriction allowed by the laws of such
jurisdiction and such restriction will be deemed to have
been revised accordingly herein.
17. Remedies; Survival. (a) The Employee
acknowledges and understands that the provisions of the
covenants contained in Sections 13, 14 and 15 hereof, the
violation of which cannot be accurately compensated for in
damages by an action at law, are of crucial importance to
the Company, and that the breach or threatened breach of the
provisions of this Agreement would cause the Company
irreparable harm. In the event of a breach or threatened
breach by the Employee of the provisions of Section 13, 14
or 15 hereof, the Company will be entitled to an injunction
restraining the Employee from such breach. Nothing herein
contained will be construed as prohibiting the Company from
pursuing any other remedies available for any breach or
threatened breach of this Agreement.
(b) Notwithstanding anything contained in this
Agreement to the contrary, the provisions of Sections 10(b),
13, 14, 15, 16 and 17 hereof will survive the expiration or
other termination of this Agreement until, by their terms,
such provisions are no longer operative.
18. Notices. Notices and other communications
hereunder will be in writing and will be delivered
personally or sent by air courier or first class certified
or registered mail, return receipt requested and postage
prepaid, addressed as follows:
if to the Employee: as specified in Annex A
and if to the Company: MedImmune, Inc.
35 West Watkins Mill Road
Gaithersburg, Maryland 20878
Attention: Chief Executive Officer
with a copy to: Frederick W. Kanner, Esq.
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, NY 10019
All notices and other communications given to any party
hereto in accordance with the provisions of this Agreement
will be deemed to have been given on the date of delivery,
if personally delivered; on the business day after the date
when sent, if sent by air courier; and on the third business
day after the date when sent, if sent by mail, in each case
addressed to such party as provided in this Section 18 or in
accordance with the latest unrevoked direction from such
party.
19. Binding Agreement; Benefit. The provisions
of this Agreement will be binding upon, and will inure to
the benefit of, the respective heirs, legal representatives
and successors of the parties hereto.
20. Governing Law. This Agreement will be
governed by, and construed and enforced in accordance with,
the laws of the State of Maryland.
21. Waiver of Breach. The waiver by either party
of a breach of any provision of this Agreement by the other
party must be in writing and will not operate or be
construed as a waiver of any subsequent breach by such other
party.
22. Entire Agreement; Amendments. This Agreement
(including Annex A) contains the entire agreement between
the parties with respect to the subject matter hereof and
supersedes all prior agreements or understandings among the
parties with respect thereof including, without limitation,
that certain employment agreement between the parties dated
as of April 1, 1997. This Agreement may be amended only by
an agreement in writing signed by the parties hereto.
23. Headings. The section headings contained in
this Agreement are for reference purposes only and will not
affect in any way the meaning or interpretation of this
Agreement.
24. Severability. Any provision of this
Agreement that is prohibited or unenforceable in any
jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction
will not invalidate or render unenforceable such provision
in any other jurisdiction.
25. Assignment. This Agreement is personal in
its nature and the parties hereto shall not, without the
consent of the other, assign or transfer this Agreement or
any rights or obligations hereunder; provided, that the
provisions hereof (including, without limitation, Sections
13, 14 and 15) will inure to the benefit of, and be binding
upon, each successor of the Company, whether by merger,
consolidation, transfer of all or substantially all of its
assets or otherwise.
IN WITNESS WHEREOF, the parties have duly executed
this Agreement as of the date first above written.
EMPLOYEE MEDIMMUNE, INC.
/s/ David M. Mott By /s/ Wayne T. Hockmeyer
David M. Mott Wayne T. Hockmeyer
EXHIBIT No. 10.87
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, dated as of November 1,
1998, is by and between FRANKLIN H. TOP, JR. (the
"Employee") and MEDIMMUNE, INC., a Delaware corporation (the
"Company") and supercedes the Employment Agreement between
them dated as of April 1, 1997.
The Company and the Employee hereby agree as
follows:
1. Employment. The Company hereby employs the
Employee, and the Employee hereby accepts employment by the
Company, upon the terms and conditions hereinafter set
forth.
2. Term. Subject to the provisions for earlier
termination as herein provided, the employment of the
Employee hereunder will be for the period commencing on the
date hereof and ending on the second anniversary of such
date. Such period may be extended, with the consent of the
Employee, for one or more one-year periods by resolution
adopted by the Compensation and Stock Committee (the
"Compensation Committee") of the Board of Directors of the
Company (the "Board"). The period of the Employee's
employment under this Agreement, as it may be terminated or
extended from time to time as provided herein, is referred
to hereafter as the "Employment Period."
3. Duties and Responsibilities. The Employee
will be employed by the Company in the position set forth on
Annex A, a copy of which is attached hereto and the terms of
which are incorporated herein by reference. The Employee
will faithfully perform the duties and responsibilities of
such office, as they may be assigned from time to time by
the Board or the Board's designee.
4. Time to be Devoted to Employment. Except for
vacation in accordance with the Company's policy in effect
from time to time and absences due to temporary illness, the
Employee shall devote full time, attention and energy during
the Employment Period to the business of the Company.
During the Employment Period, the Employee will not be
engaged in any other business activity which, in the
reasonable judgment of the Board or its designee, conflicts
with the duties of the Employee hereunder, whether or not
such activity is pursued for gain, profit or other pecuniary
advantage.
5. Compensation; Reimbursement.
(a) Base Salary. The Company (or, at the
Company's option, any subsidiary or affiliate thereof) will
pay to the Employee an annual base salary of not less than
the amount specified as the Initial Base Salary on Annex A,
payable semi-monthly. The Employee's base salary shall be
reviewed annually by the Compensation Committee and shall be
subject to increase at the option and sole discretion of the
Compensation Committee.
(b) Bonus. The Employee shall be eligible to
receive, at the sole discretion of the Compensation
Committee, an annual cash bonus based on pre-determined
performance standards of the Company.
(c) Benefits; Stock Options. In addition to the
salary and cash bonus referred to above, the Employee shall
be entitled during the Employment Period to participate in
such employee benefit plans or programs of the Company, and
shall be entitled to such other fringe benefits, as are from
time to time made available by the Company generally to
employees of the Employee's position, tenure, salary, age,
health and other qualifications. Without limiting the
generality of the foregoing, the Employee shall be eligible
for such awards, if any, under the Company's stock option
plan as shall be granted to the Employee by the Compensation
Committee or other appropriate designee of the Board acting
in its sole discretion. The Employee acknowledges and
agrees that the Company does not guarantee the adoption or
continuance of any particular employee benefit plan or
program or other fringe benefit during the Employment
Period, and participation by the Employee in any such plan
or program shall be subject to the rules and regulations
applicable thereto.
(d) Expenses. The Company will reimburse the
Employee, in accordance with the practices in effect from
time to time for other officers or staff personnel of the
Company, for all reasonable and necessary traveling expenses
and other disbursements incurred by the Employee for or on
behalf of the Company in the performance of the Employee's
duties hereunder, upon presentation by the Employee to the
Company of appropriate vouchers.
6. Death; Disability. If the Employee dies or
is incapacitated or disabled by accident, sickness or
otherwise, so as to render the Employee mentally or
physically incapable of performing the services required to
be performed by the Employee under this Agreement for a
period that would entitle the Employee to qualify for long-
term disability benefits under the Company's then-current
long-term disability insurance program or, in the absence of
such a program, for a period of 90 consecutive days or
longer (such condition being herein referred to as a
"Disability"), then (i) in the case of the Employee's death,
the Employee's employment shall be deemed to terminate on
the date of the Employee's death or (ii) in the case of a
Disability, the Company, at its option, may terminate the
employment of the Employee under this Agreement immediately
upon giving the Employee notice to that effect. Disability
shall be determined by the Board or the Board's designee.
In the case of a Disability, until the Company shall have
terminated the Employee's employment hereunder in accordance
with the foregoing, the Employee shall be entitled to
receive compensation provided for herein notwithstanding any
such physical or mental disability.
7. Termination For Cause. The Company may, with
the approval of a majority of the Board, terminate the
employment of the Employee hereunder at any time during the
Employment Period for "cause" (such termination being
hereinafter called a "Termination for Cause") by giving the
Employee notice of such termination, upon the giving of
which such termination will take effect immediately. For
purposes of this Agreement, "cause" means (i) the Employee's
willful and substantial misconduct, (ii) the Employee's
repeated, after written notice from the Company, neglect of
duties or failure to act which can reasonably be expected to
affect materially and adversely the business or affairs of
the Company or any subsidiary or affiliate thereof, (iii)
the Employee's material breach of any of the agreements
contained in Sections 13, 14 or 15 hereof, (iv) the
commission by the Employee of any material fraudulent act
with respect to the business and affairs of the Company or
any subsidiary or affiliate thereof or (v) the Employee's
conviction of (or plea of nolo contendere to) a crime
constituting a felony.
8. Termination Without Cause. The Company may
terminate the employment of the Employee hereunder at any
time without "cause" (such termination being hereinafter
called a "Termination Without Cause") by giving the Employee
notice of such termination, upon the giving of which such
termination will take effect not later than 30 days from the
date such notice is given.
9. Voluntary Termination. Any termination of
the employment of the Employee hereunder, otherwise than as
a result of death or Disability, a Termination For Cause, a
Termination Without Cause or a termination for Good Reason
(as defined below) following a Change in Control (as defined
below), will be deemed to be a "Voluntary Termination." A
Voluntary Termination will be deemed to be effective
immediately upon such termination.
10. Effect of Termination of Employment.
(a) Voluntary Termination; Termination For Cause.
Upon the termination of the Employee's employment hereunder
pursuant to a Voluntary Termination or a Termination For
Cause, neither the Employee nor the Employee's beneficiaries
or estate will have any further rights or claims against the
Company under this Agreement except the right to receive (i)
the unpaid portion of the base salary provided for in
Section 5(a) hereof, computed on a pro rata basis to the
date of termination, (ii) payment of his accrued but unpaid
rights in accordance with the terms of any incentive
compensation, stock option, retirement, employee welfare or
other employee benefit plans or programs of the Company in
which the Employee is then participating in accordance with
Sections 5(b) and 5(c) hereof and (iii) reimbursement for
any expenses for which the Employee shall not have
theretofore been reimbursed as provided in Section 5(d)
hereof.
(b) Termination Without Cause. Upon the
termination of the Employee's employment as a Termination
Without Cause, neither the Employee nor the Employee's
beneficiaries or estate will have any further rights or
claims against the Company under this Agreement except the
right to receive (i) the payments and other rights provided
for in Section 10(a) hereof, (ii) severance payments in the
form of semi-monthly payment of the Employee's base salary
(as in effect immediately prior to such termination) and of
the Pro-Rata Bonus Amount (as defined below) for a period of
12 months following the effective date of such termination,
and (iii) continuation of the medical benefits coverage to
which the Employee is entitled under Section 5(c) hereof
over the 12 month period provided in clause (ii) above, with
such coverage to be provided at the same level and subject
to the same terms and conditions (including, without
limitation, any applicable co-pay obligations of the
Employee, but excluding any applicable tax consequences for
the Employee) as in effect from time to time for officers of
the Company generally. For the purposes of this Agreement,
"Pro-Rata Bonus Amount" shall mean one-twenty-fourth
(1/24th) of the greater of (a) the most recent annual cash
bonus paid to the Employee prior to the date of his
termination, or (b) the average of the three most recent
annual cash bonuses paid to the Employee prior to the date
of his termination. The rights of the Employee and the
obligations of the Company under this Section 10(b) shall
remain in full force and effect notwithstanding the
expiration of the Employment Period, whether by failure of
the Compensation Committee to extend such period or
otherwise.
(c) Death and Disability. Upon the termination
of the Employee's employment hereunder as a result of death
or Disability, neither the Employee nor the Employee's
beneficiaries or estate will have any further rights or
claims against the Company under this Agreement except the
right to receive (i) the payments and other rights provided
for in Section 10(a) hereof, (ii) a lump-sum payment, within
15 days after the effective date of such termination, equal
to the aggregate amount of the Employee's base salary as in
effect immediately prior to such termination that would be
payable over a period of 12 months following the effective
date of such termination and (iii) in the case of Disability
only, continuation of the medical benefits coverage to which
the Employee is entitled under Section 5(c) hereof over the
same period with respect to which the lump-sum payment is
calculated under clause (ii) above, with such coverage to be
provided at the same level and subject to the same terms and
conditions (including, without limitation, any applicable co-
pay obligations of the Employee, but excluding any
applicable tax consequences for the Employee) as in effect
from time to time for officers of the Company generally.
(d) Forfeiture of Rights. In the event that,
subsequent to termination of employment hereunder, the
Employee (i) breaches any of the provisions of Section 13,
14 or 15 hereof or (ii) directly or indirectly makes or
facilitates the making of any adverse public statements or
disclosures with respect to the business or securities of
the Company, all payments and benefits to which the Employee
may otherwise have been entitled pursuant to Section 10(a),
10(b) or 11 hereof shall immediately terminate and be
forfeited, and any portion of such amounts as may have been
paid to the Employee shall forthwith be returned to the
Company.
11. Change in Control Provisions.
(a) Effect of Termination Following Change in
Control. In the event of a Change in Control during the
Employment Period and a subsequent termination of the
Employee's employment, either by the Company as a
Termination Without Cause or by the Employee for Good
Reason, whether or not such termination is during the
Employment Period, the Employee shall be entitled to receive
(i) the payments and other rights provided in Section 10(a)
hereof, (ii) a severance payment in the form a cash lump
sum, paid within 15 days of the date of termination, equal
to the sum of the Employee's semi-monthly base salary (as in
effect immediately prior to such termination) and the Pro-
Rata Bonus Amount (as determined under Section 10(b) above)
multiplied by 48 (i.e., that would have been payable on a
semi-monthly basis during the 24 months following such
termination), but discounted to present value from the dates
such payments would be made if paid on a semi-monthly basis
for such 24 month period, based on the 100% short-term
Applicable Federal Rate (compounded annually) under Section
1274(d) of the Internal Revenue Code of 1986, as amended
(the "Code") as in effect at the time of payment, and (iii)
continuation of the medical benefits coverage to which the
Employee is entitled under Section 5(c) hereof for a period
of 24 months following the date of termination, with such
coverage to be provided at the same level and subject to the
same terms and conditions (including, without limitation,
any applicable co-pay obligations of the Employee, but
excluding any applicable tax consequences for the Employee)
as in effect from time to time for officers of the Company
generally.
(b) Definition of Change in Control. For
purposes of this Agreement, a "Change in Control" shall be
deemed to have occurred upon:
(i) an acquisition subsequent to the date hereof
by any person, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) (a "Person"), of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 30% or more of either
(A) the then outstanding shares of common stock of the
Company ("Common Stock") or (B) the combined voting power of
the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); excluding,
however, the following: (1) any acquisition directly from
the Company, other than an acquisition by virtue of the
exercise of a conversion privilege unless the security being
so converted was itself acquired directly from the Company,
(2) any acquisition by the Company and (3) any acquisition
by an employee benefit plan (or related trust) sponsored or
maintained by the Company;
(ii) a change in the composition of the Board such
that during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board,
and any new director (other than a director designated by a
person who has entered into an agreement with the Company to
effect a transaction described in clause (i), (iii), or (iv)
of this paragraph) whose election by the Board or nomination
for election by the Company's stockholders was approved by a
vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the
period or whose election or nomination for election was
previously so approved, cease for any reason to constitute
at least a majority of the members thereof;
(iii) the approval by the stockholders of the
Company of a merger, consolidation, reorganization or
similar corporate transaction, whether or not the Company is
the surviving corporation in such transaction, in which
outstanding shares of Common Stock are converted into (A)
shares of stock of another company, other than a conversion
into shares of voting common stock of the successor
corporation (or a holding company thereof) representing 80%
of the voting power of all capital stock thereof outstanding
immediately after the merger or consolidation or (B) other
securities (of either the Company or another company) or
cash or other property;
(iv) the approval by stockholders of the Company
of the issuance of shares of Common Stock in connection with
a merger, consolidation, reorganization or similar corporate
transaction in an amount in excess of 40% of the number of
shares of Common Stock outstanding immediately prior to the
consummation of such transaction;
(v) the approval by the stockholders of the
Company of (A) the sale or other disposition of all or
substantially all of the assets of the Company or (B) a
complete liquidation or dissolution of the Company; or
(vi) the adoption by the Board of a resolution to
the effect that any person has acquired effective control of
the business and affairs of the Company.
(c) Good Reason Following Change in Control. For
purposes of this Agreement, termination for "Good Reason"
shall mean termination by the Employee of his employment
with the Company, within six months immediately following a
Change in Control, based on:
(i) any diminution in the Employee's position,
title, responsibilities or authority from those in effect
immediately prior to such Change in Control; or
(ii) the breach by the Company of any of its
material obligations under this Agreement.
12. Parachute Tax Indemnity
(a) If it shall be determined that any amount paid,
distributed or treated as paid or distributed by the Company
to or for the Employee's benefit (whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any
additional payments required under this Section 12) (a
"Payment") would be subject to the excise tax imposed by
Section 4999 of the Code, or any interest or penalties are
incurred by the Employee with respect to such excise tax
(such excise tax, together with any such interest and
penalties, being hereinafter collectively referred to as the
"Excise Tax"), then the Employee shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Employee of all
federal, state and local taxes (including any interest or
penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Employee retains an
amount of the Gross-Up Payment equal to the Excise Tax
imposed upon all the Payments.
(b) All determinations required to be made under this
Section 12, including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such
determination, shall be made by a nationally recognized
accounting firm as may be designated by the Employee (the
"Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Employee within 15
business days of the receipt of notice from the Employee
that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual,
entity or group effecting the change in control, the
Employee shall appoint another nationally recognized
accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to
as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 12,
shall be paid by the Company to the Employee within five
days of the receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be binding
upon the Company and the Employee. As a result of the
uncertainty in the application of Section 4999 of the Code
at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required
to be made hereunder. In the event that the Company
exhausts its remedies pursuant to this Section 12 and the
Employee thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for
the Employee's benefit.
(c) The Employee shall notify the Company in writing
of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the
Gross-Up Payment. Such notification shall be given as soon
as practicable but no later then ten business days after the
Employee is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid. The Employee
shall not pay such claim prior to the expiration of the 30-
day period following the date on which it gives such notice
to the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is
due). If the Company notifies the Employee in writing prior
to the expiration of such period that it desires to contest
such claim, the Employee shall:
(i) give the Company any information reasonably requested
by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in
writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
to effectively contest such claim, and
(iv) permit the Company to participate in any
proceeding relating to such claim; provided, however, that
the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify
and hold the Employee harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expense. Without
limitation on the foregoing provisions of this Section 12,
the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole
option, either direct the Employee to pay the tax claimed
and sue for a refund or contest the claim in any permissible
manner, and the Employee agrees to prosecute such contest to
a determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however,
that if the Company directs the Employee to pay such claim
and sue for a refund, the Company shall advance the amount
of such payment to the Employee, on an interest-free basis,
and shall indemnify and hold the Employee harmless, on an
after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further
provided that any extension of the statute of limitations
relating to payment of taxes for the Employee's taxable year
with respect to which such contested amount is claimed to be
due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Employee shall be
entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the Employee's receipt of an amount
advanced by the Company pursuant to this Section 12, the
Employee becomes entitled to receive any refund with respect
to such claim, the Employee shall (subject to the Company's
complying with the requirements of this Section 12) promptly
pay to the Company the amount of such refund (together with
any interest paid or credited thereon after taxes applicable
thereto). If, after the Employee's receipt of an amount
advanced by the Company pursuant to this Section 12, a
determination is made that the Employee shall not be
entitled to any refund with respect to such claim and the
Company does not notify the Employee in writing of its
intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to
be paid.
(e) The foregoing provisions of this Section 12
are intended to supersede the provisions of Section 7(d) of
the Company's 1991 Stock Option Plan as applied to the
Employee.
13. Disclosure of Information. The Employee will
not, at any time during or after the Employment Period,
disclose to any person, firm, corporation or other business
entity, except as required by law, any non-public
information concerning the business, products, clients or
affairs of the Company or any subsidiary or affiliate
thereof for any reason or purpose whatsoever, nor will the
Employee make use of any of such non-public information for
personal purposes or for the benefit of any person, firm,
corporation or other business entity except the Company or
any subsidiary or affiliate thereof.
14. Restrictive Covenant. (a) The Employee
hereby acknowledges and recognizes that, during the
Employment Period, the Employee will be privy to trade
secrets and confidential proprietary information critical to
the Company's business and the Employee further acknowledges
and recognizes that the Company would find it extremely
difficult or impossible to replace the Employee and,
accordingly, the Employee agrees that, in consideration of
the benefits to be received by the Employee hereunder, the
Employee will not, from and after the date hereof until the
first anniversary of the termination of the Employment
Period (or six months after the termination of the
Employment Period if such termination is as a result of a
termination for Good Reason following a Change in Control),
(i) directly or indirectly engage in the development,
production, marketing or sale of products that compete (or,
upon commercialization, would compete) with products of the
Company being developed (so long as such development has not
been abandoned), marketed or sold at the time of the
Employee's termination (such business or activity being
hereinafter called a "Competing Business") whether such
engagement shall be as an officer, director, owner,
employee, partner, affiliate or other participant in any
Competing Business, (ii) assist others in engaging in any
Competing Business in the manner described in the foregoing
clause (i), or (iii) induce other employees of the Company
or any subsidiary thereof to terminate their employment with
the Company or any subsidiary thereof or engage in any
Competing Business. Notwithstanding the foregoing, the term
"Competing Business" shall not include any business or
activity that was not conducted by the Company prior to the
effective date of a Change in Control.
(b) The Employee understands that the foregoing
restrictions may limit the ability of the Employee to earn a
livelihood in a business similar to the business of the
Company, but nevertheless believes that the Employee has
received and will receive sufficient consideration and other
benefits, as an employee of the Company and as otherwise
provided hereunder, to justify such restrictions which, in
any event (given the education, skills and ability of the
Employee), the Employee believes would not prevent the
Employee from earning a living.
15. Company Right to Inventions. The Employee
will promptly disclose, grant and assign to the Company, for
its sole use and benefit, any and all inventions,
improvements, technical information and suggestions relating
in any way to the business of the Company which the Employee
may develop or acquire during the Employment Period (whether
or not during usual working hours), together with all patent
applications, letters patent, copyrights and reissues
thereof that may at any time be granted for or upon any such
invention, improvement or technical information. In
connection therewith:
(i) the Employee shall, without charge, but at
the expense of the Company, promptly at all times hereafter
execute and deliver such applications, assignments,
descriptions and other instruments as may be necessary or
proper in the opinion of the Company to vest title to any
such inventions, improvements, technical information, patent
applications, patents, copyrights or reissues thereof in the
Company and to enable it to obtain and maintain the entire
right and title thereto throughout the world; and
(ii) the Employee shall render to the Company, at
its expense (including a reasonable payment for the time
involved in case the Employee is not then in its employ),
all such assistance as it may require in the prosecution of
applications for said patents, copyrights or reissues
thereof, in the prosecution or defense of interferences
which may be declared involving any said applications,
patents or copyrights and in any litigation in which the
Company may be involved relating to any such patents,
inventions, improvements or technical information.
16. Enforcement. It is the desire and intent of
the parties hereto that the provisions of this Agreement be
enforceable to the fullest extent permissible under the laws
and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, to the extent that a
restriction contained in this Agreement is more restrictive
than permitted by the laws of any jurisdiction where this
Agreement may be subject to review and interpretation, the
terms of such restriction, for the purpose only of the
operation of such restriction in such jurisdiction, will be
the maximum restriction allowed by the laws of such
jurisdiction and such restriction will be deemed to have
been revised accordingly herein.
17. Remedies; Survival. (a) The Employee
acknowledges and understands that the provisions of the
covenants contained in Sections 13, 14 and 15 hereof, the
violation of which cannot be accurately compensated for in
damages by an action at law, are of crucial importance to
the Company, and that the breach or threatened breach of the
provisions of this Agreement would cause the Company
irreparable harm. In the event of a breach or threatened
breach by the Employee of the provisions of Section 13, 14
or 15 hereof, the Company will be entitled to an injunction
restraining the Employee from such breach. Nothing herein
contained will be construed as prohibiting the Company from
pursuing any other remedies available for any breach or
threatened breach of this Agreement.
(b) Notwithstanding anything contained in this
Agreement to the contrary, the provisions of Sections 10(b),
13, 14, 15, 16 and 17 hereof will survive the expiration or
other termination of this Agreement until, by their terms,
such provisions are no longer operative.
18. Notices. Notices and other communications
hereunder will be in writing and will be delivered
personally or sent by air courier or first class certified
or registered mail, return receipt requested and postage
prepaid, addressed as follows:
if to the Employee: as specified in Annex A
and if to the Company: MedImmune, Inc.
35 West Watkins Mill Road
Gaithersburg, Maryland 20878
Attention: Chief Executive Officer
with a copy to: Frederick W. Kanner, Esq.
Dewey Ballantine, LLP
1301 Avenue of the Americas
New York, NY 10019
All notices and other communications given to any party
hereto in accordance with the provisions of this Agreement
will be deemed to have been given on the date of delivery,
if personally delivered; on the business day after the date
when sent, if sent by air courier; and on the third business
day after the date when sent, if sent by mail, in each case
addressed to such party as provided in this Section 18 or in
accordance with the latest unrevoked direction from such
party.
19. Binding Agreement; Benefit. The provisions
of this Agreement will be binding upon, and will inure to
the benefit of, the respective heirs, legal representatives
and successors of the parties hereto.
20. Governing Law. This Agreement will be
governed by, and construed and enforced in accordance with,
the laws of the State of Maryland.
21. Waiver of Breach. The waiver by either party
of a breach of any provision of this Agreement by the other
party must be in writing and will not operate or be
construed as a waiver of any subsequent breach by such other
party.
22. Entire Agreement; Amendments. This Agreement
(including Annex A) contains the entire agreement between
the parties with respect to the subject matter hereof and
supersedes all prior agreements or understandings among the
parties with respect thereof, including, without limitation,
that certain employment agreement between the parties dated
as of April 1, 1997. This Agreement may be amended only by
an agreement in writing signed by the parties hereto.
23. Headings. The section headings contained in
this Agreement are for reference purposes only and will not
affect in any way the meaning or interpretation of this
Agreement.
24. Severability. Any provision of this
Agreement that is prohibited or unenforceable in any
jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction
will not invalidate or render unenforceable such provision
in any other jurisdiction.
25. Assignment. This Agreement is personal in
its nature and the parties hereto shall not, without the
consent of the other, assign or transfer this Agreement or
any rights or obligations hereunder; provided, that the
provisions hereof (including, without limitation, Sections
13, 14 and 15) will inure to the benefit of, and be binding
upon, each successor of the Company, whether by merger,
consolidation, transfer of all or substantially all of its
assets or otherwise.
IN WITNESS WHEREOF, the parties have duly executed
this Agreement as of the date first above written.
EMPLOYEE MEDIMMUNE, INC.
/s/ Franklin H. Top, Jr. By: /s/ Wayne T. Hockmeyer
Franklin H. Top, Jr. Wayne T. Hockmeyer
EXHIBIT No. 10.88
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, dated as of November 1,
1998, is by and between DAVID P. WRIGHT (the "Employee") and
MEDIMMUNE, INC., a Delaware corporation (the "Company") and
supercedes the Employment Agreement between them dated as of
April 1, 1997.
The Company and the Employee hereby agree as
follows:
1. Employment. The Company hereby employs the
Employee, and the Employee hereby accepts employment by the
Company, upon the terms and conditions hereinafter set
forth.
2. Term. Subject to the provisions for earlier
termination as herein provided, the employment of the
Employee hereunder will be for the period commencing on the
date hereof and ending on the second anniversary of such
date. Such period may be extended, with the consent of the
Employee, for one or more one-year periods by resolution
adopted by the Compensation and Stock Committee (the
"Compensation Committee") of the Board of Directors of the
Company (the "Board"). The period of the Employee's
employment under this Agreement, as it may be terminated or
extended from time to time as provided herein, is referred
to hereafter as the "Employment Period."
3. Duties and Responsibilities. The Employee
will be employed by the Company in the position set forth on
Annex A, a copy of which is attached hereto and the terms of
which are incorporated herein by reference. The Employee
will faithfully perform the duties and responsibilities of
such office, as they may be assigned from time to time by
the Board or the Board's designee.
4. Time to be Devoted to Employment. Except for
vacation in accordance with the Company's policy in effect
from time to time and absences due to temporary illness, the
Employee shall devote full time, attention and energy during
the Employment Period to the business of the Company.
During the Employment Period, the Employee will not be
engaged in any other business activity which, in the
reasonable judgment of the Board or its designee, conflicts
with the duties of the Employee hereunder, whether or not
such activity is pursued for gain, profit or other pecuniary
advantage.
5. Compensation; Reimbursement.
(a) Base Salary. The Company (or, at the
Company's option, any subsidiary or affiliate thereof) will
pay to the Employee an annual base salary of not less than
the amount specified as the Initial Base Salary on Annex A,
payable semi-monthly. The Employee's base salary shall be
reviewed annually by the Compensation Committee and shall be
subject to increase at the option and sole discretion of the
Compensation Committee.
(b) Bonus. The Employee shall be eligible to
receive, at the sole discretion of the Compensation
Committee, an annual cash bonus based on pre-determined
performance standards of the Company.
(c) Benefits; Stock Options. In addition to the
salary and cash bonus referred to above, the Employee shall
be entitled during the Employment Period to participate in
such employee benefit plans or programs of the Company, and
shall be entitled to such other fringe benefits, as are from
time to time made available by the Company generally to
employees of the Employee's position, tenure, salary, age,
health and other qualifications. Without limiting the
generality of the foregoing, the Employee shall be eligible
for such awards, if any, under the Company's stock option
plan as shall be granted to the Employee by the Compensation
Committee or other appropriate designee of the Board acting
in its sole discretion. The Employee acknowledges and
agrees that the Company does not guarantee the adoption or
continuance of any particular employee benefit plan or
program or other fringe benefit during the Employment
Period, and participation by the Employee in any such plan
or program shall be subject to the rules and regulations
applicable thereto.
(d) Expenses. The Company will reimburse the
Employee, in accordance with the practices in effect from
time to time for other officers or staff personnel of the
Company, for all reasonable and necessary traveling expenses
and other disbursements incurred by the Employee for or on
behalf of the Company in the performance of the Employee's
duties hereunder, upon presentation by the Employee to the
Company of appropriate vouchers.
6. Death; Disability. If the Employee dies or
is incapacitated or disabled by accident, sickness or
otherwise, so as to render the Employee mentally or
physically incapable of performing the services required to
be performed by the Employee under this Agreement for a
period that would entitle the Employee to qualify for long-
term disability benefits under the Company's then-current
long-term disability insurance program or, in the absence of
such a program, for a period of 90 consecutive days or
longer (such condition being herein referred to as a
"Disability"), then (i) in the case of the Employee's death,
the Employee's employment shall be deemed to terminate on
the date of the Employee's death or (ii) in the case of a
Disability, the Company, at its option, may terminate the
employment of the Employee under this Agreement immediately
upon giving the Employee notice to that effect. Disability
shall be determined by the Board or the Board's designee.
In the case of a Disability, until the Company shall have
terminated the Employee's employment hereunder in accordance
with the foregoing, the Employee shall be entitled to
receive compensation provided for herein notwithstanding any
such physical or mental disability.
7. Termination For Cause. The Company may, with
the approval of a majority of the Board, terminate the
employment of the Employee hereunder at any time during the
Employment Period for "cause" (such termination being
hereinafter called a "Termination for Cause") by giving the
Employee notice of such termination, upon the giving of
which such termination will take effect immediately. For
purposes of this Agreement, "cause" means (i) the Employee's
willful and substantial misconduct, (ii) the Employee's
repeated, after written notice from the Company, neglect of
duties or failure to act which can reasonably be expected to
affect materially and adversely the business or affairs of
the Company or any subsidiary or affiliate thereof, (iii)
the Employee's material breach of any of the agreements
contained in Sections 13, 14 or 15 hereof, (iv) the
commission by the Employee of any material fraudulent act
with respect to the business and affairs of the Company or
any subsidiary or affiliate thereof or (v) the Employee's
conviction of (or plea of nolo contendere to) a crime
constituting a felony.
8. Termination Without Cause. The Company may
terminate the employment of the Employee hereunder at any
time without "cause" (such termination being hereinafter
called a "Termination Without Cause") by giving the Employee
notice of such termination, upon the giving of which such
termination will take effect not later than 30 days from the
date such notice is given.
9. Voluntary Termination. Any termination of
the employment of the Employee hereunder, otherwise than as
a result of death or Disability, a Termination For Cause, a
Termination Without Cause or a termination for Good Reason
(as defined below) following a Change in Control (as defined
below), will be deemed to be a "Voluntary Termination." A
Voluntary Termination will be deemed to be effective
immediately upon such termination.
10. Effect of Termination of Employment.
(a) Voluntary Termination; Termination For Cause.
Upon the termination of the Employee's employment hereunder
pursuant to a Voluntary Termination or a Termination For
Cause, neither the Employee nor the Employee's beneficiaries
or estate will have any further rights or claims against the
Company under this Agreement except the right to receive (i)
the unpaid portion of the base salary provided for in
Section 5(a) hereof, computed on a pro rata basis to the
date of termination, (ii) payment of his accrued but unpaid
rights in accordance with the terms of any incentive
compensation, stock option, retirement, employee welfare or
other employee benefit plans or programs of the Company in
which the Employee is then participating in accordance with
Sections 5(b) and 5(c) hereof and (iii) reimbursement for
any expenses for which the Employee shall not have
theretofore been reimbursed as provided in Section 5(d)
hereof.
(b) Termination Without Cause. Upon the
termination of the Employee's employment as a Termination
Without Cause, neither the Employee nor the Employee's
beneficiaries or estate will have any further rights or
claims against the Company under this Agreement except the
right to receive (i) the payments and other rights provided
for in Section 10(a) hereof, (ii) severance payments in the
form of semi-monthly payment of the Employee's base salary
(as in effect immediately prior to such termination) and of
the Pro-Rata Bonus Amount (as defined below) for a period of
12 months following the effective date of such termination,
and (iii) continuation of the medical benefits coverage to
which the Employee is entitled under Section 5(c) hereof
over the 12 month period provided in clause (ii) above, with
such coverage to be provided at the same level and subject
to the same terms and conditions (including, without
limitation, any applicable co-pay obligations of the
Employee, but excluding any applicable tax consequences for
the Employee) as in effect from time to time for officers of
the Company generally. For the purposes of this Agreement,
"Pro-Rata Bonus Amount" shall mean one-twenty-fourth
(1/24th) of the greater of (a) the most recent annual cash
bonus paid to the Employee prior to the date of his
termination, or (b) the average of the three most recent
annual cash bonuses paid to the Employee prior to the date
of his termination. The rights of the Employee and the
obligations of the Company under this Section 10(b) shall
remain in full force and effect notwithstanding the
expiration of the Employment Period, whether by failure of
the Compensation Committee to extend such period or
otherwise.
(c) Death and Disability. Upon the termination
of the Employee's employment hereunder as a result of death
or Disability, neither the Employee nor the Employee's
beneficiaries or estate will have any further rights or
claims against the Company under this Agreement except the
right to receive (i) the payments and other rights provided
for in Section 10(a) hereof, (ii) a lump-sum payment, within
15 days after the effective date of such termination, equal
to the aggregate amount of the Employee's base salary as in
effect immediately prior to such termination that would be
payable over a period of 12 months following the effective
date of such termination and (iii) in the case of Disability
only, continuation of the medical benefits coverage to which
the Employee is entitled under Section 5(c) hereof over the
same period with respect to which the lump-sum payment is
calculated under clause (ii) above, with such coverage to be
provided at the same level and subject to the same terms and
conditions (including, without limitation, any applicable co-
pay obligations of the Employee, but excluding any
applicable tax consequences for the Employee) as in effect
from time to time for officers of the Company generally.
(d) Forfeiture of Rights. In the event that,
subsequent to termination of employment hereunder, the
Employee (i) breaches any of the provisions of Section 13,
14 or 15 hereof or (ii) directly or indirectly makes or
facilitates the making of any adverse public statements or
disclosures with respect to the business or securities of
the Company, all payments and benefits to which the Employee
may otherwise have been entitled pursuant to Section 10(a),
10(b) or 11 hereof shall immediately terminate and be
forfeited, and any portion of such amounts as may have been
paid to the Employee shall forthwith be returned to the
Company.
11. Change in Control Provisions.
(a) Effect of Termination Following Change in
Control. In the event of a Change in Control during the
Employment Period and a subsequent termination of the
Employee's employment, either by the Company as a
Termination Without Cause or by the Employee for Good
Reason, whether or not such termination is during the
Employment Period, the Employee shall be entitled to receive
(i) the payments and other rights provided in Section 10(a)
hereof, (ii) a severance payment in the form a cash lump
sum, paid within 15 days of the date of termination, equal
to the sum of the Employee's semi-monthly base salary (as in
effect immediately prior to such termination) and the Pro-
Rata Bonus Amount (as determined under Section 10(b) above)
multiplied by 48 (i.e., that would have been payable on a
semi-monthly basis during the 24 months following such
termination), but discounted to present value from the dates
such payments would be made if paid on a semi-monthly basis
for such 24 month period, based on the 100% short-term
Applicable Federal Rate (compounded annually) under Section
1274(d) of the Internal Revenue Code of 1986, as amended
(the "Code") as in effect at the time of payment, and (iii)
continuation of the medical benefits coverage to which the
Employee is entitled under Section 5(c) hereof for a period
of 24 months following the date of termination, with such
coverage to be provided at the same level and subject to the
same terms and conditions (including, without limitation,
any applicable co-pay obligations of the Employee, but
excluding any applicable tax consequences for the Employee)
as in effect from time to time for officers of the Company
generally.
(b) Definition of Change in Control. For
purposes of this Agreement, a "Change in Control" shall be
deemed to have occurred upon:
(i) an acquisition subsequent to the date hereof
by any person, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a
"Person"), of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of
30% or more of either (A) the then outstanding shares
of common stock of the Company ("Common Stock") or (B)
the combined voting power of the then outstanding
voting securities of the Company entitled to vote
generally in the election of directors (the
"Outstanding Company Voting Securities"); excluding,
however, the following: (1) any acquisition directly
from the Company, other than an acquisition by virtue
of the exercise of a conversion privilege unless the
security being so converted was itself acquired
directly from the Company, (2) any acquisition by the
Company and (3) any acquisition by an employee benefit
plan (or related trust) sponsored or maintained by the
Company;
(ii) a change in the composition of the Board such
that during any period of two consecutive years,
individuals who at the beginning of such period
constitute the Board, and any new director (other than
a director designated by a person who has entered into
an agreement with the Company to effect a transaction
described in clause (i), (iii), or (iv) of this
paragraph) whose election by the Board or nomination
for election by the Company's stockholders was approved
by a vote of at least two-thirds of the directors then
still in office who either were directors at the
beginning of the period or whose election or nomination
for election was previously so approved, cease for any
reason to constitute at least a majority of the members
thereof;
(iii) the approval by the stockholders of the
Company of a merger, consolidation, reorganization or
similar corporate transaction, whether or not the
Company is the surviving corporation in such
transaction, in which outstanding shares of Common
Stock are converted into (A) shares of stock of another
company, other than a conversion into shares of voting
common stock of the successor corporation (or a holding
company thereof) representing 80% of the voting power
of all capital stock thereof outstanding immediately
after the merger or consolidation or (B) other
securities (of either the Company or another company)
or cash or other property;
(iv) the approval by stockholders of the Company
of the issuance of shares of Common Stock in connection
with a merger, consolidation, reorganization or similar
corporate transaction in an amount in excess of 40% of
the number of shares of Common Stock outstanding
immediately prior to the consummation of such
transaction;
(v) the approval by the stockholders of the
Company of (A) the sale or other disposition of all or
substantially all of the assets of the Company or (B) a
complete liquidation or dissolution of the Company; or
(vi) the adoption by the Board of a resolution to
the effect that any person has acquired effective
control of the business and affairs of the Company.
(c) Good Reason Following Change in Control. For
purposes of this Agreement, termination for "Good Reason"
shall mean termination by the Employee of his employment
with the Company, within six months immediately following a
Change in Control, based on:
(i) any diminution in the Employee's position,
title, responsibilities or authority from those in
effect immediately prior to such Change in Control; or
(ii) the breach by the Company of any of its
material obligations under this Agreement.
12. Parachute Tax Indemnity
(a) If it shall be determined that any amount
paid, distributed or treated as paid or distributed by the
Company to or for the Employee's benefit (whether paid or
payable or distributed or distributable pursuant to the
terms of this Agreement or otherwise, but determined without
regard to any additional payments required under this
Section 12) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code, or any interest or
penalties are incurred by the Employee with respect to such
excise tax (such excise tax, together with any such interest
and penalties, being hereinafter collectively referred to as
the "Excise Tax"), then the Employee shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Employee of all
federal, state and local taxes (including any interest or
penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Employee retains an
amount of the Gross-Up Payment equal to the Excise Tax
imposed upon all the Payments.
(b) All determinations required to be made under
this Section 12, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such
determination, shall be made by a nationally recognized
accounting firm as may be designated by the Employee (the
"Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Employee within 15
business days of the receipt of notice from the Employee
that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual,
entity or group effecting the change in control, the
Employee shall appoint another nationally recognized
accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to
as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 12,
shall be paid by the Company to the Employee within five
days of the receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be binding
upon the Company and the Employee. As a result of the
uncertainty in the application of Section 4999 of the Code
at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required
to be made hereunder. In the event that the Company
exhausts its remedies pursuant to this Section 12 and the
Employee thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for
the Employee's benefit.
(c) The Employee shall notify the Company in
writing of any claim by the Internal Revenue Service that,
if successful, would require the payment by the Company of
the Gross-Up Payment. Such notification shall be given as
soon as practicable but no later then ten business days
after the Employee is informed in writing of such claim and
shall apprise the Company of the nature of such claim and
the date on which such claim is requested to be paid. The
Employee shall not pay such claim prior to the expiration of
the 30-day period following the date on which it gives such
notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is
due). If the Company notifies the Employee in writing prior
to the expiration of such period that it desires to contest
such claim, the Employee shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with
contesting such claim as the Company shall reasonably
request in writing from time to time, including, without
limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good
faith in order to effectively contest such claim, and
(iv) permit the Company to participate in any
proceeding relating to such claim; provided, however, that
the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties)
incurred in connection with such contest and shall
indemnify and hold the Employee harmless, on an after-tax
basis, from any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and
expense. Without limitation on the foregoing provisions of
this Section 12, the Company shall control all proceedings
taken in connection with such contest and, at its sole
option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its
sole option, either direct the Employee to pay the tax
claimed and sue for a refund or contest the claim in any
permissible manner, and the Employee agrees to prosecute
such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company shall determine;
provided, however, that if the Company directs the Employee
to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to the Employee, on an
interest-free basis, and shall indemnify and hold the
Employee harmless, on an after-tax basis, from any Excise
Tax or income tax (including interest or penalties with
respect thereto) imposed with respect to such advance or
with respect to any imputed income with respect to such
advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for the
Employee's taxable year with respect to which such
contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control
of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the
Employee shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the Employee's receipt of an amount
advanced by the Company pursuant to this Section 12, the
Employee becomes entitled to receive any refund with respect
to such claim, the Employee shall (subject to the Company's
complying with the requirements of this Section 12) promptly
pay to the Company the amount of such refund (together with
any interest paid or credited thereon after taxes applicable
thereto). If, after the Employee's receipt of an amount
advanced by the Company pursuant to this Section 12, a
determination is made that the Employee shall not be
entitled to any refund with respect to such claim and the
Company does not notify the Employee in writing of its
intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to
be paid.
(e) The foregoing provisions of this Section 12
are intended to supersede the provisions of Section 7(d) of
the Company's 1991 Stock Option Plan as applied to the
Employee.
13. Disclosure of Information. The Employee will
not, at any time during or after the Employment Period,
disclose to any person, firm, corporation or other business
entity, except as required by law, any non-public
information concerning the business, products, clients or
affairs of the Company or any subsidiary or affiliate
thereof for any reason or purpose whatsoever, nor will the
Employee make use of any of such non-public information for
personal purposes or for the benefit of any person, firm,
corporation or other business entity except the Company or
any subsidiary or affiliate thereof.
14. Restrictive Covenant. (a) The Employee
hereby acknowledges and recognizes that, during the
Employment Period, the Employee will be privy to trade
secrets and confidential proprietary information critical to
the Company's business and the Employee further acknowledges
and recognizes that the Company would find it extremely
difficult or impossible to replace the Employee and,
accordingly, the Employee agrees that, in consideration of
the benefits to be received by the Employee hereunder, the
Employee will not, from and after the date hereof until the
first anniversary of the termination of the Employment
Period (or six months after the termination of the
Employment Period if such termination is as a result of a
termination for Good Reason following a Change in Control),
(i) directly or indirectly engage in the development,
production, marketing or sale of products that compete (or,
upon commercialization, would compete) with products of the
Company being developed (so long as such development has not
been abandoned), marketed or sold at the time of the
Employee's termination (such business or activity being
hereinafter called a "Competing Business") whether such
engagement shall be as an officer, director, owner,
employee, partner, affiliate or other participant in any
Competing Business, (ii) assist others in engaging in any
Competing Business in the manner described in the foregoing
clause (i), or (iii) induce other employees of the Company
or any subsidiary thereof to terminate their employment with
the Company or any subsidiary thereof or engage in any
Competing Business. Notwithstanding the foregoing, the term
"Competing Business" shall not include any business or
activity that was not conducted by the Company prior to the
effective date of a Change in Control.
(b) The Employee understands that the foregoing
restrictions may limit the ability of the Employee to earn a
livelihood in a business similar to the business of the
Company, but nevertheless believes that the Employee has
received and will receive sufficient consideration and other
benefits, as an employee of the Company and as otherwise
provided hereunder, to justify such restrictions which, in
any event (given the education, skills and ability of the
Employee), the Employee believes would not prevent the
Employee from earning a living.
15. Company Right to Inventions. The Employee
will promptly disclose, grant and assign to the Company, for
its sole use and benefit, any and all inventions,
improvements, technical information and suggestions relating
in any way to the business of the Company which the Employee
may develop or acquire during the Employment Period (whether
or not during usual working hours), together with all patent
applications, letters patent, copyrights and reissues
thereof that may at any time be granted for or upon any such
invention, improvement or technical information. In
connection therewith:
(i) the Employee shall, without charge, but at
the expense of the Company, promptly at all times
hereafter execute and deliver such applications,
assignments, descriptions and other instruments as may
be necessary or proper in the opinion of the Company to
vest title to any such inventions, improvements,
technical information, patent applications, patents,
copyrights or reissues thereof in the Company and to
enable it to obtain and maintain the entire right and
title thereto throughout the world; and
(ii) the Employee shall render to the Company, at
its expense (including a reasonable payment for the
time involved in case the Employee is not then in its
employ), all such assistance as it may require in the
prosecution of applications for said patents,
copyrights or reissues thereof, in the prosecution or
defense of interferences which may be declared
involving any said applications, patents or copyrights
and in any litigation in which the Company may be
involved relating to any such patents, inventions,
improvements or technical information.
16. Enforcement. It is the desire and intent of
the parties hereto that the provisions of this Agreement be
enforceable to the fullest extent permissible under the laws
and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, to the extent that a
restriction contained in this Agreement is more restrictive
than permitted by the laws of any jurisdiction where this
Agreement may be subject to review and interpretation, the
terms of such restriction, for the purpose only of the
operation of such restriction in such jurisdiction, will be
the maximum restriction allowed by the laws of such
jurisdiction and such restriction will be deemed to have
been revised accordingly herein.
17. Remedies; Survival. (a) The Employee
acknowledges and understands that the provisions of the
covenants contained in Sections 13, 14 and 15 hereof, the
violation of which cannot be accurately compensated for in
damages by an action at law, are of crucial importance to
the Company, and that the breach or threatened breach of the
provisions of this Agreement would cause the Company
irreparable harm. In the event of a breach or threatened
breach by the Employee of the provisions of Section 13, 14
or 15 hereof, the Company will be entitled to an injunction
restraining the Employee from such breach. Nothing herein
contained will be construed as prohibiting the Company from
pursuing any other remedies available for any breach or
threatened breach of this Agreement.
(b) Notwithstanding anything contained in this
Agreement to the contrary, the provisions of Sections 10(b),
13, 14, 15, 16 and 17 hereof will survive the expiration or
other termination of this Agreement until, by their terms,
such provisions are no longer operative.
18. Notices. Notices and other communications
hereunder will be in writing and will be delivered
personally or sent by air courier or first class certified
or registered mail, return receipt requested and postage
prepaid, addressed as follows:
if to the Employee: as specified in Annex A
and if to the Company: MedImmune, Inc.
35 West Watkins Mill Road
Gaithersburg, Maryland 20878
Attention: Chief Executive Officer
with a copy to: Frederick W. Kanner, Esq.
Dewey Ballantine, LLP
1301 Avenue of the Americas
New York, NY 10019
All notices and other communications given to any party
hereto in accordance with the provisions of this Agreement
will be deemed to have been given on the date of delivery,
if personally delivered; on the business day after the date
when sent, if sent by air courier; and on the third business
day after the date when sent, if sent by mail, in each case
addressed to such party as provided in this Section 18 or in
accordance with the latest unrevoked direction from such
party.
19. Binding Agreement; Benefit. The provisions
of this Agreement will be binding upon, and will inure to
the benefit of, the respective heirs, legal representatives
and successors of the parties hereto.
20. Governing Law. This Agreement will be
governed by, and construed and enforced in accordance with,
the laws of the State of Maryland.
21. Waiver of Breach. The waiver by either party
of a breach of any provision of this Agreement by the other
party must be in writing and will not operate or be
construed as a waiver of any subsequent breach by such other
party.
22. Entire Agreement; Amendments. This Agreement
(including Annex A) contains the entire agreement between
the parties with respect to the subject matter hereof and
supersedes all prior agreements or understandings among the
parties with respect thereof, including, without limitation,
that certain employment agreement between the parties dated
as of April 1, 1997. This Agreement may be amended only by
an agreement in writing signed by the parties hereto.
23. Headings. The section headings contained in
this Agreement are for reference purposes only and will not
affect in any way the meaning or interpretation of this
Agreement.
24. Severability. Any provision of this
Agreement that is prohibited or unenforceable in any
jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction
will not invalidate or render unenforceable such provision
in any other jurisdiction.
25. Assignment. This Agreement is personal in
its nature and the parties hereto shall not, without the
consent of the other, assign or transfer this Agreement or
any rights or obligations hereunder; provided, that the
provisions hereof (including, without limitation, Sections
13, 14 and 15) will inure to the benefit of, and be binding
upon, each successor of the Company, whether by merger,
consolidation, transfer of all or substantially all of its
assets or otherwise.
IN WITNESS WHEREOF, the parties have duly executed
this Agreement as of the date first above written.
EMPLOYEE MEDIMMUNE, INC.
/s/ David P. Wright By: /s/ Wayne T. Hockmeyer
David P. Wright Wayne T. Hockmeyer
EXHIBIT No. 10.89
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, dated as of November 1,
1998, is by and between JAMES F. YOUNG (the "Employee") and
MEDIMMUNE, INC., a Delaware corporation (the "Company") and
supercedes the Employment Agreement between them dated as of
April 1, 1997.
The Company and the Employee hereby agree as
follows:
1. Employment. The Company hereby employs the
Employee, and the Employee hereby accepts employment by the
Company, upon the terms and conditions hereinafter set
forth.
2. Term. Subject to the provisions for earlier
termination as herein provided, the employment of the
Employee hereunder will be for the period commencing on the
date hereof and ending on the second anniversary of such
date. Such period may be extended, with the consent of the
Employee, for one or more one-year periods by resolution
adopted by the Compensation and Stock Committee (the
"Compensation Committee") of the Board of Directors of the
Company (the "Board"). The period of the Employee's
employment under this Agreement, as it may be terminated or
extended from time to time as provided herein, is referred
to hereafter as the "Employment Period."
3. Duties and Responsibilities. The Employee
will be employed by the Company in the position set forth on
Annex A, a copy of which is attached hereto and the terms of
which are incorporated herein by reference. The Employee
will faithfully perform the duties and responsibilities of
such office, as they may be assigned from time to time by
the Board or the Board's designee.
4. Time to be Devoted to Employment. Except for
vacation in accordance with the Company's policy in effect
from time to time and absences due to temporary illness, the
Employee shall devote full time, attention and energy during
the Employment Period to the business of the Company.
During the Employment Period, the Employee will not be
engaged in any other business activity which, in the
reasonable judgment of the Board or its designee, conflicts
with the duties of the Employee hereunder, whether or not
such activity is pursued for gain, profit or other pecuniary
advantage.
5. Compensation; Reimbursement.
(a) Base Salary. The Company (or, at the
Company's option, any subsidiary or affiliate thereof) will
pay to the Employee an annual base salary of not less than
the amount specified as the Initial Base Salary on Annex A,
payable semi-monthly. The Employee's base salary shall be
reviewed annually by the Compensation Committee and shall be
subject to increase at the option and sole discretion of the
Compensation Committee.
(b) Bonus. The Employee shall be eligible to
receive, at the sole discretion of the Compensation
Committee, an annual cash bonus based on pre-determined
performance standards of the Company.
(c) Benefits; Stock Options. In addition to the
salary and cash bonus referred to above, the Employee shall
be entitled during the Employment Period to participate in
such employee benefit plans or programs of the Company, and
shall be entitled to such other fringe benefits, as are from
time to time made available by the Company generally to
employees of the Employee's position, tenure, salary, age,
health and other qualifications. Without limiting the
generality of the foregoing, the Employee shall be eligible
for such awards, if any, under the Company's stock option
plan as shall be granted to the Employee by the Compensation
Committee or other appropriate designee of the Board acting
in its sole discretion. The Employee acknowledges and
agrees that the Company does not guarantee the adoption or
continuance of any particular employee benefit plan or
program or other fringe benefit during the Employment
Period, and participation by the Employee in any such plan
or program shall be subject to the rules and regulations
applicable thereto.
(d) Expenses. The Company will reimburse the
Employee, in accordance with the practices in effect from
time to time for other officers or staff personnel of the
Company, for all reasonable and necessary traveling expenses
and other disbursements incurred by the Employee for or on
behalf of the Company in the performance of the Employee's
duties hereunder, upon presentation by the Employee to the
Company of appropriate vouchers.
6. Death; Disability. If the Employee dies or
is incapacitated or disabled by accident, sickness or
otherwise, so as to render the Employee mentally or
physically incapable of performing the services required to
be performed by the Employee under this Agreement for a
period that would entitle the Employee to qualify for long-
term disability benefits under the Company's then-current
long-term disability insurance program or, in the absence of
such a program, for a period of 90 consecutive days or
longer (such condition being herein referred to as a
"Disability"), then (i) in the case of the Employee's death,
the Employee's employment shall be deemed to terminate on
the date of the Employee's death or (ii) in the case of a
Disability, the Company, at its option, may terminate the
employment of the Employee under this Agreement immediately
upon giving the Employee notice to that effect. Disability
shall be determined by the Board or the Board's designee.
In the case of a Disability, until the Company shall have
terminated the Employee's employment hereunder in accordance
with the foregoing, the Employee shall be entitled to
receive compensation provided for herein notwithstanding any
such physical or mental disability.
7. Termination For Cause. The Company may, with
the approval of a majority of the Board, terminate the
employment of the Employee hereunder at any time during the
Employment Period for "cause" (such termination being
hereinafter called a "Termination for Cause") by giving the
Employee notice of such termination, upon the giving of
which such termination will take effect immediately. For
purposes of this Agreement, "cause" means (i) the Employee's
willful and substantial misconduct, (ii) the Employee's
repeated, after written notice from the Company, neglect of
duties or failure to act which can reasonably be expected to
affect materially and adversely the business or affairs of
the Company or any subsidiary or affiliate thereof, (iii)
the Employee's material breach of any of the agreements
contained in Sections 13, 14 or 15 hereof, (iv) the
commission by the Employee of any material fraudulent act
with respect to the business and affairs of the Company or
any subsidiary or affiliate thereof or (v) the Employee's
conviction of (or plea of nolo contendere to) a crime
constituting a felony.
8. Termination Without Cause. The Company may
terminate the employment of the Employee hereunder at any
time without "cause" (such termination being hereinafter
called a "Termination Without Cause") by giving the Employee
notice of such termination, upon the giving of which such
termination will take effect not later than 30 days from the
date such notice is given.
9. Voluntary Termination. Any termination of
the employment of the Employee hereunder, otherwise than as
a result of death or Disability, a Termination For Cause, a
Termination Without Cause or a termination for Good Reason
(as defined below) following a Change in Control (as defined
below), will be deemed to be a "Voluntary Termination." A
Voluntary Termination will be deemed to be effective
immediately upon such termination.
10. Effect of Termination of Employment.
(a) Voluntary Termination; Termination For Cause.
Upon the termination of the Employee's employment hereunder
pursuant to a Voluntary Termination or a Termination For
Cause, neither the Employee nor the Employee's beneficiaries
or estate will have any further rights or claims against the
Company under this Agreement except the right to receive (i)
the unpaid portion of the base salary provided for in
Section 5(a) hereof, computed on a pro rata basis to the
date of termination, (ii) payment of his accrued but unpaid
rights in accordance with the terms of any incentive
compensation, stock option, retirement, employee welfare or
other employee benefit plans or programs of the Company in
which the Employee is then participating in accordance with
Sections 5(b) and 5(c) hereof and (iii) reimbursement for
any expenses for which the Employee shall not have
theretofore been reimbursed as provided in Section 5(d)
hereof.
(b) Termination Without Cause. Upon the
termination of the Employee's employment as a Termination
Without Cause, neither the Employee nor the Employee's
beneficiaries or estate will have any further rights or
claims against the Company under this Agreement except the
right to receive (i) the payments and other rights provided
for in Section 10(a) hereof, (ii) severance payments in the
form of semi-monthly payment of the Employee's base salary
(as in effect immediately prior to such termination) and of
the Pro-Rata Bonus Amount (as defined below) for a period of
12 months following the effective date of such termination,
and (iii) continuation of the medical benefits coverage to
which the Employee is entitled under Section 5(c) hereof
over the 12 month period provided in clause (ii) above, with
such coverage to be provided at the same level and subject
to the same terms and conditions (including, without
limitation, any applicable co-pay obligations of the
Employee, but excluding any applicable tax consequences for
the Employee) as in effect from time to time for officers of
the Company generally. For the purposes of this Agreement,
"Pro-Rata Bonus Amount" shall mean one-twenty-fourth
(1/24th) of the greater of (a) the most recent annual cash
bonus paid to the Employee prior to the date of his
termination, or (b) the average of the three most recent
annual cash bonuses paid to the Employee prior to the date
of his termination. The rights of the Employee and the
obligations of the Company under this Section 10(b) shall
remain in full force and effect notwithstanding the
expiration of the Employment Period, whether by failure of
the Compensation Committee to extend such period or
otherwise.
(c) Death and Disability. Upon the termination
of the Employee's employment hereunder as a result of death
or Disability, neither the Employee nor the Employee's
beneficiaries or estate will have any further rights or
claims against the Company under this Agreement except the
right to receive (i) the payments and other rights provided
for in Section 10(a) hereof, (ii) a lump-sum payment, within
15 days after the effective date of such termination, equal
to the aggregate amount of the Employee's base salary as in
effect immediately prior to such termination that would be
payable over a period of 12 months following the effective
date of such termination and (iii) in the case of Disability
only, continuation of the medical benefits coverage to which
the Employee is entitled under Section 5(c) hereof over the
same period with respect to which the lump-sum payment is
calculated under clause (ii) above, with such coverage to be
provided at the same level and subject to the same terms and
conditions (including, without limitation, any applicable co-
pay obligations of the Employee, but excluding any
applicable tax consequences for the Employee) as in effect
from time to time for officers of the Company generally.
(d) Forfeiture of Rights. In the event that,
subsequent to termination of employment hereunder, the
Employee (i) breaches any of the provisions of Section 13,
14 or 15 hereof or (ii) directly or indirectly makes or
facilitates the making of any adverse public statements or
disclosures with respect to the business or securities of
the Company, all payments and benefits to which the Employee
may otherwise have been entitled pursuant to Section 10(a),
10(b) or 11 hereof shall immediately terminate and be
forfeited, and any portion of such amounts as may have been
paid to the Employee shall forthwith be returned to the
Company.
11. Change in Control Provisions.
(a) Effect of Termination Following Change in
Control. In the event of a Change in Control during the
Employment Period and a subsequent termination of the
Employee's employment, either by the Company as a
Termination Without Cause or by the Employee for Good
Reason, whether or not such termination is during the
Employment Period, the Employee shall be entitled to receive
(i) the payments and other rights provided in Section 10(a)
hereof, (ii) a severance payment in the form a cash lump
sum, paid within 15 days of the date of termination, equal
to the sum of the Employee's semi-monthly base salary (as in
effect immediately prior to such termination) and the Pro-
Rata Bonus Amount (as determined under Section 10(b) above)
multiplied by 48 (i.e., that would have been payable on a
semi-monthly basis during the 24 months following such
termination), but discounted to present value from the dates
such payments would be made if paid on a semi-monthly basis
for such 24 month period, based on the 100% short-term
Applicable Federal Rate (compounded annually) under Section
1274(d) of the Internal Revenue Code of 1986, as amended
(the "Code") as in effect at the time of payment, and (iii)
continuation of the medical benefits coverage to which the
Employee is entitled under Section 5(c) hereof for a period
of 24 months following the date of termination, with such
coverage to be provided at the same level and subject to the
same terms and conditions (including, without limitation,
any applicable co-pay obligations of the Employee, but
excluding any applicable tax consequences for the Employee)
as in effect from time to time for officers of the Company
generally.
(b) Definition of Change in Control. For
purposes of this Agreement, a "Change in Control" shall be
deemed to have occurred upon:
(i) an acquisition subsequent to the date hereof
by any person, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a
"Person"), of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of
30% or more of either (A) the then outstanding shares
of common stock of the Company ("Common Stock") or (B)
the combined voting power of the then outstanding
voting securities of the Company entitled to vote
generally in the election of directors (the
"Outstanding Company Voting Securities"); excluding,
however, the following: (1) any acquisition directly
from the Company, other than an acquisition by virtue
of the exercise of a conversion privilege unless the
security being so converted was itself acquired
directly from the Company, (2) any acquisition by the
Company and (3) any acquisition by an employee benefit
plan (or related trust) sponsored or maintained by the
Company;
(ii) a change in the composition of the Board such
that during any period of two consecutive years,
individuals who at the beginning of such period
constitute the Board, and any new director (other than
a director designated by a person who has entered into
an agreement with the Company to effect a transaction
described in clause (i), (iii), or (iv) of this
paragraph) whose election by the Board or nomination
for election by the Company's stockholders was approved
by a vote of at least two-thirds of the directors then
still in office who either were directors at the
beginning of the period or whose election or nomination
for election was previously so approved, cease for any
reason to constitute at least a majority of the members
thereof;
(iii) the approval by the stockholders of the
Company of a merger, consolidation, reorganization or
similar corporate transaction, whether or not the
Company is the surviving corporation in such
transaction, in which outstanding shares of Common
Stock are converted into (A) shares of stock of another
company, other than a conversion into shares of voting
common stock of the successor corporation (or a holding
company thereof) representing 80% of the voting power
of all capital stock thereof outstanding immediately
after the merger or consolidation or (B) other
securities (of either the Company or another company)
or cash or other property;
(iv) the approval by stockholders of the Company
of the issuance of shares of Common Stock in connection
with a merger, consolidation, reorganization or similar
corporate transaction in an amount in excess of 40% of
the number of shares of Common Stock outstanding
immediately prior to the consummation of such
transaction;
(v) the approval by the stockholders of the
Company of (A) the sale or other disposition of all or
substantially all of the assets of the Company or (B) a
complete liquidation or dissolution of the Company; or
(vi) the adoption by the Board of a resolution to
the effect that any person has acquired effective
control of the business and affairs of the Company.
(c) Good Reason Following Change in Control. For
purposes of this Agreement, termination for "Good Reason"
shall mean termination by the Employee of his employment
with the Company, within six months immediately following a
Change in Control, based on:
(i) any diminution in the Employee's position,
title, responsibilities or authority from those in
effect immediately prior to such Change in Control; or
(ii) the breach by the Company of any of its
material obligations under this Agreement.
12. Parachute Tax Indemnity
(a) If it shall be determined that any amount
paid, distributed or treated as paid or distributed by the
Company to or for the Employee's benefit (whether paid or
payable or distributed or distributable pursuant to the
terms of this Agreement or otherwise, but determined without
regard to any additional payments required under this
Section 12) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code, or any interest or
penalties are incurred by the Employee with respect to such
excise tax (such excise tax, together with any such interest
and penalties, being hereinafter collectively referred to as
the "Excise Tax"), then the Employee shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Employee of all
federal, state and local taxes (including any interest or
penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Employee retains an
amount of the Gross-Up Payment equal to the Excise Tax
imposed upon all the Payments.
(b) All determinations required to be made under
this Section 12, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such
determination, shall be made by a nationally recognized
accounting firm as may be designated by the Employee (the
"Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Employee within 15
business days of the receipt of notice from the Employee
that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual,
entity or group effecting the change in control, the
Employee shall appoint another nationally recognized
accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to
as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 12,
shall be paid by the Company to the Employee within five
days of the receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be binding
upon the Company and the Employee. As a result of the
uncertainty in the application of Section 4999 of the Code
at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required
to be made hereunder. In the event that the Company
exhausts its remedies pursuant to this Section 12 and the
Employee thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for
the Employee's benefit.
(c) The Employee shall notify the Company in
writing of any claim by the Internal Revenue Service that,
if successful, would require the payment by the Company of
the Gross-Up Payment. Such notification shall be given as
soon as practicable but no later then ten business days
after the Employee is informed in writing of such claim and
shall apprise the Company of the nature of such claim and
the date on which such claim is requested to be paid. The
Employee shall not pay such claim prior to the expiration of
the 30-day period following the date on which it gives such
notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is
due). If the Company notifies the Employee in writing prior
to the expiration of such period that it desires to contest
such claim, the Employee shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with
contesting such claim as the Company shall reasonably
request in writing from time to time, including, without
limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good
faith in order to effectively contest such claim, and
(iv) permit the Company to participate in any
proceeding relating to such claim; provided, however, that
the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties)
incurred in connection with such contest and shall
indemnify and hold the Employee harmless, on an after-tax
basis, from any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and
expense. Without limitation on the foregoing provisions of
this Section 12, the Company shall control all proceedings
taken in connection with such contest and, at its sole
option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its
sole option, either direct the Employee to pay the tax
claimed and sue for a refund or contest the claim in any
permissible manner, and the Employee agrees to prosecute
such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company shall determine;
provided, however, that if the Company directs the Employee
to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to the Employee, on an
interest-free basis, and shall indemnify and hold the
Employee harmless, on an after-tax basis, from any Excise
Tax or income tax (including interest or penalties with
respect thereto) imposed with respect to such advance or
with respect to any imputed income with respect to such
advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for the
Employee's taxable year with respect to which such
contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control
of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the
Employee shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the Employee's receipt of an amount
advanced by the Company pursuant to this Section 12, the
Employee becomes entitled to receive any refund with respect
to such claim, the Employee shall (subject to the Company's
complying with the requirements of this Section 12) promptly
pay to the Company the amount of such refund (together with
any interest paid or credited thereon after taxes applicable
thereto). If, after the Employee's receipt of an amount
advanced by the Company pursuant to this Section 12, a
determination is made that the Employee shall not be
entitled to any refund with respect to such claim and the
Company does not notify the Employee in writing of its
intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to
be paid.
(e) The foregoing provisions of this Section 12
are intended to supersede the provisions of Section 7(d) of
the Company's 1991 Stock Option Plan as applied to the
Employee.
13. Disclosure of Information. The Employee will
not, at any time during or after the Employment Period,
disclose to any person, firm, corporation or other business
entity, except as required by law, any non-public
information concerning the business, products, clients or
affairs of the Company or any subsidiary or affiliate
thereof for any reason or purpose whatsoever, nor will the
Employee make use of any of such non-public information for
personal purposes or for the benefit of any person, firm,
corporation or other business entity except the Company or
any subsidiary or affiliate thereof.
14. Restrictive Covenant. (a) The Employee
hereby acknowledges and recognizes that, during the
Employment Period, the Employee will be privy to trade
secrets and confidential proprietary information critical to
the Company's business and the Employee further acknowledges
and recognizes that the Company would find it extremely
difficult or impossible to replace the Employee and,
accordingly, the Employee agrees that, in consideration of
the benefits to be received by the Employee hereunder, the
Employee will not, from and after the date hereof until the
first anniversary of the termination of the Employment
Period (or six months after the termination of the
Employment Period if such termination is as a result of a
termination for Good Reason following a Change in Control),
(i) directly or indirectly engage in the development,
production, marketing or sale of products that compete (or,
upon commercialization, would compete) with products of the
Company being developed (so long as such development has not
been abandoned), marketed or sold at the time of the
Employee's termination (such business or activity being
hereinafter called a "Competing Business") whether such
engagement shall be as an officer, director, owner,
employee, partner, affiliate or other participant in any
Competing Business, (ii) assist others in engaging in any
Competing Business in the manner described in the foregoing
clause (i), or (iii) induce other employees of the Company
or any subsidiary thereof to terminate their employment with
the Company or any subsidiary thereof or engage in any
Competing Business. Notwithstanding the foregoing, the term
"Competing Business" shall not include any business or
activity that was not conducted by the Company prior to the
effective date of a Change in Control.
(b) The Employee understands that the foregoing
restrictions may limit the ability of the Employee to earn a
livelihood in a business similar to the business of the
Company, but nevertheless believes that the Employee has
received and will receive sufficient consideration and other
benefits, as an employee of the Company and as otherwise
provided hereunder, to justify such restrictions which, in
any event (given the education, skills and ability of the
Employee), the Employee believes would not prevent the
Employee from earning a living.
15. Company Right to Inventions. The Employee
will promptly disclose, grant and assign to the Company, for
its sole use and benefit, any and all inventions,
improvements, technical information and suggestions relating
in any way to the business of the Company which the Employee
may develop or acquire during the Employment Period (whether
or not during usual working hours), together with all patent
applications, letters patent, copyrights and reissues
thereof that may at any time be granted for or upon any such
invention, improvement or technical information. In
connection therewith:
(i) the Employee shall, without charge, but at
the expense of the Company, promptly at all times
hereafter execute and deliver such applications,
assignments, descriptions and other instruments as may
be necessary or proper in the opinion of the Company to
vest title to any such inventions, improvements,
technical information, patent applications, patents,
copyrights or reissues thereof in the Company and to
enable it to obtain and maintain the entire right and
title thereto throughout the world; and
(ii) the Employee shall render to the Company, at
its expense (including a reasonable payment for the
time involved in case the Employee is not then in its
employ), all such assistance as it may require in the
prosecution of applications for said patents,
copyrights or reissues thereof, in the prosecution or
defense of interferences which may be declared
involving any said applications, patents or copyrights
and in any litigation in which the Company may be
involved relating to any such patents, inventions,
improvements or technical information.
16. Enforcement. It is the desire and intent of
the parties hereto that the provisions of this Agreement be
enforceable to the fullest extent permissible under the laws
and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, to the extent that a
restriction contained in this Agreement is more restrictive
than permitted by the laws of any jurisdiction where this
Agreement may be subject to review and interpretation, the
terms of such restriction, for the purpose only of the
operation of such restriction in such jurisdiction, will be
the maximum restriction allowed by the laws of such
jurisdiction and such restriction will be deemed to have
been revised accordingly herein.
17. Remedies; Survival. (a) The Employee
acknowledges and understands that the provisions of the
covenants contained in Sections 13, 14 and 15 hereof, the
violation of which cannot be accurately compensated for in
damages by an action at law, are of crucial importance to
the Company, and that the breach or threatened breach of the
provisions of this Agreement would cause the Company
irreparable harm. In the event of a breach or threatened
breach by the Employee of the provisions of Section 13, 14
or 15 hereof, the Company will be entitled to an injunction
restraining the Employee from such breach. Nothing herein
contained will be construed as prohibiting the Company from
pursuing any other remedies available for any breach or
threatened breach of this Agreement.
(b) Notwithstanding anything contained in this
Agreement to the contrary, the provisions of Sections 10(b),
13, 14, 15, 16 and 17 hereof will survive the expiration or
other termination of this Agreement until, by their terms,
such provisions are no longer operative.
18. Notices. Notices and other communications
hereunder will be in writing and will be delivered
personally or sent by air courier or first class certified
or registered mail, return receipt requested and postage
prepaid, addressed as follows:
if to the Employee: as specified in Annex A
and if to the Company: MedImmune, Inc.
35 West Watkins Mill Road
Gaithersburg, Maryland 20878
Attention: Chief Executive Officer
with a copy to: Frederick W. Kanner, Esq.
Dewey Ballantine, LLP
1301 Avenue of the Americas
New York, NY 10019
All notices and other communications given to any party
hereto in accordance with the provisions of this Agreement
will be deemed to have been given on the date of delivery,
if personally delivered; on the business day after the date
when sent, if sent by air courier; and on the third business
day after the date when sent, if sent by mail, in each case
addressed to such party as provided in this Section 18 or in
accordance with the latest unrevoked direction from such
party.
19. Binding Agreement; Benefit. The provisions
of this Agreement will be binding upon, and will inure to
the benefit of, the respective heirs, legal representatives
and successors of the parties hereto.
20. Governing Law. This Agreement will be
governed by, and construed and enforced in accordance with,
the laws of the State of Maryland.
21. Waiver of Breach. The waiver by either party
of a breach of any provision of this Agreement by the other
party must be in writing and will not operate or be
construed as a waiver of any subsequent breach by such other
party.
22. Entire Agreement; Amendments. This Agreement
(including Annex A) contains the entire agreement between
the parties with respect to the subject matter hereof and
supersedes all prior agreements or understandings among the
parties with respect thereof, including, without limitation,
that certain employment agreement between the parties dated
as of April 1, 1997. This Agreement may be amended only by
an agreement in writing signed by the parties hereto.
23. Headings. The section headings contained in
this Agreement are for reference purposes only and will not
affect in any way the meaning or interpretation of this
Agreement.
24. Severability. Any provision of this
Agreement that is prohibited or unenforceable in any
jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction
will not invalidate or render unenforceable such provision
in any other jurisdiction.
25. Assignment. This Agreement is personal in
its nature and the parties hereto shall not, without the
consent of the other, assign or transfer this Agreement or
any rights or obligations hereunder; provided, that the
provisions hereof (including, without limitation, Sections
13, 14 and 15) will inure to the benefit of, and be binding
upon, each successor of the Company, whether by merger,
consolidation, transfer of all or substantially all of its
assets or otherwise.
IN WITNESS WHEREOF, the parties have duly executed
this Agreement as of the date first above written.
EMPLOYEE MEDIMMUNE, INC.
/s/ James F. Young By: /s/ Wayne T.
Hockmeyer
James F. Young Wayne T.
Hockmeyer
EXHIBIT No. 10.90
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, dated as of November 1,
1998, is by and between BOGDAN DZIURZYNSKI (the "Employee")
and MEDIMMUNE, INC., a Delaware corporation (the "Company")
and supercedes the Employment Agreement between them dated
as of April 1, 1997.
The Company and the Employee hereby agree as
follows:
1. Employment. The Company hereby employs the
Employee, and the Employee hereby accepts employment by the
Company, upon the terms and conditions hereinafter set
forth.
2. Term. Subject to the provisions for earlier
termination as herein provided, the employment of the
Employee hereunder will be for the period commencing on the
date hereof and ending on the second anniversary of such
date. Such period may be extended, with the consent of the
Employee, for one or more one-year periods by resolution
adopted by the Compensation and Stock Committee (the
"Compensation Committee") of the Board of Directors of the
Company (the "Board"). The period of the Employee's
employment under this Agreement, as it may be terminated or
extended from time to time as provided herein, is referred
to hereafter as the "Employment Period."
3. Duties and Responsibilities. The Employee
will be employed by the Company in the position set forth on
Annex A, a copy of which is attached hereto and the terms of
which are incorporated herein by reference. The Employee
will faithfully perform the duties and responsibilities of
such office, as they may be assigned from time to time by
the Board or the Board's designee.
4. Time to be Devoted to Employment. Except for
vacation in accordance with the Company's policy in effect
from time to time and absences due to temporary illness, the
Employee shall devote full time, attention and energy during
the Employment Period to the business of the Company.
During the Employment Period, the Employee will not be
engaged in any other business activity which, in the
reasonable judgment of the Board or its designee, conflicts
with the duties of the Employee hereunder, whether or not
such activity is pursued for gain, profit or other pecuniary
advantage.
5. Compensation; Reimbursement.
(a) Base Salary. The Company (or, at the
Company's option, any subsidiary or affiliate thereof) will
pay to the Employee an annual base salary of not less than
the amount specified as the Initial Base Salary on Annex A,
payable semi-monthly. The Employee's base salary shall be
reviewed annually by the Compensation Committee and shall be
subject to increase at the option and sole discretion of the
Compensation Committee.
(b) Bonus. The Employee shall be eligible to
receive, at the sole discretion of the Compensation
Committee, an annual cash bonus based on pre-determined
performance standards of the Company.
(c) Benefits; Stock Options. In addition to the
salary and cash bonus referred to above, the Employee shall
be entitled during the Employment Period to participate in
such employee benefit plans or programs of the Company, and
shall be entitled to such other fringe benefits, as are from
time to time made available by the Company generally to
employees of the Employee's position, tenure, salary, age,
health and other qualifications. Without limiting the
generality of the foregoing, the Employee shall be eligible
for such awards, if any, under the Company's stock option
plan as shall be granted to the Employee by the Compensation
Committee or other appropriate designee of the Board acting
in its sole discretion. The Employee acknowledges and
agrees that the Company does not guarantee the adoption or
continuance of any particular employee benefit plan or
program or other fringe benefit during the Employment
Period, and participation by the Employee in any such plan
or program shall be subject to the rules and regulations
applicable thereto.
(d) Expenses. The Company will reimburse the
Employee, in accordance with the practices in effect from
time to time for other officers or staff personnel of the
Company, for all reasonable and necessary traveling expenses
and other disbursements incurred by the Employee for or on
behalf of the Company in the performance of the Employee's
duties hereunder, upon presentation by the Employee to the
Company of appropriate vouchers.
6. Death; Disability. If the Employee dies or
is incapacitated or disabled by accident, sickness or
otherwise, so as to render the Employee mentally or
physically incapable of performing the services required to
be performed by the Employee under this Agreement for a
period that would entitle the Employee to qualify for long-
term disability benefits under the Company's then-current
long-term disability insurance program or, in the absence of
such a program, for a period of 90 consecutive days or
longer (such condition being herein referred to as a
"Disability"), then (i) in the case of the Employee's death,
the Employee's employment shall be deemed to terminate on
the date of the Employee's death or (ii) in the case of a
Disability, the Company, at its option, may terminate the
employment of the Employee under this Agreement immediately
upon giving the Employee notice to that effect. Disability
shall be determined by the Board or the Board's designee.
In the case of a Disability, until the Company shall have
terminated the Employee's employment hereunder in accordance
with the foregoing, the Employee shall be entitled to
receive compensation provided for herein notwithstanding any
such physical or mental disability.
7. Termination For Cause. The Company may, with
the approval of a majority of the Board, terminate the
employment of the Employee hereunder at any time during the
Employment Period for "cause" (such termination being
hereinafter called a "Termination for Cause") by giving the
Employee notice of such termination, upon the giving of
which such termination will take effect immediately. For
purposes of this Agreement, "cause" means (i) the Employee's
willful and substantial misconduct, (ii) the Employee's
repeated, after written notice from the Company, neglect of
duties or failure to act which can reasonably be expected to
affect materially and adversely the business or affairs of
the Company or any subsidiary or affiliate thereof, (iii)
the Employee's material breach of any of the agreements
contained in Sections 13, 14 or 15 hereof, (iv) the
commission by the Employee of any material fraudulent act
with respect to the business and affairs of the Company or
any subsidiary or affiliate thereof or (v) the Employee's
conviction of (or plea of nolo contendere to) a crime
constituting a felony.
8. Termination Without Cause. The Company may
terminate the employment of the Employee hereunder at any
time without "cause" (such termination being hereinafter
called a "Termination Without Cause") by giving the Employee
notice of such termination, upon the giving of which such
termination will take effect not later than 30 days from the
date such notice is given.
9. Voluntary Termination. Any termination of
the employment of the Employee hereunder, otherwise than as
a result of death or Disability, a Termination For Cause, a
Termination Without Cause or a termination for Good Reason
(as defined below) following a Change in Control (as defined
below), will be deemed to be a "Voluntary Termination." A
Voluntary Termination will be deemed to be effective
immediately upon such termination.
10. Effect of Termination of Employment.
(a) Voluntary Termination; Termination For Cause.
Upon the termination of the Employee's employment hereunder
pursuant to a Voluntary Termination or a Termination For
Cause, neither the Employee nor the Employee's beneficiaries
or estate will have any further rights or claims against the
Company under this Agreement except the right to receive (i)
the unpaid portion of the base salary provided for in
Section 5(a) hereof, computed on a pro rata basis to the
date of termination, (ii) payment of his accrued but unpaid
rights in accordance with the terms of any incentive
compensation, stock option, retirement, employee welfare or
other employee benefit plans or programs of the Company in
which the Employee is then participating in accordance with
Sections 5(b) and 5(c) hereof and (iii) reimbursement for
any expenses for which the Employee shall not have
theretofore been reimbursed as provided in Section 5(d)
hereof.
(b) Termination Without Cause. Upon the
termination of the Employee's employment as a Termination
Without Cause, neither the Employee nor the Employee's
beneficiaries or estate will have any further rights or
claims against the Company under this Agreement except the
right to receive (i) the payments and other rights provided
for in Section 10(a) hereof, (ii) severance payments in the
form of semi-monthly payment of the Employee's base salary
(as in effect immediately prior to such termination) and of
the Pro-Rata Bonus Amount (as defined below) for a period of
12 months following the effective date of such termination,
and (iii) continuation of the medical benefits coverage to
which the Employee is entitled under Section 5(c) hereof
over the 12 month period provided in clause (ii) above, with
such coverage to be provided at the same level and subject
to the same terms and conditions (including, without
limitation, any applicable co-pay obligations of the
Employee, but excluding any applicable tax consequences for
the Employee) as in effect from time to time for officers of
the Company generally. For the purposes of this Agreement,
"Pro-Rata Bonus Amount" shall mean one-twenty-fourth
(1/24th) of the greater of (a) the most recent annual cash
bonus paid to the Employee prior to the date of his
termination, or (b) the average of the three most recent
annual cash bonuses paid to the Employee prior to the date
of his termination. The rights of the Employee and the
obligations of the Company under this Section 10(b) shall
remain in full force and effect notwithstanding the
expiration of the Employment Period, whether by failure of
the Compensation Committee to extend such period or
otherwise.
(c) Death and Disability. Upon the termination
of the Employee's employment hereunder as a result of death
or Disability, neither the Employee nor the Employee's
beneficiaries or estate will have any further rights or
claims against the Company under this Agreement except the
right to receive (i) the payments and other rights provided
for in Section 10(a) hereof, (ii) a lump-sum payment, within
15 days after the effective date of such termination, equal
to the aggregate amount of the Employee's base salary as in
effect immediately prior to such termination that would be
payable over a period of 12 months following the effective
date of such termination and (iii) in the case of Disability
only, continuation of the medical benefits coverage to which
the Employee is entitled under Section 5(c) hereof over the
same period with respect to which the lump-sum payment is
calculated under clause (ii) above, with such coverage to be
provided at the same level and subject to the same terms and
conditions (including, without limitation, any applicable co-
pay obligations of the Employee, but excluding any
applicable tax consequences for the Employee) as in effect
from time to time for officers of the Company generally.
(d) Forfeiture of Rights. In the event that,
subsequent to termination of employment hereunder, the
Employee (i) breaches any of the provisions of Section 13,
14 or 15 hereof or (ii) directly or indirectly makes or
facilitates the making of any adverse public statements or
disclosures with respect to the business or securities of
the Company, all payments and benefits to which the Employee
may otherwise have been entitled pursuant to Section 10(a),
10(b) or 11 hereof shall immediately terminate and be
forfeited, and any portion of such amounts as may have been
paid to the Employee shall forthwith be returned to the
Company.
11. Change in Control Provisions.
(a) Effect of Termination Following Change in
Control. In the event of a Change in Control during the
Employment Period and a subsequent termination of the
Employee's employment, either by the Company as a
Termination Without Cause or by the Employee for Good
Reason, whether or not such termination is during the
Employment Period, the Employee shall be entitled to receive
(i) the payments and other rights provided in Section 10(a)
hereof, (ii) a severance payment in the form a cash lump
sum, paid within 15 days of the date of termination, equal
to the sum of the Employee's semi-monthly base salary (as in
effect immediately prior to such termination) and the Pro-
Rata Bonus Amount (as determined under Section 10(b) above)
multiplied by 48 (i.e., that would have been payable on a
semi-monthly basis during the 24 months following such
termination), but discounted to present value from the dates
such payments would be made if paid on a semi-monthly basis
for such 24 month period, based on the 100% short-term
Applicable Federal Rate (compounded annually) under Section
1274(d) of the Internal Revenue Code of 1986, as amended
(the "Code") as in effect at the time of payment, and (iii)
continuation of the medical benefits coverage to which the
Employee is entitled under Section 5(c) hereof for a period
of 24 months following the date of termination, with such
coverage to be provided at the same level and subject to the
same terms and conditions (including, without limitation,
any applicable co-pay obligations of the Employee, but
excluding any applicable tax consequences for the Employee)
as in effect from time to time for officers of the Company
generally.
(b) Definition of Change in Control. For
purposes of this Agreement, a "Change in Control" shall be
deemed to have occurred upon:
(i) an acquisition subsequent to the date hereof
by any person, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a
"Person"), of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of
30% or more of either (A) the then outstanding shares
of common stock of the Company ("Common Stock") or (B)
the combined voting power of the then outstanding
voting securities of the Company entitled to vote
generally in the election of directors (the
"Outstanding Company Voting Securities"); excluding,
however, the following: (1) any acquisition directly
from the Company, other than an acquisition by virtue
of the exercise of a conversion privilege unless the
security being so converted was itself acquired
directly from the Company, (2) any acquisition by the
Company and (3) any acquisition by an employee benefit
plan (or related trust) sponsored or maintained by the
Company;
(ii) a change in the composition of the Board such
that during any period of two consecutive years,
individuals who at the beginning of such period
constitute the Board, and any new director (other than
a director designated by a person who has entered into
an agreement with the Company to effect a transaction
described in clause (i), (iii), or (iv) of this
paragraph) whose election by the Board or nomination
for election by the Company's stockholders was approved
by a vote of at least two-thirds of the directors then
still in office who either were directors at the
beginning of the period or whose election or nomination
for election was previously so approved, cease for any
reason to constitute at least a majority of the members
thereof;
(iii) the approval by the stockholders of the
Company of a merger, consolidation, reorganization or
similar corporate transaction, whether or not the
Company is the surviving corporation in such
transaction, in which outstanding shares of Common
Stock are converted into (A) shares of stock of another
company, other than a conversion into shares of voting
common stock of the successor corporation (or a holding
company thereof) representing 80% of the voting power
of all capital stock thereof outstanding immediately
after the merger or consolidation or (B) other
securities (of either the Company or another company)
or cash or other property;
(iv) the approval by stockholders of the Company
of the issuance of shares of Common Stock in connection
with a merger, consolidation, reorganization or similar
corporate transaction in an amount in excess of 40% of
the number of shares of Common Stock outstanding
immediately prior to the consummation of such
transaction;
(v) the approval by the stockholders of the
Company of (A) the sale or other disposition of all or
substantially all of the assets of the Company or (B) a
complete liquidation or dissolution of the Company; or
(vi) the adoption by the Board of a resolution to
the effect that any person has acquired effective
control of the business and affairs of the Company.
(c) Good Reason Following Change in Control. For
purposes of this Agreement, termination for "Good Reason"
shall mean termination by the Employee of his employment
with the Company, within six months immediately following a
Change in Control, based on:
(i) any diminution in the Employee's position,
title, responsibilities or authority from those in
effect immediately prior to such Change in Control; or
(ii) the breach by the Company of any of its
material obligations under this Agreement.
12. Parachute Tax Indemnity
(a) If it shall be determined that any amount
paid, distributed or treated as paid or distributed by the
Company to or for the Employee's benefit (whether paid or
payable or distributed or distributable pursuant to the
terms of this Agreement or otherwise, but determined without
regard to any additional payments required under this
Section 12) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code, or any interest or
penalties are incurred by the Employee with respect to such
excise tax (such excise tax, together with any such interest
and penalties, being hereinafter collectively referred to as
the "Excise Tax"), then the Employee shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Employee of all
federal, state and local taxes (including any interest or
penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Employee retains an
amount of the Gross-Up Payment equal to the Excise Tax
imposed upon all the Payments.
(b) All determinations required to be made under
this Section 12, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such
determination, shall be made by a nationally recognized
accounting firm as may be designated by the Employee (the
"Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Employee within 15
business days of the receipt of notice from the Employee
that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual,
entity or group effecting the change in control, the
Employee shall appoint another nationally recognized
accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to
as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 12,
shall be paid by the Company to the Employee within five
days of the receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be binding
upon the Company and the Employee. As a result of the
uncertainty in the application of Section 4999 of the Code
at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required
to be made hereunder. In the event that the Company
exhausts its remedies pursuant to this Section 12 and the
Employee thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for
the Employee's benefit.
(c) The Employee shall notify the Company in
writing of any claim by the Internal Revenue Service that,
if successful, would require the payment by the Company of
the Gross-Up Payment. Such notification shall be given as
soon as practicable but no later then ten business days
after the Employee is informed in writing of such claim and
shall apprise the Company of the nature of such claim and
the date on which such claim is requested to be paid. The
Employee shall not pay such claim prior to the expiration of
the 30-day period following the date on which it gives such
notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is
due). If the Company notifies the Employee in writing prior
to the expiration of such period that it desires to contest
such claim, the Employee shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with
contesting such claim as the Company shall reasonably
request in writing from time to time, including, without
limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good
faith in order to effectively contest such claim, and
(iv) permit the Company to participate in any
proceeding relating to such claim; provided, however, that
the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties)
incurred in connection with such contest and shall
indemnify and hold the Employee harmless, on an after-tax
basis, from any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and
expense. Without limitation on the foregoing provisions of
this Section 12, the Company shall control all proceedings
taken in connection with such contest and, at its sole
option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its
sole option, either direct the Employee to pay the tax
claimed and sue for a refund or contest the claim in any
permissible manner, and the Employee agrees to prosecute
such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company shall determine;
provided, however, that if the Company directs the Employee
to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to the Employee, on an
interest-free basis, and shall indemnify and hold the
Employee harmless, on an after-tax basis, from any Excise
Tax or income tax (including interest or penalties with
respect thereto) imposed with respect to such advance or
with respect to any imputed income with respect to such
advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for the
Employee's taxable year with respect to which such
contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control
of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the
Employee shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the Employee's receipt of an amount
advanced by the Company pursuant to this Section 12, the
Employee becomes entitled to receive any refund with respect
to such claim, the Employee shall (subject to the Company's
complying with the requirements of this Section 12) promptly
pay to the Company the amount of such refund (together with
any interest paid or credited thereon after taxes applicable
thereto). If, after the Employee's receipt of an amount
advanced by the Company pursuant to this Section 12, a
determination is made that the Employee shall not be
entitled to any refund with respect to such claim and the
Company does not notify the Employee in writing of its
intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to
be paid.
(e) The foregoing provisions of this Section 12
are intended to supersede the provisions of Section 7(d) of
the Company's 1991 Stock Option Plan as applied to the
Employee.
13. Disclosure of Information. The Employee will
not, at any time during or after the Employment Period,
disclose to any person, firm, corporation or other business
entity, except as required by law, any non-public
information concerning the business, products, clients or
affairs of the Company or any subsidiary or affiliate
thereof for any reason or purpose whatsoever, nor will the
Employee make use of any of such non-public information for
personal purposes or for the benefit of any person, firm,
corporation or other business entity except the Company or
any subsidiary or affiliate thereof.
14. Restrictive Covenant. (a) The Employee
hereby acknowledges and recognizes that, during the
Employment Period, the Employee will be privy to trade
secrets and confidential proprietary information critical to
the Company's business and the Employee further acknowledges
and recognizes that the Company would find it extremely
difficult or impossible to replace the Employee and,
accordingly, the Employee agrees that, in consideration of
the benefits to be received by the Employee hereunder, the
Employee will not, from and after the date hereof until the
first anniversary of the termination of the Employment
Period (or six months after the termination of the
Employment Period if such termination is as a result of a
termination for Good Reason following a Change in Control),
(i) directly or indirectly engage in the development,
production, marketing or sale of products that compete (or,
upon commercialization, would compete) with products of the
Company being developed (so long as such development has not
been abandoned), marketed or sold at the time of the
Employee's termination (such business or activity being
hereinafter called a "Competing Business") whether such
engagement shall be as an officer, director, owner,
employee, partner, affiliate or other participant in any
Competing Business, (ii) assist others in engaging in any
Competing Business in the manner described in the foregoing
clause (i), or (iii) induce other employees of the Company
or any subsidiary thereof to terminate their employment with
the Company or any subsidiary thereof or engage in any
Competing Business. Notwithstanding the foregoing, the term
"Competing Business" shall not include any business or
activity that was not conducted by the Company prior to the
effective date of a Change in Control.
(b) The Employee understands that the foregoing
restrictions may limit the ability of the Employee to earn a
livelihood in a business similar to the business of the
Company, but nevertheless believes that the Employee has
received and will receive sufficient consideration and other
benefits, as an employee of the Company and as otherwise
provided hereunder, to justify such restrictions which, in
any event (given the education, skills and ability of the
Employee), the Employee believes would not prevent the
Employee from earning a living.
15. Company Right to Inventions. The Employee
will promptly disclose, grant and assign to the Company, for
its sole use and benefit, any and all inventions,
improvements, technical information and suggestions relating
in any way to the business of the Company which the Employee
may develop or acquire during the Employment Period (whether
or not during usual working hours), together with all patent
applications, letters patent, copyrights and reissues
thereof that may at any time be granted for or upon any such
invention, improvement or technical information. In
connection therewith:
(i) the Employee shall, without charge, but at
the expense of the Company, promptly at all times
hereafter execute and deliver such applications,
assignments, descriptions and other instruments as may
be necessary or proper in the opinion of the Company to
vest title to any such inventions, improvements,
technical information, patent applications, patents,
copyrights or reissues thereof in the Company and to
enable it to obtain and maintain the entire right and
title thereto throughout the world; and
(ii) the Employee shall render to the Company, at
its expense (including a reasonable payment for the
time involved in case the Employee is not then in its
employ), all such assistance as it may require in the
prosecution of applications for said patents,
copyrights or reissues thereof, in the prosecution or
defense of interferences which may be declared
involving any said applications, patents or copyrights
and in any litigation in which the Company may be
involved relating to any such patents, inventions,
improvements or technical information.
16. Enforcement. It is the desire and intent of
the parties hereto that the provisions of this Agreement be
enforceable to the fullest extent permissible under the laws
and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, to the extent that a
restriction contained in this Agreement is more restrictive
than permitted by the laws of any jurisdiction where this
Agreement may be subject to review and interpretation, the
terms of such restriction, for the purpose only of the
operation of such restriction in such jurisdiction, will be
the maximum restriction allowed by the laws of such
jurisdiction and such restriction will be deemed to have
been revised accordingly herein.
17. Remedies; Survival. (a) The Employee
acknowledges and understands that the provisions of the
covenants contained in Sections 13, 14 and 15 hereof, the
violation of which cannot be accurately compensated for in
damages by an action at law, are of crucial importance to
the Company, and that the breach or threatened breach of the
provisions of this Agreement would cause the Company
irreparable harm. In the event of a breach or threatened
breach by the Employee of the provisions of Section 13, 14
or 15 hereof, the Company will be entitled to an injunction
restraining the Employee from such breach. Nothing herein
contained will be construed as prohibiting the Company from
pursuing any other remedies available for any breach or
threatened breach of this Agreement.
(b) Notwithstanding anything contained in this
Agreement to the contrary, the provisions of Sections 10(b),
13, 14, 15, 16 and 17 hereof will survive the expiration or
other termination of this Agreement until, by their terms,
such provisions are no longer operative.
18. Notices. Notices and other communications
hereunder will be in writing and will be delivered
personally or sent by air courier or first class certified
or registered mail, return receipt requested and postage
prepaid, addressed as follows:
if to the Employee: as specified in Annex A
and if to the Company: MedImmune, Inc.
35 West Watkins Mill Road
Gaithersburg, Maryland 20878
Attention: Chief Executive Officer
with a copy to: Frederick W. Kanner, Esq.
Dewey Ballantine, LLP
1301 Avenue of the Americas
New York, NY 10019
All notices and other communications given to any party
hereto in accordance with the provisions of this Agreement
will be deemed to have been given on the date of delivery,
if personally delivered; on the business day after the date
when sent, if sent by air courier; and on the third business
day after the date when sent, if sent by mail, in each case
addressed to such party as provided in this Section 18 or in
accordance with the latest unrevoked direction from such
party.
19. Binding Agreement; Benefit. The provisions
of this Agreement will be binding upon, and will inure to
the benefit of, the respective heirs, legal representatives
and successors of the parties hereto.
20. Governing Law. This Agreement will be
governed by, and construed and enforced in accordance with,
the laws of the State of Maryland.
21. Waiver of Breach. The waiver by either party
of a breach of any provision of this Agreement by the other
party must be in writing and will not operate or be
construed as a waiver of any subsequent breach by such other
party.
22. Entire Agreement; Amendments. This Agreement
(including Annex A) contains the entire agreement between
the parties with respect to the subject matter hereof and
supersedes all prior agreements or understandings among the
parties with respect thereof, including, without limitation,
that certain employment agreement between the parties dated
as of April 1, 1997. This Agreement may be amended only by
an agreement in writing signed by the parties hereto.
23. Headings. The section headings contained in
this Agreement are for reference purposes only and will not
affect in any way the meaning or interpretation of this
Agreement.
24. Severability. Any provision of this
Agreement that is prohibited or unenforceable in any
jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction
will not invalidate or render unenforceable such provision
in any other jurisdiction.
25. Assignment. This Agreement is personal in
its nature and the parties hereto shall not, without the
consent of the other, assign or transfer this Agreement or
any rights or obligations hereunder; provided, that the
provisions hereof (including, without limitation, Sections
13, 14 and 15) will inure to the benefit of, and be binding
upon, each successor of the Company, whether by merger,
consolidation, transfer of all or substantially all of its
assets or otherwise.
IN WITNESS WHEREOF, the parties have duly executed
this Agreement as of the date first above written.
EMPLOYEE MEDIMMUNE, INC.
/s/ Bogdan Dziurzynski By: /s/ Wayne T. Hockmeyer
Bogdan Dziurzynski Wayne T. Hockmeyer
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Registration Statement on Form S-3 (File No. 333-13373) and the
Registration Statements on Form S-8 (File Nos. 333-28481 and 333-
28527) of MedImmune, Inc. of our report dated January 25, 1999,
except for Note 18, which is as of February 24, 1999, appearing
in this Annual Report on Form 10-K.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
McLean, Virginia
March 23, 1999
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MEDIMMUNE,
INC.'S YEARLY REPORT ON FORM 10-K FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FILING.
</LEGEND>
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 37,959
<SECURITIES> 96,923
<RECEIVABLES> 31,682
<ALLOWANCES> 0
<INVENTORY> 19,760
<CURRENT-ASSETS> 216,366
<PP&E> 74,822
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<TOTAL-ASSETS> 353,120
<CURRENT-LIABILITIES> 57,970
<BONDS> 83,195
0
0
<COMMON> 547
<OTHER-SE> 209,286
<TOTAL-LIABILITY-AND-EQUITY> 353,120
<SALES> 163,440
<TOTAL-REVENUES> 200,708
<CGS> 70,236
<TOTAL-COSTS> 194,514
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,041
<INCOME-PRETAX> 8,812
<INCOME-TAX> (47,428)
<INCOME-CONTINUING> 56,420
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</TABLE>
EXHIBIT No. 10.91 (2)
LICENSE AGREEMENT
THIS LICENSE AGREEMENT ("Agreement") is made and entered into as
of November 20, 1998 (the "Effective Date") between MEDIMMUNE, INC., a
Delaware corporation having its principal place of business at 35 West
Watkins Mill Road, Gaithersburg, MD 20878 (hereinafter referred to as
"MEDIMMUNE"), and CONNAUGHT LABORATORIES, INC. a Delaware corporation
having its principal place of business at Route 611, P.O. Box 187,
Swiftwater, Pennsylvania 18370 (hereinafter referred to as "PMC").
RECITALS
A. MEDIMMUNE has certain proprietary rights relating to the use
of Decorin Binding Proteins (as defined below) for treatment and/or
prevention of Lyme Disease.
B. PMC desires to obtain a license to such rights and to
research, develop, manufacture, market, sell and distribute certain
vaccines for treatment and/or prevention of Lyme Disease which
incorporate Decorin Binding Proteins, all under the terms and
conditions set forth below.
NOW THEREFORE, for and in consideration of the covenants,
conditions, and undertakings hereinafter set forth, it is agreed by and
between the parties as follows:
ARTICLE 1
DEFINITIONS
1.1 "Affiliate" shall mean, with respect to any Person, (i) any
other Person of which securities or other ownership interests
representing fifty percent (50%) or more of the voting interests (or
such lesser percentage which is the maximum allowed to be owned by a
foreign corporation in a particular jurisdiction) are, at the time such
determination is being made, owned, controlled or held directly or
indirectly, by such Person, or (ii) any other Person which, at the time
such determination is being made, is Controlling, Controlled by or
under common Control with, such Person.
For the purpose of this section 1.1, "Control," whether used
as a noun or verb, refers to the possession directly or indirectly, of
the power to direct, or cause the direction of, the management or
policies of a Person, whether through the ownership of voting
securities, by contract or otherwise, and "Person" means any natural
person, corporation, firm, business trust, joint venture, association,
organization, company, partnership or other business entity, or any
government, or any agency or political subdivision thereof.
1.2 "Decorin Binding Protein" means a polypeptide that binds to
decorin and fragments thereof, which fragment may or may not bind to
decorin and/or an encoding gene therefor.
1.3 "Licensed Know-How" means MEDIMMUNE Know-How and/or
Sublicensed Know-How.
1.4 "Licensed Product" shall mean, a therapeutic and/or
prophylactic vaccine for Lyme Disease for humans and non-human animals
that infringes upon any Valid Claim of Patent Rights and/or that, in
whole or in part, incorporates, uses, or is based on Licensed Know-How.
1.5 "Licensee" shall mean a person or entity who is granted a
license to Licensed Product by PMC or an Affiliate of PMC.
1.6 "MEDIMMUNE Know-How" shall mean any biological materials, and
any research and development information, inventions, know-how, pre-
clinical, clinical and other technical data, in each case that are
owned by MEDIMMUNE, as of the Effective Date with the right to provide
the same to others, and which is necessary or useful for the research,
development, improving, making, using or selling of a Decorin Binding
Protein for use in a therapeutic and/or prophylactic vaccine for Lyme
Disease.
1.7 "MEDIMMUNE Patent Rights" shall mean:
(a) all patents and applications listed in Exhibit A; any
continuations, continuations-in-part, divisions and substitutions
thereof, or of which such an application or patent is a successor;
patents which may issue upon any of the foregoing; and all renewals,
reissues and extensions thereof; and
(b) Any foreign patents and/or applications that are
counterparts of a patent or application described in paragraph (a)
above, including any patent or application that claims subject matter
claimed in, or that takes priority from, a patent or application
described in paragraph (a) above.
1.8 "Net Sales" shall mean the gross invoice price to Third
Parties of any Licensed Product, less: (i) normal and customary trade
and quantity discounts actually allowed; (ii) returns and allowances,
all to the extent actually allowed, (iii) to the extent separately
reported on the invoice, sales or other excise taxes, duties and other
governmental charges (other than taxes on income) imposed on sales of
Licensed Product imposed upon and paid by PMC, its Affiliates or their
Licensees with respect to such sales, and (iv) transportation charges
and insurance for transportation to the extent separately invoiced or
separately reported on the invoice and paid by the seller; (v)
retroactive price reductions and rebates customary to the trade or
required by law; , all as determined and calculated in accordance with
Generally Accepted Accounting Principles. In the event that any
quantities of Licensed Product are transferred to a Third Party for
consideration other than cash or for no consideration, the fair and
reasonable market value of the applicable Licensed Product shall be
used to calculate Net Sales. Notwithstanding the foregoing, Net Sales
shall not include sales between or among Affiliates for resale by an
Affiliate, or any Licensed Product used in any clinical trial.
In the event that Licensed Product is sold in other than an arms
length transaction, then Net Sales shall be the gross invoice price
which would be received in an arms length transaction, taking into
account any deductions for items referred to in clauses (i), (ii),
(iii), (iv) and (v) of the preceding paragraph.
1.9 "Patent Right(s)" shall mean MEDIMMUNE Patent Rights and
Sublicensed Patent Rights.
1.10 "Sublicensed Know-How" means all "KNOW-HOW" (as defined in
the Texas A&M Agreement) anywhere in the world to which MEDIMMUNE has
rights under the Texas A&M Agreement.
1.11 "Sublicensed Patent Rights" shall mean any and all "PATENT
RIGHTS" (as defined in the Texas A&M Agreement) anywhere in the world
to which MEDIMMUNE has rights under the Texas A&M Agreement.
1.12 "Sublicensed Rights" shall mean the Sublicensed Patent Rights
and the Sublicensed Know-How.
1.13 "TAMUS" means Texas A&M University System.
1.14 "Territory" shall mean all countries of the world.
1.15 "Texas A&M Agreement" shall mean the License Agreement
between the Texas A&M University System and MEDIMMUNE, effective as of
June 19, 1995, and the amendment thereto, attached as Exhibit B hereto.
1.16 "Third Party" means any corporation, company, partnership or
other entity which is not a party hereto or an Affiliate of a party
hereto.
1.17 "Valid Claim" shall mean a claim of an issued and unexpired
patent which has not been held unenforceable, unpatentable or invalid
by a court or other governmental agency of competent jurisdiction from
which no appeal can be or is taken, and which has not been admitted to
be invalid or unenforceable through reissue, disclaimer or otherwise.
1.18 All dollar amounts are United States Dollars.
ARTICLE 2
GRANT OF RIGHTS
2.1 Subject to the terms and condition of this Agreement,
MEDIMMUNE grants to PMC (i)subject to Section 5.06 of the Texas A&M
agreement a sole and exclusive license under MEDIMMUNE's interest in
MEDIMMUNE Patent Rights; (ii) a sole and exclusive sublicense under
Sublicensed Rights; and (iii) subject to Section 5.06 of the Texas A&M
Agreement a sole and exclusive license under MEDIMMUNE Know-How, in
each case to make, have made, use, sell, have sold, import and export
Licensed Product in the Territory. During the term of this Agreement,
MEDIMMUNE shall not grant any rights or licenses under the MEDIMMUNE
Patent Rights, the MEDIMMUNE Know-How or the Sublicensed Rights to
make, have made, use, sell, have sold, import or export Licensed
Product in the Territory.
2.2 PMC acknowledges and agrees that the Sublicensed Rights are
subject to the terms, conditions and obligations of the Texas A&M
Agreement and that the Sublicensed Rights are no greater than the
rights granted to MEDIMMUNE under the Texas A&M Agreement.
2.3 PMC warrants, covenants and agrees that PMC is responsible
for and shall perform all of MEDIMMUNE'S obligations under the Texas
A&M Agreement, other than (i) any obligation which MEDIMMUNE may have
to pay to TAMUS any portion of the payments which MEDIMMUNE receives
from PMC hereunder and (ii) the obligations set forth in Section
5.02(f) of the Texas A&M Agreement. Such obligations include but are
not limited to the obligation to (i) pay patent expenses incurred on or
after July 10, 1998 as required by Paragraphs 3.01 and 6.03 of the
Texas A&M Agreement; (ii) the payment and reporting obligations of
Paragraphs 3.03; 3.04; 3.05, and 7.01 through 7.06 of the Texas A&M
Agreement (iii) the due diligence obligations of Article V; and (iv)
the obligations of Article XII and paragraphs 14.01 and 14.02 of the
Texas A&M Agreement; (v) and the (CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED) due to TAMUS under Par. 3.07 of the Texas A&M Agreement.
With respect to the payment and reporting obligations under the
Texas A&M Agreement, PMC shall provide MEDIMMUNE with a copy of any and
all reports provided to TAMUS under the Texas A&M Agreement within
three (3) business days of the day on which such report is provided to
TAMUS, and shall provide MEDIMMUNE evidence that any payment due
thereunder has been made to TAMUS, which evidence shall be provided
within three (3) business days of the day on which such payment is
made.
2.4 With respect to the obligations of Article XII and Sections
14.01 and 14.02 of the Texas A&M Agreement, PMC shall be bound to TAMUS
as if PMC was a party to the Texas A&M Agreement, substituting PMC for
MEDIMMUNE thereunder.
2.5 With respect to the rights granted under Section 2.1 hereof,
PMC shall have the right to grant sublicenses with the prior approval
of MEDIMMUNE as to the Licensee, which approval shall not be
unreasonably denied. MEDIMMUNE hereby consents to the granting by PMC
of sublicenses to its Affiliates.
2.6 (a) In case of any sublicense by PMC of the rights and
licenses granted in this Agreement to any Third Party, the Licensee
shall agree to be bound by the terms, obligations and conditions of
Articles 6 and 10 of this Agreement (substituting the name of the
sublicensee for that of PMC) with MEDIMMUNE being expressly made a
third party beneficiary thereof, and PMC shall be responsible for the
performance by the appointed Licensee of such terms, obligations and
conditions.
(b) Each sublicense agreement concluded by PMC that grants a
sublicense under this Agreement will include a requirement that the
Licensee maintain records and permit inspection on terms essentially
identical to Section 9.4 of this Agreement. At MEDIMMUNE's request,
PMC shall arrange for an independent certified accountant selected by
MEDIMMUNE and reasonably acceptable to PMC and such Licensee to inspect
the records of its sublicensee(s) for the purpose of verifying
royalties due to MEDIMMUNE and shall cause such accountant to report
the results thereof to MEDIMMUNE.
(c) All sublicenses granted for a Licensed Product under
this Agreement shall terminate upon termination of the licenses granted
hereunder with respect to such Licensed Product.
(d) Each such sublicense shall state that no further
sublicenses are permitted.
2.7 Upon the execution of this Agreement, MEDIMMUNE shall provide
to PMC copies of all available information in tangible form that is
within the possession of or available to MEDIMMUNE and is MEDIMMUNE
Know-How or Sublicensed Know-How.
ARTICLE 3
MILESTONES AND ROYALTIES TO MEDIMMUNE
3.1 As compensation for past research and development expenses
and the MEDIMMUNE Know-How licensed to PMC under this Agreement, PMC
shall pay to MEDIMMUNE (CONFIDENTIAL TREATMENT HAS BEEN REQUESTED)
within fifteen (15) days of the signing of this Agreement by the
parties hereto.
3.2 Subject to Section 9.3 hereof, PMC shall pay to MEDIMMUNE the
non-refundable and non-creditable amounts specified below within thirty
(30) days following the accomplishment by PMC its Affiliates or any of
their Licensees of the corresponding event set forth below. The
milestone payment shall be made only once for each event:
(a) (CONFIDENTIAL TREATMENT HAS BEEN REQUESTED) for the
filing of the first application for licensure for sale of Licensed
Product in the United States or in a country(ies) in Europe.
(b) (CONFIDENTIAL TREATMENT HAS BEEN REQUESTED) for receipt
of the first regulatory approval to sell Licensed Product in the United
States or in a country(ies) in Europe.
(c) (CONFIDENTIAL TREATMENT HAS BEEN REQUESTED) for the
first calendar year in which total worldwide sales of Licensed Product
is at least (CONFIDENTIAL TREATMENT HAS BEEN REQUESTED).
3.3 PMC shall pay to MEDIMMUNE the following royalties on all
Licensed Product sold by PMC, Affiliates of PMC and their Licensees :
(a) (CONFIDENTIAL TREATMENT HAS BEEN REQUESTED) of Net Sales
of Licensed Product sold (i) in each country where the sale of Licensed
Product in such country is covered by a Valid Claim of a Patent Right,
or (ii) anywhere in the Territory, if where manufactured the Licensed
Product is covered by a Valid Claim of a Patent Right.
(b) (CONFIDENTIAL TREATMENT HAS BEEN REQUESTED) of Net Sales
of all Licensed Product that is not subject to royalty under Paragraph
3.3(a).
(c) In the event that a Licensed Product is sold as part of
a vaccine that treats or prevents a disease in addition to Lyme Disease
(a "Combined Product") then Net Sales shall be the amount which is
normally received by PMC or its Affiliates or their Licensees from sale
of the Licensed Product in the applicable country in an arm's length
transaction with a Third Party other than as a Combined Product. If
the Licensed Product is not sold separately, then Net Sales upon which
a royalty is paid shall be the Net Sales of the Combined Product
multiplied by a fraction, the numerator of which is the cost for
producing the Licensed Product and the denominator of which is the cost
for producing the Combined Product.
3.4 (a) Royalties shall be calculated and paid on a country-by-
country and Licensed Product-by-Licensed Product basis.
(b) With respect to a Licensed Product in any country, upon
the later to occur of (i) the date on which PMC is no longer obligated
to pay royalties under Section 3.3(a) for such Licensed Product for
such country or (ii) ten (10) years following the first commercial sale
of such Licensed Product in such country, PMC shall have a fully paid,
royalty-free license for such Licensed Product under the Patent Rights
and the Licensed Know-How in such country, provided that this Agreement
is still in effect at such time.
3.5 It is understood that in no event shall more than one royalty
be payable under Section 3.3 with respect to a particular unit of
Licensed Product.
3.6 PMC acknowledges and agrees that the payments to MEDIMMUNE
under this Article 3 are in addition to the payments that PMC makes or
is to make under the Texas A&M Agreement, as required by Section 2.3 of
this Agreement.
ARTICLE 4
TERM AND TERMINATION
4.1 This Agreement shall become effective as of the Effective
Date and, unless earlier terminated pursuant to the other provisions of
this Article 4, shall continue in full force and effect as long as PMC
is obligated to pay royalties on Net Sales under this Agreement, and
shall thereafter expire. PMC's license under Section 2.1 shall survive
such expiration, but not an earlier termination.
4.2 In the event of a material breach of this Agreement the
nonbreaching party in addition to any other remedy which it may have
shall be entitled to terminate this Agreement following written notice
of such breach to the breaching party. If such breach is not cured
within sixty (60) days after written notice is given by the
nonbreaching party to the breaching party specifying the breach, the
non-breaching party may terminate the Agreement forthwith upon written
notice to the breaching party after expiration of such 60-day period.
4.3
4.3.1 Termination of this Agreement for any reason shall
not release either party hereto from any liability which at the time of
such termination has already accrued to the other party.
4.3.2 In the event this Agreement is terminated for any
reason, PMC and its Affiliates and Licensees shall have the right to
sell or otherwise dispose of the stock of any Licensed Product then on
hand, all subject to the payment to MEDIMMUNE of fees and royalties
pursuant to Article 3 hereof.
4.3.3 Articles 6, 10, and 11, and Sections 4.1, 4.3,
4.4, and 5.5, shall survive the expiration and any termination of this
Agreement. Except as otherwise provided in Section 4.1 and Section
4.3, all rights and obligations of the parties under this Agreement
shall terminate upon the expiration or termination of this Agreement.
4.4. In the event that PMC's rights and licenses under this
Agreement are terminated, PMC agrees not to make, use or sell Licensed
Products except as permitted by paragraph 4.3.2.
4.5 Either party may terminate this Agreement upon written notice
if the other party makes a general assignment for the benefit of
creditors, is the subject of proceedings in voluntary or involuntary
bankruptcy or has a receiver or trustee appointed for substantially
all of its property; provided that in the case of an involuntary
bankruptcy proceeding such right to terminate shall only become
effective if the other party consents thereto or such proceeding is not
dismissed within ninety (90) days after the filing thereof. If, in
connection with bankruptcy proceedings involving a party, an election
is made by or on behalf of such party to reject the obligations of this
Agreement and the other party elects to retain its rights to
intellectual property hereunder pursuant to Section 365 n.1 of the
United States Bankruptcy Code, as amended (the "Code"), such other
party shall be entitled to enforce any rights exclusively granted to it
in respect of intellectual property hereunder by commencement of any
action it deems necessary to that effect against third-party infringes
and may do so in the name and stead of the bankrupt party. The parties
further agree that, in the event that PMC elects to retain its rights
as a licensee under the Code, PMC shall be entitled to complete access
to any technology licensed to it hereunder and all embodiments of such
technology. Such embodiments of the technology shall be delivered to
PMC not later than (a) the commencement of bankruptcy proceedings
against MEDIMMUNE, unless MEDIMMUNE elects to perform its obligations
under this Agreement, or (b) if not delivered under (a) above, upon the
rejection of this Agreement by or on behalf of MEDIMMUNE.
4.6 PMC may terminate this Agreement at any time upon ninety
(90) days' prior written notice to MEDIMMUNE.
ARTICLE 5
PATENTS AND INFRINGEMENTS
5.1 MEDIMMUNE shall have the right but not the obligation to
control the filing, prosecution and maintenance of the Patent Rights,
subject to the Texas A&M Agreement. MEDIMMUNE agrees to keep PMC
informed as to the status of the Patent Rights in the Territory and
shall provide PMC with copies of all proposed filings and
correspondence of substantive nature with respect to patents or patent
applications relating to the Patent Rights to be made or sent to the
United States Patent and Trademark Office or its counterpart in any
country (each, a "Patent Authority") of the Territory and copies of all
correspondence that MEDIMMUNE receives from such Patent Authorities
with respect to the Patent Rights. If MEDIMMUNE does not wish to
control the filing, prosecution and maintenance of the MEDIMMUNE Patent
Rights, it shall so inform PMC and PMC shall have the right but not the
obligation to control the filing, prosecution and maintenance of such
MEDIMMUNE Patent Rights. PMC shall pay all out-of-pocket costs
reasonably incurred by MEDIMMUNE on or after July 10, 1998 with respect
to filing, prosecution and maintenance of Patent Rights.
5.2 If the production, sale or use of a Licensed Product results
in any claim for infringement of a patent or other proprietary right of
a Third Party against PMC, its Affiliates or Licensees , PMC shall
promptly notify MEDIMMUNE thereof in writing. As between the parties
to this Agreement, PMC shall have the right at its own expense to
defend and control the defense of any such claim against PMC, by
counsel of PMC's own choice, and PMC shall be liable for any such
claim.
5.3 (a) In the event that any Patent Rights are infringed by a
Third Party with respect to a Licensed Product. PMC and/or its
Affiliates or Licensees shall have the right (except as provided
below), but not the obligation, to institute, and prosecute any action
or proceeding under the Patent Rights with respect to such
infringement, by counsel of its choice, including any declaratory
judgment action arising from such infringement. Any amounts recovered
from Third Parties with respect to the Patent Rights in such action
shall be applied first to reimburse the expenses of the action; then to
the extent the award is based on lost profits, MEDIMMUNE and PMC shall
divide such remaining portion such that MEDIMMUNE shall receive (a)
(CONFIDENTIAL TREATMENT HAS BEEN REQUESTED) in respect of countries in
which the sale or manufacture of the Licensed Product is covered by a
Valid Claim of a Patent Right and (b) (CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED) in respect of countries in which the sale or manufacture of
the Licensed product is not covered by a Valid Claim of a Patent Right.
In respect of any other recovery, the remaining amount shall be
treated as Net Sales with MEDIMMUNE receiving its royalty on such "Net
Sales." PMC shall not have the right to settle, compromise or take any
action in such litigation which diminish, limit or inhibit the scope,
validity or enforceability of the Patent Rights without the express
written permission of MEDIMMUNE. PMC shall keep MEDIMMUNE advised of
the progress of such proceedings.
5.4 In the event that a Third Party is infringing the Patent
Rights with respect to a Licensed Product and PMC does not elect to
institute an action, MEDIMMUNE shall have the right, but not the
obligation, to commence an infringement suit under the Patent Rights
against such infringer and retain any recovery, provided that it so
notifies PMC.
5.5 Each party agrees to cooperate with each other with respect
to any litigation under Sections 5.2, 5.3 or 5.4.
ARTICLE 6
CONFIDENTIALITY
6.1 Nondisclosure. Except as otherwise provided in this
Agreement, a party receiving (the "Receiving Party") any business or
technical information ("Proprietary Information") that is disclosed to
it by the other party (the "Disclosing Party") shall for a period
beginning on the Effective Date and ending five (5) years after the
termination of this Agreement hold in confidence and not disclose to
any Third Party the Proprietary Information. In addition, the
Receiving Party shall not use Proprietary Information that it receives
from the Disclosing Party, except that PMC may use Proprietary
Information of MEDIMMUNE to the extent licensed to PMC under Article 2
of this Agreement. Notwithstanding the foregoing, with the prior
written permission of MEDIMMUNE (which shall not be unreasonably
withheld), PMC may disclose information concerning the Patent Rights
and/or the MEDIMMUNE Know-How to actual or prospective sublicensees or
to other Third Parties with whom PMC is considering or has entered into
a business relationship, all of whom are similarly bound in writing
under a reasonable confidentiality agreement. Proprietary Information
of a party shall not include:
6.1.1 Information which is or was published or has become
generally available to the public through no fault of the Receiving
Party;
6.1.2 Information which the Receiving Party can document is
or was in its possession at the time of disclosure or was independently
developed by the Receiving Party; or
6.1.3 Information which is rightfully acquired by the
Receiving Party from a Third Party who is not under an obligation of
confidentiality to the Disclosing Party, and to the best of the
Receiving Party's knowledge and belief is entitled to rightfully make
such disclosure, but only to the extent the Receiving Party complies
with any restrictions imposed by the Third Party.
6.2 The Receiving Party may disclose Proprietary Information of
the other if required by applicable law or in connection with the order
of a court of law or administrative or governmental authority provided
that the Receiving Party exerts reasonable efforts to preserve the
confidentiality thereof and the Disclosing Party is given an
opportunity to protect the confidentiality thereof. PMC may disclose
Proprietary Information as is reasonably necessary in connection with
the labeling of Licensed Products that are otherwise sold in compliance
with this Agreement or as required for obtaining regulatory approval of
Licensed Product, provided that PMC protects the confidentiality
thereof to the fullest extent possible.
6.3 Notwithstanding anything else to the contrary and subject to
Section 3.4(b) in the event that PMC's rights and licenses under this
Agreement are terminated, PMC agrees not to use Patent Rights and
Licensed Know-How provided to PMC by MEDIMMUNE or any information
developed by PMC that, in whole or in part, incorporates, uses or is
based on Licensed Know-How for the research, development, making, or
using or selling of any product or process and (b) not to do any of the
foregoing while this Agreement is in force for any product other than a
Licensed Product.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES AND COVENANTS
7.1 MEDIMMUNE and PMC each represents and warrants to the other
that (a) each has the full right and authority to enter into this
Agreement and grant the rights and licenses granted herein;
(b) Each is a corporation duly incorporated and validly
existing as a corporation and in good standing under the laws of
Delaware, respectively, with the corporate power to own, lease and
operate its properties and to carry on its business as now conducted;
(c) Each has all necessary corporate power and authority to
enter into this Agreement and to consummate the transactions
contemplated hereby;
(d) The execution, delivery and performance of this
Agreement by each of MEDIMMUNE and PMC does not conflict with or
contravene its articles or certificate of incorporation or by-laws,
regulations or partnership agreement (or other comparable governing
instruments with different names), nor will the execution, delivery or
performance of this Agreement conflict with or result in a breach of,
or entitle any party thereto to terminate, any material agreement or
instrument to which it is a party, or by which any of its assets or
properties is bound.
(e) This Agreement has been duly authorized, executed and
delivered by MEDIMMUNE and PMC and constitutes a legal, valid and
binding agreement of MEDIMMUNE and PMC, enforceable against MEDIMMUNE
AND PMC in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, moratorium, reorganization or other
similar laws affecting creditors' rights generally; and
7.2 MEDIMMUNE represents and warrants to PMC that:
(a) it has not previously granted and, prior to termination
of this Agreement, will not grant any rights in the Patent Rights or
the MEDIMMUNE Know-How that are inconsistent with the rights and
licenses granted to PMC herein and in the Texas A&M Agreement, TAMUS
has represented to MedImmune that TAMUS has not previously granted and
prior to termination of the Texas A&M Agreement, TAMUS will not grant
any rights in the Sublicensed Patent Rights that are inconsistent with
the rights and license granted to MedImmune under the Texas A&M
Agreement, and MedImmune has no reason to believe that such
representation is not true on the date hereof;
(b) MEDIMMUNE has provided to PMC a true, complete and
correct copy of the Texas A&M Agreement (including any amendments
thereto) under which MEDIMMUNE has acquired or licensed rights to the
Sublicensed Rights licensed to PMC hereunder. MEDIMMUNE has carried
out all requirements under such agreement to enable MEDIMMUNE to grant
the license granted to PMC hereunder, and there are no other
requirements necessary for MEDIMMUNE to grant such license. The Texas
A&M Agreement is in full force and effect, and MEDIMMUNE has neither
received nor delivered any notice of default thereunder. As of the
Effective Date, except for due diligence obligations of Section 7.06
and the reporting obligations of Article VII, MEDIMMUNE has not
breached any obligations under the Texas A&M Agreement that will
adversely affect the rights granted to PMC to the SubLicensed Rights
under this Agreement. MEDIMMUNE hereby covenants and agrees that it
shall not consent to any amendment thereof or terminate such agreement
without the prior written consent of PMC;
(c) The MEDIMMUNE PATENT RIGHTS listed in Exhibit A have
been filed in the United States Patent and Trademark Office and the
inventors named in such application are obligated to assign their
rights therein to MEDIMMUNE. There have been no material claims made
against MEDIMMUNE asserting the invalidity or unenforceability of, or
the misuse of, the MEDIMMUNE Patent Rights, or the Sublicensed Patent
Rights. MEDIMMUNE has not received a notice of conflict of the Patent
Rights or MEDIMMUNE Know-How with the asserted rights of others, or
otherwise challenging its rights to use any of the MEDIMMUNE Patent
Rights, MEDIMMUNE Know-How or the Sublicensed Rights.
7.3 Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN
SECTION 7.1 ABOVE, NEITHER PARTY MAKES ANY REPRESENTATION OR EXTENDS
ANY WARRANTIES OF ANY KIND EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT
LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, NONINFRINGEMENT, OR VALIDITY OF ANY PATENT RIGHTS ISSUED OR
PENDING.
ARTICLE 8
DUE DILIGENCE
8.1 PMC shall use commercially reasonable efforts to research,
develop, register, market and sell and to continue to market and sell
each Licensed Product in the United States and other countries of North
America and/or Europe for which, in PMC's reasonable judgment, there is
or would be a significant market for Licensed Product, and in which
there would be a satisfactory return on the investment required to
enter such market, with timely notice to MEDIMMUNE of such PMC
decisions.
8.2 PMC shall promptly notify MEDIMMUNE, in writing, if at any
time PMC does not intend to continue to research, develop and/or obtain
regulatory approval for and/or market and sell a Licensed Product in
the United States or in countries of the European Economic Community.
8.3 In the event that PMC provides MEDIMMUNE with notice pursuant
to Section 8.2 with respect to any Licensed Product or with respect to
any country(ies) the rights herein granted by MEDIMMUNE to PMC to such
Licensed Product in such country(ies), upon written notice from
MEDIMMUNE to PMC shall revert to MEDIMMUNE.
8.4 PMC acknowledges, agrees and understands its assumed
obligations with respect to due diligence under Article V of the Texas
A&M Agreement.
8.5 PMC shall provide written reports to MEDIMMUNE on or before
June 30th and December 31st of each year (commencing on June 30, 1999)
concerning the efforts being made in accordance with Section 8.1 with
respect to the Licensed Product. PMC shall provide MEDIMMUNE with any
additional information reasonably requested by MEDIMMUNE in this
respect. Such reports shall be considered to be Proprietary
Information of PMC.
ARTICLE 9
ACCOUNTING RECORDS AND PAYMENTS
9.1 PMC agrees to make quarterly written reports to MEDIMMUNE
within sixty (60) days after the end of each calendar quarter in which
royalties are due to MEDIMMUNE under this Agreement, stating in each
such report the number, description, and aggregate Net Sales of
Licensed Products sold during the calendar quarter and upon which a fee
or royalty is payable under Article 3 above. The report shall also
include the calculation of Net Sales all on a country by country and
Licensed Product by Licensed Product basis. The report shall be due
with respect to sales of Licensed Product sold by PMC or its AFFILIATES
sixty (60) days after the end of the calendar quarter and with respect
to sales of Licensed Product by Licensees of PMC or its AFFILIATES,
ninety (90) days after the end of a calendar quarter. All information
provided to MEDIMMUNE in such reports shall be considered Proprietary
Information.
9.2 Concurrently with the making of each such report of Section
9.1, PMC shall pay to MEDIMMUNE the royalties at the rate specified in
Article 3 above. All payments by PMC to MEDIMMUNE hereunder shall be
made in U.S. Dollars. If any currency conversion shall be required in
connection with the calculation of royalties hereunder, such conversion
shall be made by using the rate of exchange published in the Wall
Street Journal for the last business day of the applicable calendar
quarter.
9.3 Any withholding or other tax that PMC or any of its
Affiliates are required by statute to withhold and pay on behalf of
MEDIMMUNE with respect to the royalties payable to MEDIMMUNE under this
Agreement shall be deducted from said royalties and paid
contemporaneously with the remittance to MEDIMMUNE; provided, however,
that in regard to any tax so deducted PMC shall furnish MEDIMMUNE with
proper evidence of the taxes paid on its behalf. MEDIMMUNE will
furnish PMC with appropriate documents to secure application of the
most favorable rate of withholding tax under applicable tax treaties.
9.4
9.4.1 PMC shall keep complete, true and accurate books of
account and records for the purpose of determining the amounts payable
to MEDIMMUNE under this Agreement. Such books and records shall be
kept at PMC's principal place of business for at least three (3) years
following the end of the calendar quarter to which they pertain, and
will be open for inspection during such three (3) year period by an
independent certified accountant selected by MEDIMMUNE and reasonably
acceptable to PMC for the purpose of verifying PMC's royalty
statements. Such inspections may be made no more than once each
calendar year, during normal business hours and upon thirty (30) days'
prior written notice. Any such information shall be considered to be
Proprietary Information of PMC.
9.4.2 Inspections conducted under this Section 9.4 shall be
at the expense of MEDIMMUNE, unless an underpayment exceeding
(CONFIDENTIAL TREATMENT HAS BEEN REQUESTED) for the period covered by
the inspection is established in the course of any such inspection,
whereupon all costs relating thereto will be paid by PMC.
9.4.3 Any underpaid royalties shall be paid to MEDIMMUNE
within thirty (30) days after requested by MEDIMMUNE.
ARTICLE 10
INDEMNIFICATION
10.1 PMC shall defend, indemnify and hold harmless MEDIMMUNE,
Affiliates of MEDIMMUNE and its licensors, and their respective
directors, officers, shareholders, agents, consultants and employees
(individually and collectively, the "Indemnitees") from and against any
and all liability, loss, damages (including, without limitation,
consequential damages) and expenses (including reasonable attorneys'
fees) as the result of claims, demands, costs or judgments which may be
made or instituted against any of the Indemnitees arising out of (i)
the research, development manufacture, design, possession,
distribution, use, testing, sale or other disposition by or through PMC
and/or Affiliates of PMC and/or Licensees of either PMC or Affiliates
of PMC of any Licensed Product and/or any product or process in
connection with or arising out of the Sublicensed Rights or MEDIMMUNE
Know-How, (ii) a breach of this Agreement (including the breach of a
representation of warranty) by PMC, or (iii) the negligence or willful
misconduct of PMC, in each case, PMC's obligation to defend, indemnify
and hold harmless shall include any and all such claims, demands, costs
or judgments, including but not limited to money damages arising from
alleged personal injury (including death) to any person or alleged
property damage,. Notwithstanding the foregoing, PMC shall have no
obligation to indemnify or hold any Indemnitee harmless (but shall
still have the obligation to defend) with respect to any claim, demand,
cost or judgment that is finally determined to result from the willful
misconduct or gross negligence of such Indemnitee.
10.2 MEDIMMUNE hereby agrees to indemnify, defend and hold
harmless PMC and its Affiliates and their respective officers,
directors, shareholders, employees and agents from and against any and
all liability, loss, damages (including, without limitation,
consequential damages) and expenses (including reasonable attorneys'
fees) arising out of, based upon or resulting from (i) a breach of this
Agreement (including the breach of a representation or warranty) by
MEDIMMUNE, or (ii) the negligence or willful misconduct of MEDIMMUNE.
10.3 (a) Any party entitled to indemnification under Section
10.1 or 10.2 hereof (an "Indemnified Party") shall promptly notify the
party potentially responsible for such indemnification (the
"Indemnifying Party") upon becoming aware of any claim or claims
asserted or threatened against such Indemnified Party which could give
rise to a right of indemnification under this Agreement; provided,
however, that the failure to give such notice shall not relieve the
Indemnifying Party of its indemnity obligation hereunder except to the
extent that such failure substantially prejudices its rights hereunder.
(b) the Indemnifying Party shall have the right to defend,
at its sole cost and expense, such claim by all appropriate
proceedings, which proceedings shall be prosecuted diligently by the
Indemnifying Party to a final conclusion or settled at the discretion
of the Indemnifying Party; provided, however, that the Indemnifying
Party may not enter into any compromise or settlement unless (x) the
Indemnified Party consents thereto, which consent shall not be
reasonably withheld, and (y) such compromise or settlement includes as
an unconditional term thereof, the giving by each claimant or plaintiff
to the Indemnified Party of a release from all liability in respect of
such claim.
(c) The Indemnified Party may participate in, but not
control, any defense or settlement of any claim controlled by the
Indemnifying Party pursuant to this Section 10.3 and shall bear its own
costs and expenses with respect to such participation; provided,
however, that the Indemnifying Party shall bear such costs and expenses
if counsel for the Indemnifying Party shall have reasonably determined
that such counsel may not properly represent both the Indemnifying
Party and the Indemnified Party.
(d) If the Indemnifying Party fails to notify the
Indemnified Party within twenty (20) days after receipt of notice of a
claim in accordance with Section 10.3(a) hereof that it elects to
defend the Indemnified Party pursuant to this Section 10.3, or if the
Indemnifying Party elects to defend the Indemnified Party but fails to
prosecute or settle the claim diligently and promptly, then the
Indemnified Party shall have the right to defend, at the sole cost and
expense of the Indemnifying Party, the claim by all appropriate
proceedings, which proceedings shall be promptly and vigorously
prosecuted by the Indemnified Party to a final conclusion or settled;
provided, however, that in no event shall the Indemnifying Party be
required to indemnify the Indemnified Party for any amount paid or
payable by the Indemnified Party in the settlement of any such claim
agreed to without the consent of the Indemnifying Party, which shall
not be unreasonably withheld.
ARTICLE 11
MISCELLANEOUS
11.1 MEDIMMUNE and PMC shall cooperate in the preparation of a
mutually agreeable press release and other publicity disclosing the
existence of this Agreement and their business relationship. Except
for information disclosed in such a mutually agreed press release or
publicity, neither PMC nor MEDIMMUNE shall disclose the existence or
any terms of this Agreement without the prior written consent of the
other party, except for such limited disclosure as may be reasonably
necessary to either party's bankers, investors, attorneys or other
professional advisors, or in connection with a merger or acquisition of
the disclosing party, or as may be required by law in the offering of
securities or in securities regulatory filings or otherwise.
11.2 It is agreed that no waiver by either party hereto of any
breach or default of any of the covenants or agreements herein set
forth shall be deemed a waiver as to any subsequent and/or similar
breach or default.
11.3 The relationship of the parties hereto is that of independent
contractors. Neither party hereto is an agent, partner or joint
venturer of the other for any purpose.
11.4 In exercising its rights under this license, PMC shall fully
comply with the requirements of any and all applicable laws,
regulations, rules and orders of any governmental body having
jurisdiction over the exercise of rights under this license.
11.5 Any notice required or permitted to be given to the parties
hereto shall be deemed to have been properly given if delivered in
person or when received if mailed by first-class certified mail, by
overnight courier or sent by facsimile to the other party at the
appropriate address as set forth below or to such other addresses as
may be designated in writing by the parties from time to time during
the term of this Agreement.
MEDIMMUNE: MEDIMMUNE, INC.
35 West Watkins Mill Road
Gaithersburg, MD 20878
Attention: President
PMC: CONNAUGHT LABORATORIES, INC.
Route 611, P.O. Box 187
Swiftwater, Pennsylvania 18370
Attention: Corporate V.P., Business
Development and
V.P. Business Development PMC USA
With Copy to: Executive V.P., Secretary & General
Counsel
at: Pasteur M,rieux Serum et Vaccins, S.A.
58, avenue Leclerc
69007 Lyon, France
11.6 It is understood and agreed between MEDIMMUNE and PMC that
this Agreement constitutes the entire agreement with respect to the
subject matter of this Agreement, both written and oral, between the
parties, and that all prior agreements respecting the subject matter
hereof, either written or oral, expressed or implied, shall be
abrogated, canceled, and are null and void and of no effect. No
amendment or change hereof or addition hereto shall be effective or
binding on either of the parties hereto unless reduced to writing and
executed by the respective duly authorized representatives of each of
the parties hereto.
11.7 In the event that any provision of this Agreement becomes or
is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and
effect without said provision and the parties shall exert commercially
reasonable efforts to amend this Agreement to include a provision which
is valid, legal and enforceable and which carries out the original
intent of the parties. In the event that such a provision cannot be
included in the Agreement and the absence thereof materially changes a
party's obligations or rights under this Agreement, such party shall
have the right to terminate this Agreement.
11.8 This Agreement may be executed in counterparts, each of which
shall be deemed to be an original and both together shall be deemed to
be one and the same agreement. All headings and any cover page or
table of contents are inserted for convenience of reference only and
shall not affect its meaning or interpretation.
11.9 All matters affecting the interpretation, validity and
performance under this Agreement shall be governed by the internal laws
of the State of Maryland without regard for its conflict of laws
principles.
11.10 If and to the extent that either party hereto is
prevented, by circumstances not now reasonably foreseeable and not
within its reasonable ability to control, from performing any of its
obligations under this Agreement (other than payment obligations) and
promptly so notifies the other party giving full particulars of the
circumstances in question, then the party affected shall be relieved of
liability to the other for failure to perform such obligations, but
shall nevertheless use commercially reasonable efforts to resume full
performance thereof without avoidable delay, and pending such
resumption shall consult with the other party and shall permit and
shall use commercially reasonable efforts to facilitate any efforts the
other party may make to effect the performance of such obligations by
other means. If such failure to perform continues for a period of more
than six (6) months, the other party may terminate this Agreement by
written notice to the non-performing party with respect to the rights
and licenses with respect to those Licensed Products and with respect
to those countries affected by such failure. The failure of PMC to
meet MEDIMMUNE's obligations under the Texas A&M Agreement shall not be
considered to be circumstances within this Section 11.10 unless such
circumstances are covered by Section 14.04 of the Texas A&M Agreement.
11.11 PMC warrants that Affiliates of PMC will comply with the
terms, obligations and conditions imposed on PMC under this Agreement
as if such Affiliates were signatories to this Agreement.
ARTICLE 12
ASSIGNMENT; SUCCESSORS
12.1 This Agreement shall not be assignable by either of the
parties without the prior written consent of the other party (which
consent shall not be unreasonably withheld), except that either party
may assign this Agreement to an Affiliate or to a successor in interest
or transferee of all or substantially all of the portion of the
business to which this Agreement relates.
12.2 Subject to the limitations on assignment herein, this
Agreement shall be binding upon and inure to the benefit of said
successors in interest and assigns of MEDIMMUNE and PMC. In order for
any assignment to be effective any such successor or assignee of a
party's interest shall expressly assume in writing the performance of
all the terms and conditions of this Agreement to be performed by said
party and such Assignment shall not relieve the Assignor of any of its
obligations under this Agreement.
12.3 MEDIMMUNE agrees not to assign the Texas A&M Agreement
without the prior written consent of PMC (which consent shall not be
unreasonably withheld), except that such consent shall not be required
for assignment to an Affiliate or to a successor in interest or
transferee of all or substantially all of MEDIMMUNE's business, (i)
provided that such assignment is subject to this Agreement and (ii)
such assignment does not affect the Texas A&M Agreement or MEDIMMUNE'S
rights thereunder.
IN WITNESS WHEREOF, both MEDIMMUNE and PMC have executed this
Agreement, in duplicate originals, by their respective officers
hereunto duly authorized, the day and year first above written.
MEDIMMUNE, INC CONNAUGHT LABORATORIES, INC.
By: /s/ David M. Mott By: /s/ David J. Williams
Print Name: David M. Mott Print Name: David J. Williams
Title: Vice Chairman and CFO Title: President and CEO
EXHIBIT No. 10.92 (2)
AMENDMENT No. 2 TO
TERMINATION, PURCHASE and ROYALTY AGREEMENT
This AMENDMENT effective as of September 30, 1998, to the TERMINATION,
PURCHASE AND ROYALTY AGREEMENT, dated the 24th day of December, 1992 and as
amended the 29th day of December 1995, by and between MEDIMMUNE, INC.
(previously Molecular Vaccines, Inc.) ("MEDIMMUNE"), a corporation organized
under the laws of the State of Delaware, having its principal place of business
at 35 West Watkins Mill Road, Gaithersburg, MD 20878 and CONNAUGHT TECHNOLOGY
CORPORATION ("CTC"), a corporation organized under the laws of the State of
Delaware, having its principal place of business at 103 Springer Building, 3411
Silverside Road, Wilmington, Delaware 19810, CONNAUGHT LABORATORIES, INC.
("CLI"), a corporation organized under the laws of the State of Delaware, having
its principal place of business at P.O. Box 187, Route 611, Swiftwater,
Pennsylvania 18370, CONNAUGHT LABORATORIES LIMITED ("CLL"), a corporation
organized under the laws of the Province of Ontario, Canada, having its
principal place of business at 1755 Steeles Avenue West, Willowdale, Ontario,
M2R 3T4 Canada, and PASTEUR MERIEUX SERUMS et VACCINES S.A. ("PMsv"), a
corporation organized under the laws of France, having its principal place of
business in Lyon, France (CTC, CLI, CLL and PMsv being referred to individually
and collectively as "PMC").
W I T N E S S E T H:
WHEREAS, MEDIMMUNE and PMC entered into the Termination, Purchase and
Royalty Agreement dated December 24, 1992 (the "Agreement"), as amended
effective December 29, 1995, with respect to cytomegalovirus hyperimmune
globulin ("CMV Product"); and
WHEREAS, MEDIMMUNE wishes to further amend such Agreement to extend the
term of the filling and packaging of the CMV Product by PMC for MEDIMMUNE and
PMC wishes to provide such filling and packaging services under the terms
provided herein; and
WHEREAS, in consideration of this extended relationship, PMC is willing to
modify its filling and packaging facilities to accommodate the continued filling
and packaging of the CMV Product.
NOW, THEREFORE, in consideration of the respective covenants and agreements
contained herein, the parties, intending to be legally bound, hereby agree with
each other as follows:
1. Except as amended herein all capitalized terms have the same meaning
as in the Agreement, as previously amended.
2. Add the following Section 2.11 to Article II of the Agreement:
"2.11 In recognition of the extension of the term of the Agreement
and the modifications needed to permit the filling and packaging of CMV Product
and PMC's products on the same filling line, MEDIMMUNE hereby agrees to pay for
any required change parts to the PMC filling line that will be used for the CMV
Product. The cost for such change parts to the filling line will not exceed
fifteen thousand dollars ($15,000). In the event CLI determines that a new
incubator is required solely to support the filling and packaging of CMV Product
at the CLI facility, MEDIMMUNE hereby agrees to purchase or lease such incubator
and pay for the installation thereof. The cost of the new incubator and its
installation, if needed, shall be thirty thousand dollars ($30,000) to forty
thousand dollars ($40,000). CLI shall provide copies of all third party
invoices it pays on behalf of MEDIMMUNE, for which it seeks reimbursement from
MEDIMMUNE and shall submit to MEDIMMUNE an itemized invoice for all services
related to installation of the incubator performed by CLI on behalf of
MEDIMMUNE. Upon termination of this Agreement, MEDIMMUNE may take possession of
the incubator, by paying for (i) its removal from PMC's facility, in accordance
with PMC's reasonable direction, and (ii) its shipping costs to a destination of
MEDIMMUNE's choosing."
3. Amend Section 5.09 (a) of the Agreement as follows:
a) In the first sentence, change "December 31, 1998" to
"June 30, 2000"; and
b) Delete the last two (2) sentences in their entirety and
substitute in their place the following:
"MEDIMMUNE shall use CLI to fill, package and ship one hundred percent (100%) of
MEDIMMUNE's requirements for the CMV Product until June 30, 2000. CLI agrees to
fill, package and ship the CMV Product to meet such requirements of MEDIMMUNE."
4. Amend Section 5.09 (b) of the Agreement by adding a new paragraph
following paragraph (ii) and before the last sentence as follows:
"(iii) For Product delivered on or after October 1, 1998 and during 1999, a
price equal to (CONFIDENTIAL TREATMENT HAS BEEN REQUESTED) per vial of CMV
Product for both 1.0 and 2.5 gram vials; provided, however, that any overtime
costs or other incremental costs incurred by CLI to fill, package and ship the
CMV Product for expedited delivery to MEDIMMUNE, at MEDIMMUNE's request, shall
be borne by MEDIMMUNE. Such price may be increased by PMC effective January 1,
2000 by the most recent increase in the annual U.S. Producer Price Index."
5. Amend Section 5.09 (f) of the Agreement:
a) In the second sentence, change "December 31, 1998" to "June 30,
2000"; and
b) Delete the third and fourth sentences in their entirety and
substitute in their place the following:
"CLI shall not be required to deliver Product to MEDIMMUNE earlier than
sixty (60) days after the date of CLI's receipt of Bulk Product from which such
CMV Product is to be made; provided, however, that CLI shall use reasonable
efforts to deliver CMV Product more promptly at MEDIMMUNE's reasonable request.
It is agreed hereby that any delays in the installation, validation and approval
for use of the incubator and filling line change parts referenced in Section
2.11 hereof, shall not compromise CLI's delivery requirements for Product under
this Agreement."
6. Amend Section 5.09 (l) of the Agreement as follows:
In the first sentence, change "six (6)" to "seven (7)".
7. Amend Section 5.09 (m) of the Agreement by deleting it in its entirety
and substituting in its place the following:
"(m) In the event that as of June 30, 2000, MEDIMMUNE has not provided CLI
with orders to fill and package the "Minimum Amount of Vials" of Product, then
MEDIMMUNE shall pay to CLI an amount equal to the difference between the
"Minimum Amount of Vials" and the number of vials of Product ordered by
MEDIMMUNE from CLI multiplied by (CONFIDENTIAL TREATMENT HAS BEEN REQUESTED) of
the per vial price in effect during 2000, which amount shall be paid by
MEDIMMUNE no later than August 31, 2000. The "Minimum Amount of Vials" is equal
to (CONFIDENTIAL TREATMENT HAS BEEN REQUESTED) vials, including all vials of
Product delivered to MEDIMMUNE by PMC since the beginning of deliveries under
this Agreement in 1996. It is agreed that the (CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED) per vial penalty for any shortfall from the previous "Minimum Amount
of Vials" under the December 29, 1995 Amendment is hereby waived."
8. Add a new Section 5.09 (n) as follows:
"(n) The parties hereby agree that, in order to assist MEDIMMUNE with a
transition to its own manufacturing of Bulk Product, CLI will fill and label
three consistency lots of CMV Product (a total of approximately thirteen
thousand five hundred (13,500) vials) from Bulk Product manufactured in
MEDIMMUNE's new Frederick, MD facility and will cooperate with MEDIMMUNE to
prepare the required documentation for regulatory review purposes. MEDIMMUNE
shall notify CLI of the availability of such Bulk Product on a timely basis, and
the actual timing of the filling of such consistency lots shall be as reasonably
determined by CLI. The price per vial paid by MEDIMMUNE to CLI for such
consistency lots shall be (CONFIDENTIAL TREATMENT HAS BEEN REQUESTED). The
quantity of such consistency lot vials shall not be included in the "Minimum
Amount of Vials". In the event, following regulatory approval for marketing,
that MEDIMMUNE desires Bulk Product from its Frederick, MD facility to be
filled by CLI after the June 30, 2000 termination of this AMENDMENT, CLI agrees
to negotiate in good faith an additional extension to the Agreement."
9. Each party represents and warrants that it has the power and authority
to execute, deliver and perform its obligations under this Amendment, and that
neither the execution nor delivery of this Amendment nor the performance of its
obligations hereunder will constitute a breach of the terms or provisions of any
contract or violate the rights of any third party.
10. This Amendment shall be construed in accordance with and governed by
the laws of the Commonwealth of Pennsylvania applicable to agreements made and
to be performed wholly within such jurisdiction.
11. This Amendment may be executed in one or more counterparts (including
facsimiles), each of which shall for the purposes be deemed to be an original
and all of which when taken together shall constitute the same instrument.
12. The Agreement is amended as provided herein as of the effective date
of this amendment. Except as amended herein, the Agreement remains unchanged
and in full force and effect. This Second Amendment, the First Amendment and
the Agreement constitute the entire understanding between the parties and
supersede all prior understandings and agreements regarding the subject matter
of this Second Amendment, the First Amendment and the Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this AMENDMENT to
be executed on its behalf effective as of the date first above written.
MEDIMMUNE, INC.
By: /s/ David M. Mott
Title: Vice Chairman and Chief Financial Officer
CONNAUGHT TECHNOLOGY CORPORATION
By: /s/ Michael Ducas
Title: Secretary
CONNAUGHT LABORATORIES, INC.
By: /s/ David Williams
Title: President and Chief Executive Officer
CONNAUGHT LABORATORIES LIMITED
By: /s/ David Williams
Title: President and Chief Operating Officer
PASTEUR MERIEUX SERUMS et VACCINS S.A.
By: /s/ Paul Kirkconnell
Title: Corporate Vice President, Business Development
Exhibit No. 10.93
PURCHASE CONTRACT
Aid Association for Lutherans
MedImmune, Inc.
THIS PURCHASE CONTRACT ("Agreement") made as of the
25th day of November, 1998, by and between AID
ASSOCIATION FOR LUTHERANS, a Wisconsin corporation
(hereinafter called "Seller"), and MEDIMMUNE, INC., a
Delaware corporation (hereinafter called "Purchaser");
W I T N E S S E T H, T H A T:
1. Purchase and Sale. For the consideration
hereinafter set forth, but subject to the terms,
provisions, covenants and conditions herein contained,
Seller hereby agrees to convey, and Purchaser hereby
agrees to pay for:
(a) the land (the "Land") situated in
Frederick County, Maryland, described in APPENDIX 1
attached hereto and made a part hereof for all purposes,
together with all buildings and other improvements
situated thereon (collectively, the "Improvements"), all
fixtures and other property affixed thereto
(collectively, the "Fixtures"), all of Seller's estate,
right, title and interest under all leases, rental, and
tenancy agreements with tenants of the Land, the
Improvements, or both (collectively, the "Leases"), and
all of Seller's rights and appurtenances (collectively,
the "Benefits") pertaining to the Land, including all of
Seller's estate, right, title and interest in and to
adjacent streets, alleys, rights-of-way, and parking
areas; and
(b) all of Seller's estate, right, title and
interest in and to all equipment, machinery, furniture,
inventory and other personal property (collectively, the
"Personalty") situated on or in the Land or Improvements,
or used or acquired for use in the ownership, operation,
management or maintenance of all existing businesses
located upon the Land.
The Land, the Fixtures, the Improvements, the Leases, the
Benefits, and the Personality are herein called the
"Property".
2. Purchase Price. The purchase price to be paid
to Seller by Purchaser for the Property is Three Million
Two Hundred Forty Thousand and No/100 Dollars
($3,240,000.00).
3. Earnest Money Deposit: Contemporaneously
with the execution hereof, Purchaser has deposited with
Landmark Title Corporation located at 1707 N. Street,
N.W. Washington, D.C. 20036, Attention: Robert A.
Vogelsohn, Esq., (the "Escrow Agent") the sum of Fifty
Thousand and No/100 Dollars ($50,000.00) (such amount,
together with interest earned thereon, hereinafter called
the "Earnest Money") to be held in an FDIC insured
interest bearing escrow account. Purchaser and Seller
agree that upon execution of this Agreement, the Earnest
Money will become non-refundable and earned by Seller at
4:00 PM CST on December 28, 1998, subject to the material
breaches described in Paragraph 4 hereof.
Escrow Provisions.
(A) Release of the Earnest Money. Except as
otherwise provided herein, the Escrow Agent shall hold
the Earnest Money until the earlier of the following:
(i) One (1) business day following
receipt by the Escrow Agent, prior to December 28, 1998,
of a copy of the notice delivered by Purchaser to Seller
stating that Purchaser has elected to terminate this
Agreement prior to 4:00 PM EST on December 28, 1998 and
that Purchaser requests return of the Earnest Money, at
which time the Escrow Agent shall return the Earnest
Money to Purchaser;
(ii) Ten (10) days following receipt by
the Escrow Agent of a certificate (the "Seller's
Certificate") executed in good faith by Seller to the
effect that (a) the Closing has not been effected by the
Closing Date solely as a result of Purchaser's material
breach of it's obligations under this Agreement, and (b)
notice of said Seller's Certificate has been delivered to
Purchaser, at which time the Escrow Agent shall, unless
on or before such date the Escrow Agent has received a
certificate (a copy of which shall be provided by
Purchaser to Seller) executed in good faith by Purchaser
contesting the statement contained in the Sellers'
Certificate, release and deliver the Earnest Money to
Seller, together with all interest accrued thereon;
(iii) Ten (10) days following receipt
by the Escrow Agent of a certificate (the "Purchaser's
Certificate") executed in good faith by Purchaser to the
effect that (a) the Closing has not been effected by the
Closing Date as a result of Seller's material breach of
it's obligations under this Agreement or failure of a
closing condition, and (b) notice of said Purchaser's
Certificate has been delivered to Seller, at which time
the Escrow Agent shall, unless on or before such date the
Escrow Agent has received a certificate (a copy of which
shall be provided by Seller to Purchaser) executed in
good faith by Seller contesting the statements contained
in Purchaser's Certificate, release and deliver the
Earnest Money to Purchaser, together with all interest
accrued thereon;
(iv) An event set forth in Section 4(B)
hereof, whereupon the Escrow Agent shall release and
deliver the Earnest Money as contemplated in such Section
4(B).
(v) The Closing Date, at which time the
Earnest Money shall be delivered to Seller, together with
all interest accrued thereon.
(B) Objection to Certificate.
(i) In the event that Purchaser objects
to Seller's Certificate or Seller objects to Purchaser's
Certificate as provided in Subsections 4(A) (ii) or (iii)
above, then unless Purchaser and Seller resolve
completely such dispute within thirty (30) days from the
date of such objection and within that period advise the
Escrow Agent by joint written notice from Purchaser and
Seller of the resolution of such dispute and of the
disposition to be made by the Escrow Agent of the Earnest
Money (in which event the Escrow Agent shall release and
deliver the Earnest Money in accordance with such written
notice), then such dispute shall be resolved, upon the
initiation by any party hereto in an appropriate
proceeding, by an appropriate court. Furthermore, any of
the parties hereto may request that the Escrow Agent
tender the Earnest Money to the court in which such
proceeding has been commenced and, provided that such
court is authorized by applicable law to receive such
tender and consents thereto (if such consent is
necessary), the Escrow Agent shall tender the Earnest
Money to such court. The Escrow Agent shall thereby be
released from all further liability with respect to this
Agreement or the Earnest Money. In the event no such
request to tender the Earnest Money to such a court is
made or the court is not authorized or refuses to accept
such tender, the Escrow Agent shall continue to hold the
deposit until a final non-appealable judgment by the
appropriate court is rendered (in which event the Escrow
Agent shall release and deliver the Earnest Money in
accordance with such judgment), or until the Escrow Agent
receives joint written notice from Purchaser and Seller
advising the Escrow Agent of the resolution of such
dispute and instructing the Escrow Agent of the
disposition to be made of the Earnest Money, in which
event the Escrow Agent shall release and deliver the
Earnest Money in accordance with such written notice.
(ii) All reasonable costs and expenses
incurred or sustained by Purchaser and Seller (including,
without limitation, all of such parties' reasonable
attorneys' fees) relating to the litigation of any
dispute as provided in subsection 4(B)(i) above shall be
entirely borne by and paid for by the party or parties
against whom judgment is rendered.
(C) Provisions Regarding Escrow Agent.
(i) The duties and obligations of the
Escrow Agent shall be determined solely by the express
provisions of this Agreement and the Escrow Agent shall
not be liable except for the performance of such duties
and obligations as are specifically set out in this
Agreement. Escrow Agent shall be fully protected in
acting on or relying upon any written advise,
certificate, notice, direction, instruction, request, or
other paper or document which the Escrow Agent in good
faith believes to be genuine and to have been signed or
presented by the proper party or parties, and may assume
that any person purporting to give advise, certificate,
notice, direction, instruction or request or other paper
or document has been duly authorized to do so.
(ii) The Escrow Agent shall be fully
protected in acting on or relying upon any written
advice, certificate, notice, direction, instruction,
request, or other paper or document which the Escrow
Agent in good faith believes to be genuine and to have
been signed or presented by the proper party or parties,
and may assume that any person purporting to give advise,
certificate, notice direction, instruction or request or
other paper or document has been duly authorized to do
so.
(iii) The Escrow Agent shall not be
liable for any error of judgment, or for any act done or
step taken or omitted by it in good faith or for any
mistake in fact or law, or for anything which it may do
or refrain from doing in connection herewith, except its
own gross negligence or willful misconduct.
(iv) The Escrow Agent may seek the advice
of legal counsel in the event of any dispute or question
as to the construction of any of the provisions of this
Agreement or its duties hereunder, and it shall incur no
liability and shall be fully protected in respect of any
action taken, omitted or suffered by it in good faith in
accordance with the opinion of such counsel. If a
controversy arises between one or more parties hereto, as
to whether or not or to whom the Escrow Agent shall
deliver the Earnest Money or any portion thereof or as to
any other matter arising out of or relating to this
Agreement or the Earnest Money, the Escrow Agent shall
not be required to determine such controversy and need
not make any delivery of the Earnest Money or any portion
thereof but may retain the Earnest Money without
liability to anyone until the rights of the parties to
the dispute shall have been finally resolved by mutual
agreement, or by order, judgment or decree, accompanied
by an opinion of counsel of the party requesting release
of the Earnest Money to the effect that such order,
judgment or decree represents a final adjudication of the
rights of the parties by a court of competent
jurisdiction of the United States of America and the time
for appeal thereof, if any has expired without an appeal
thereof having been noticed, filed or perfected, and the
Escrow Agent shall be under no duty whatsoever to
institute or defend any such proceedings. The Escrow
Agent shall be entitled to assume that no such
controversy has arisen unless it has received conflicting
written notices from the parties to this Agreement or a
written notice form any person that such a controversy
has arisen which refers specifically to this Agreement
and identifies by name and address the adverse claimants
to the controversy.
(v) Seller and Purchaser will jointly and
severally reimburse and indemnify the Escrow Agent for,
and hold it harmless against, any loss, liability or
expense, including, without limitation, reasonable
attorneys' fees, incurred without bad faith, willful
misconduct or gross negligence on the part of the Escrow
Agent or its employees and arising out of or in
connection with its acceptance of, or the performance of
its duties and obligations under, this Agreement as well
as the costs and expenses of defending against any claim
or liability arising out of or relating to this
Agreement.
(vi) The Escrow Agent hereby accepts its
appointment and agrees to act as the Escrow Agent under
the terms and conditions of this Agreement.
5. Good, Insurable and Indefeasible Title. On the
Closing Date (hereinafter defined) Seller will have and
will convey to Purchaser the Property by Special Warranty
Deed warranting against and agreeing to defend against
anyone lawfully claiming by, through, or under Seller.
Such conveyance shall be made subject to the Permitted
Exceptions (see APPENDIX 2).
6. Survey. Within fifteen (15) days after a title
commitment has been issued, Purchaser, at Purchaser's
expense, shall cause to be certified to Purchaser and the
title company, an as-built survey certified substantially
in conformity with APPENDIX 3 (the "Survey"). If the
Survey does not meet the certification of Appendix 3
Purchaser shall give written notice detailing the
specific failure within five business (5) days of receipt
of the Survey. Seller will then cause the surveyor to
remedy the deficiency.
7. Owner's Title Policy Commitment. Within ten
(10) days after the effective date of this Agreement,
Seller shall cause, at Purchaser's expense, Chicago Title
to issue and actually deliver a Commitment for Title (the
"Title Commitment") to Purchaser, accompanied by true and
legible copies of all recorded instruments creating or
evidencing encumbrances against all or part of the
Property and committing the title company to furnish the
Title Policy (ALTA Form B) to Purchaser at Closing. The
Title Policy shall be in the amount of the Purchase
Price. If any encumbrance or other matters referred to
in the Title Commitment are reasonably unacceptable to
Purchaser, Purchaser shall give written notice to Seller
on or before five (5) days after the date of Purchaser's
receipt whereupon Seller may, but shall not be obligated
to cure the same; provided, however, Seller shall be
obligated to satisfy any liens encumbering the Property
which have arisen by, through or under Seller or which
are created after the effective date of this Agreement.
At the time of closing, Seller shall have the right to
use the proceeds of sale to satisfy any existing liens.
In the event Seller is unable to cure such objectionable
matters on or before the expiration of five (5) business
days thereafter, Purchaser may elect to either (a)
terminate this Agreement whereupon all Earnest Money
(hereinafter defined) shall be refunded to Purchaser and
neither party hereto shall have any further rights,
duties or obligations one to the other hereunder or (b)
waive such uncured objections and proceed to Closing
without reduction in the Purchase Price. All matters
approved by Purchaser pursuant hereto are herein referred
to as the "Permitted Exceptions".
8. Inspection. From the date hereof until 4:00 PM
CST on December 28, 1998, Purchaser, its agents,
contractors and employees shall have the right, subject
to the rights of tenants in possession, to enter the
Property to conduct such studies, tests, inspections and
analysis as Purchaser deems advisable or necessary.
Purchaser acknowledges to Seller that Purchaser is an
astute investor and having completed such due diligence
investigation as Purchaser has seen fit, approves all
matters relating to the inspection of the Property and
shall accept the Property on the closing date in its "as
is" condition without any warranty as to the Property's
physical or financial condition except as set forth
herein. Seller agrees to cooperate with Purchaser in
such efforts. Copies of any analysis, studies, reports,
test results, or other documentation given to Purchaser
by Seller will be returned to Seller should this
Agreement be terminated for any reason other than as a
result of a default by Seller. Purchaser shall have an
absolute right to terminate this Agreement with or
without cause and without recourse or forfeiture of any
Earnest Money up to 4:00 PM CST on December 28, 1998.
9. Covenants of Seller. Seller covenants and
agrees with Purchaser that, between the date hereof and
the date of Closing (both dates inclusive):
(a) Immediately upon obtaining knowledge of
the institution of any proceedings for the condemnation
or other taking of the Property, or any portion thereof,
by exercise of the power of eminent domain, Seller will
notify Purchaser of the pendency of such proceedings. If
any such proceedings are commenced, Purchaser shall have
twenty (20) days after receipt of Seller's written notice
or notices specifying the exact description of the
portions of the Property to be taken to elect to
terminate this Agreement by giving written notice to
Seller, and, if and to the extent required to permit such
full 20-day election period, the Closing Date shall be
automatically extended. Unless Purchaser duly exercises
such termination option, Seller shall enter into no
settlement agreement with the condemning authority
without first obtaining Purchaser's approval thereof and
all proceeds of condemnation or conveyance in lieu of
condemnation shall be assigned to Purchaser at Closing.
(b) Without the prior written consent of
Purchaser, Seller will not create, place or permit to be
created or placed, or through any act or failure to act,
acquiesce in the placing of, or allow to remain, any deed
of trust, mortgage, security interest, encumbrance,
charge or voluntary or involuntary lien (other than
unrecorded liens for routine repairs which will be
satisfied by Seller prior to Closing), whether statutory,
constitutional or contractual, against any part of the
Property (except for liens for ad valorem taxes on the
Property which are not delinquent and the lien of any non-
delinquent governmental assessment for public
improvements).
(c) Seller agrees forthwith to furnish to
Purchaser a true and correct rent roll of the Property,
dated currently, and listing the name of the tenant(s),
the termination date of the lease agreement(s) (including
any renewal options), the amount of monthly rent, the
amount of any security deposit(s), the date and amount of
the last rent increase (or decrease) and whether there is
any rent or other balances past due. All rent deposits,
security deposits in the Seller's possession, advance
rent deposits, prepaid rent and other similar sums in
respect of the Leases will be shown on the rent roll and
will be identified and disclosed and will be delivered or
credited to Purchaser at the Closing. All defaults and
delinquencies, if any, known, to Seller as of the Closing
Date will be disclosed to Purchaser by Seller.
(d) Seller will deliver possession of the
Property at the Closing free of any contract or agreement
with any employee, manager, agent, independent contractor
or other person or entity for the furnishing of any goods
or services (including, but not limited to, management
and lease brokerage services) under which Purchaser or
his successors or assigns might be held bound except only
those contracts, if any, which Purchaser agrees in
writing to assume; and Seller, at its expense, will pay
and discharge all obligations under all such contracts or
agreements as exist to the date of Closing. Seller
agrees to indemnify Purchaser against all such contracts
and agreements and all claims arising under any of them
except only to the extent, if any, Purchaser assumes in
writing obligations accruing under any such contracts
from and after Closing. Seller agrees to indemnify and
hold Purchaser harmless against any claim that Purchaser
is obligated or liable for the payment or performance of
any obligations under any contract or agreement entered
into by Seller in anyway in respect of the ownership,
operation or maintenance of the Property except only to
the extent, if any, that Purchaser assumes same in
writing.
(e) Seller will not enter into any new
agreements or commitments including leases and renewals
for the Property (except continued routine maintenance
and repair) affecting the Property without prior notice
to and approval of Purchaser.
(f) Seller will deliver possession of the
Property to Purchaser at Closing in the same condition as
it exists on the date of this Agreement, ordinary wear
and tear only excepted.
(g) Seller agrees to allow Purchaser the right
to contact the tenants at the Property for the purpose of
attempting to obtain Estoppel certificates from tenants
listed on the rent roll prior to Closing. Seller, as a
condition of Closing however, will not be obligated to
provide Estoppel certificates from tenants to Purchaser.
10. The Closing. The closing (the "Closing") of
this transaction shall take place in escrow at the office
of the Escrow Agent on or before December 31, 1998,
hereinafter called the "Closing Date". The parties shall
endeavor to preclose the transaction on the business day
prior to the Closing Date. Seller and Purchaser may
elect to close the transaction on an earlier date by
mutual written agreement.
At the Closing:
A. Seller shall satisfy the following
conditions:
(1) Deliver to Purchaser a duly executed
and acknowledged Special Warranty Deed (the "Deed") in
the form of Appendix 5 attached hereto, and a duly
executed and acknowledged bill of sale (the "Bill of
Sale") in the form of Appendix 6 attached hereto;
(2) Pay for and deliver to Purchaser the
Title Policy in the amount of the Purchase Price issued
by the title company, insuring that Purchaser owns fee
simple title to the Land, subject to no exceptions or
encumbrances other than the Permitted Exceptions;
(3) Deliver to Purchaser any Leases
affecting the Property in Seller's possession. (Seller
will not be liable for any Leases or pages of Leases not
actually received by Seller).
(4) Deliver to Purchaser an assignment of
the Leases in the form of Appendix 7 attached hereto;
(5) Accord to Purchaser a credit against
the Purchase Price equal to all tenant deposits which
were actually paid to or received by Seller in
satisfaction of any obligation of Seller to transfer such
deposits to Purchaser (Seller will not be liable for any
security deposit not actually received by Seller);
(6) Deliver to Purchaser original letters
to all tenants of the Property, signed by Seller (or its
duly authorized agent), stating that the Property has
been purchased by Purchaser and that all future rent is
to be paid to Purchaser;
(7) Deliver to Purchaser all keys to all
doors on the Property that Seller may have in its
possession;
(8) Pay Seller's share of the items to be
prorated at Closing, as specified below, and Seller's
closing costs;
(9) Pay one-half of any officials fees
and documentary stamps on the deed, transfer taxes or
taxes on intangibles, and escrow charges, if any;
(10) Deliver to Purchaser a Nonforeign
Certificate pursuant to the IRC Section 1445.
B. Provided that Seller fulfills at Closing
each of the foregoing conditions precedent listed above
to Purchaser's obligations listed below, Purchaser shall:
(1) Pay to Seller the Purchase Price less
credits and Earnest Money.
(2) Pay Purchaser's share of the items to
be prorated at Closing, as specified below, and
Purchaser's closing costs.
Pay one-half any documentary stamps on the deed,
transfer taxes or taxes on intangibles, and escrow fee
charges, if any.
(4) Pay one-half any official fees for
the filing and recording of Seller's deed.
C. The following prorations and other matters
shall be made and accomplished:
(1) Rents under all Leases shall be
prorated as of the Closing Date. Provided, however, that
past due rents shall not be prorated at Closing.
Purchaser shall have no obligation to collect any rents
or other charges due under the leases of the Property
attributable to the period prior to the Closing:
provided, however, that if Purchaser receives any such
past due rents or other charges applicable to the period
prior to the Closing, Purchaser shall promptly turn the
same over to Seller. All past due rents collected after
Closing shall first be applied to amounts due Purchaser.
(2) Property taxes for the year of
Closing shall be prorated as of the Closing Date. If the
actual amount of any such tax or maintenance fee is not
available at Closing, then an estimated proration shall
be made based upon the previous year's amounts.
Purchaser will be responsible for any and all property
taxes, special assessments or reassessments of the
Property levied by an federal, state, or municipal
governing authorities after the date of Closing.
(3) Each party shall be responsible for
the payment of its or his own attorneys' fees incurred in
connection with the transaction contemplated by this
Agreement, subject, however, to the provisions of Section
12 of the Agreement.
(4) All utilities services furnished to
the Property and not directly paid for by the tenants
shall be prorated as of the Closing Date, based upon the
utilities bills for the immediately preceding billing
period and meter readings taken within five (5) days
prior to the Closing Date. All utility services will be
put in the name of the Purchaser at the time of closing.
D. The obligations of Purchaser under this
Agreement are subject to the satisfaction on or before
the Closing Date, of each of the following conditions:
The representations and warranties of Seller
contained in this Agreement shall be true on the Closing
Date with the same effect as if they were made on and as
of the Closing Date, except as affected by transactions
contemplated hereby.
(2) Seller shall have performed all of
its obligations and agreements and complied with all of
its covenants contained in this Agreement to be performed
and complied with by it on or before the Closing Date.
(3) To be best of Seller's knowledge,
there are no laws or environmental laws, and there shall
be no proceeding pending before a court or administrative
agency of competent jurisdiction, which in the reasonable
judgment of Purchaser may result in a judgment or order
which enjoins, restrains, makes illegal or prohibits
consummation by the parties of the transactions
contemplated hereby or restricts or reduces in a material
way the operation or value of the Property.
(4) From the date hereof until the
completion of the Closing, there shall have been no
material adverse change in the Property or its occupancy
or operation.
(5) The Title Company shall have issued
coverage with respect to the Property, in the amount of
the Purchase Price, on the ALTA Form B form insuring fee
simple title.
(6) Seller shall provide Purchaser with
the documents listed in Paragraph 10(A) and 10(B) in form
reasonably satisfactory to Purchaser.
11. Litigation costs. Should either Seller or
Purchaser bring legal proceedings permitted hereunder
against the other to enforce the terms and provision of
this Agreement, the party in whose favor final judgment
is entered by the court in such proceedings shall be
entitled to recover against the other party the
attorneys' reasonable fees and expenses incurred by the
prevailing party in such proceedings.
12. Seller's Representations and Warranties.
Seller represents and warrants to Purchaser as follows:
(a) The execution and delivery by Seller of
this Agreement and said documents and their consummation
has been duly authorized by Seller, will not be in
conflict with any agreement or instrument to which Seller
is a party which would cause or result in the creation or
imposition of any lien, charge or encumbrance of any
nature whatsoever upon any of the Property or affect the
ability of Seller to carry out its obligations under this
Agreement.
(b) Seller is a corporation, duly organized,
validly existing and in good standing under the laws of
its jurisdiction of organization or incorporation,
authorized or licensed to do business in which the
Property is located, and has all requisite power and
authority, licenses and franchises to own and operate the
Property.
(c) To the best of Seller's knowledge, the
Land and Improvements are free from any use or occupancy
restrictions which restrict or prevent the present and
continued current use on and after the Closing Date of
the Property and no proceedings are pending or threatened
to change, redesignate or redefine the zoning
classification or use status of the Property.
(d) With respect to the Property, and except
for the matters listed in Schedule 12(d), Seller is not a
party to, nor is Seller bound or affected by, nor is the
Property subject to, any
(i) license agreement, assignment or
contract;
(ii) agreements for the purchase or sale
of goods or services; and
(iii) management, maintenance, agency,
leasing, service, security or any other agreement,
contract, arrangement or understanding related to the
Property.
All management and service contracts shall be
terminated by Seller prior to closing at no cost or
expense to Purchaser.
(e) To the best of Seller's knowledge, there
is no claim, suit, proceeding, arbitration, investigation
or inquiry pending before any federal, state, municipal,
foreign or other court or governmental, administrative or
self-regulatory body or agency or any private arbitration
tribunal, threatened against, relating to or affecting
the Property or the transaction contemplated by this
Agreement.
(f) To the best of Seller's knowledge, there
are no condemnation or eminent domain pending or
threatened and Seller has made no commitments therefor
and has received no notice, oral or written, of the
desire of any public authority or other entity to take or
use the Property for easements, rights-of-way or other
public or quasi-public purposes or for any other use
whatsoever.
(g) Except as set forth in the Leases, there
are no leasing commission or locator fees due or owing
which affect the Property on the Closing Date.
(h) To the best of Seller's knowledge, Seller
and its agents, contractors, consultants, lessees and
predecessors have obtained all permits, licenses and
other authorizations and have provided all notifications
and reports which are or were required under
environmental laws affecting the Property.
(i) To the best of Seller's knowledge, Seller
and its agents, consultants, and lessees are in
compliance with all terms and conditions of such required
permits, licenses and authorizations, and are in
compliance with all environmental laws affecting the
Property.
(j) To the best of Seller's knowledge, Seller
and its agents, contractors, consultants and lessees have
not received notice of, and are not aware of, any civil,
criminal or administrative action, suit, demand, claim,
hearing, notice of violation, investigation, proceeding
demand letter, or potentially responsible party letter,
pending or threatened against or relating in any way to
the environmental laws affecting the Property.
(k) To the best of Seller's knowledge all
leases and tenancies (including any subleases) to which
the Property is subject (collectively, the "Leases") are
set forth under APPENDIX 8. Except as shown on APPENDIX
8, no leases or tenancies shall encumber the Property on
the Closing Date nor shall any person or entity have any
other rights of use or possession to the Property on the
Closing Date. Each of the Leases are in full force and
effect, in accordance with its terms and has not been
modified, amended or extended. To the best of Seller's
knowledge, none of the tenants is in monetary default
(beyond any applicable grace period provided by the
Leases), nor, in default in the performance or observance
of any of the non-monetary terms, covenants or conditions
to be kept, observed or performed by it under the Leases.
13. Real Estate Commissions and Finder's Fees.
Seller shall be responsible for payment of a real estate
commission per a separate agreement with Carey Winston
(agent on behalf of the Seller) and Scheer Partners, Inc.
(agent on behalf of the Purchaser) payable upon close out
of escrow in respect to this transaction. Seller will
not be responsible for any other real estate commission
in respect to this transaction. Seller and Purchaser
warrant to each other that, to the best of their
respective knowledge, no other brokers were involved in
this transaction.
14. Casualty. In the event the Improvements should
be damaged by any casualty prior to Closing, the
Purchaser shall, within ten business (10) days following
the receipt of the notice give the Seller notice that it
is either proceeding to close or terminating this
Agreement. Failure of Purchaser to give Seller such
notice shall be deemed to be a decision by Purchaser to
proceed to closing. All insurance proceeds paid or
payable to Seller shall be delivered or assigned, as the
case may be, to Purchaser at closing.
15. Notice. Any notice or communication required
or permitted hereunder shall be given in writing, and may
be given by mailing same by United States mail, postage
prepaid, registered or certified mail, or by prepaid
telegram (provided that such telegram is confirmed by
mail in the manner previously described), or by fax
addressed as follows:
IF TO SELLER:
Aid Association for Lutherans
4321 North Ballard Road
Appleton, WI 54919
Attention: Mark G. McMurtrie
Fax No. (414) 380-6004
with a copy to:
Michael R. McAdoo, Esq.
King and Nordlinger
4350 N. Fairfax Drive,
Suite 950
Arlington, VA 22203
Fax No. (703) 522-8108
IF TO PURCHASER:
MedImmune, Inc.
35 West Watkins Road
Gaithersburg, MD 20878
Attention: David LeBehn
Fax No. (301) 527-4257
with a copy to:
Howard J. Rosenstock, Esq.
Dewey Ballantine LLP
1775 Pennsylvania Avenue, N.W.
Washington, DC 20006
Fax No. (202) 862-1093
IF TO ESCROW AGENT:
Landmark Title Corporation
1707 N. Street, N.W.
Washington, D.C. 20036
Attention: Robert A. Vogelsohn
Fax No. (202) 835-8337
or to such other address or in care of such other person
as hereafter shall be designated in writing by the
applicable party. Any such notice or communication shall
be deemed to have been given (a) on the date actually
received by the party for whom intended, (b) as of the
date of delivery or attempted delivery at the address and
in the manner provided in the preceding sentence or (c)
three (3) days after mailing in accordance with the
provisions of the preceding sentence, which ever occurs
first.
16. Section Order and Headings. The Section order
headings contained in this Agreement are for convenience
only and shall in no way enlarge or limit the scope of
meaning of the various and several Sections hereof, or be
referred to in interpreting the meanings of the
provisions of this Agreement.
17. Complete Agreement. This Agreement embodies
the complete agreement between Seller and Purchaser and
cannot be varied except by the written agreement of the
parties.
18. Applicability. The terms and provisions of
this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs,
personal representatives, successors and assigns.
19. Time. Time is of the essence of this
Agreement. This Purchase Contract together the Earnest
Money must be executed by Escrow Agent and Purchaser
without modification and received by Escrow Agent on or
before 4:00 PM EST on November 30, 1998 or this Purchase
Contract will be null and void.
20. Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of each of the
parties hereto and to their respective transferees,
successors and assigns. Notwithstanding the foregoing,
Seller hereby consents to an assignment of this Agreement
by Purchaser to a limited liability company to be formed
of which the Purchaser will be the general partner of one
of the members, and one or more of its offers will be the
managers for the limited liability company.
21. Applicable Law: This Agreement shall be
construed in accordance with and governed by the laws of
the State of Maryland.
22. Gender. Within this Agreement, words of any
gender shall be held and construed to include any other
gender, and words in the singular number shall be held
and construed to include the plural, unless the context
otherwise requires.
23. Survival. The representations and warranties
set forth in this Agreement shall not be merged with the
Deed or the Bill of Sale but shall survive the Closing
for a period of eighteen (18) months.
24. Severability. If any provision of this
Agreement is determined by a court of competent
jurisdiction to be illegal or unenforceable, then each
such provision shall be severed from this Agreement and
deemed excised herefrom, and the remainder of this
Agreement shall be enforced in accordance with its terms,
without regard to such provision so severed.
IN WITNESS WHEREOF, this Agreement is executed in
multiple originals by Seller and Purchaser as of the date
first above written.
SELLER: PURCHASER:
AID ASSOCIATION FOR LUTHERANS, MEDIMMUNE, INC.
a Wisconsin corporation a Delaware corporation
BY: /s/ Wayne C. Streck By: /s/ Melvin D. Booth
Name: Wayne C. Streck Name: Melvin D. Booth
Title: Vice President Title: President
Mortgage and Real Estate
By: /s/ David Crist
Name: David Crist
Title: Assistant Secretary
ESCROW AGENT:
LANDMARK TITLE INSURANCE CORPORATION
BY: /s/ Robert A. Vogelsohn
Name: Robert A. Vogelsohn
Title: President
Exhibit 10.94
1 SEVENTH AMENDMENT OF LEASE
THIS SEVENTH AMENDMENT OF LEASE (this "Seventh Amendment") is made as of August
1, 1998 (the "Effective Date") by and between ARE-QRS CORP., a Maryland corpora
tion ("Landlord"), and MEDIMMUNE, INC., a Delaware corporation ("Tenant").
EXPLANATORY STATEMENT
A. Clopper Road Associates ("Original Landlord") and Tenant entered into a
Lease Agreement dated February 14, 1991 (the "Original Lease"), whereby Tenant
agreed to lease from Landlord forty thousand eight hundred forty-three (40,843)
square feet (the "Original Leased Premises") in the building (the "Building")
known as Building D located at 35 West Watkins Mill Road, in the Bennington
Corporate Center in Gaithersburg, Maryland.
B. Original Landlord and Tenant entered into a First Amendment of Lease dated
June 8, 1993 (the "First Amendment"), pursuant to which Building D was expanded
and the square footage of the Original Leased Premises was increased by the
amount of such expansion (the "Expansion Space") (collectively, the Original
Leased Premises and the Expansion Space shall be hereinafter referred to as the
"Expanded Leased Premises"). Certain other changes were also made to the
Original Lease as a result of the First Amendment.
C. Original Landlord and Tenant entered into a Second Amendment of Lease dated
June 30, 1993 (the "Second Amendment"), pursuant to which the square footage of
the Expanded Leased Premises was increased by adding space (the "Second
Expansion Space") in Building B located at 25 West Watkins Mill Road
(collectively, the Original Leased Premises, the Expansion Space and the Second
Expansion Space are hereinafter referred to as the "Second Expanded Leased
Premises'); the Rent payable was adjusted, and certain other changes were made
to the Original Lease, as amended.
D. Original Landlord and Tenant entered into a Third Amendment of Lease dated
April 15, 1996, but effective as of January 1, 1995 (the "Third Amendment") to
adjust percentages and addresses set forth in the Original Lease as amended.
E. Original Landlord and Tenant entered into a Fourth Amendment of Lease dated
October 3, 1996 (the "Fourth Amendment") pursuant to which the portion of the
Second Expanded Leased Premises in Building B was expanded by adding space
adjacent thereto (the "VAD Space") (the Second Expanded Leased Premises, as
expanded by the VAD Space is hereinafter referred to as the 'Third Expanded
Leased Premises"); the Rent was adjusted, and certain other changes were made to
the Original Lease, as amended.
F. Original Landlord and Tenant entered into a Fifth Amendment of Lease dated
October 3, 1996 (the "Fifth Amendment") pursuant to which the portion of the
Third Expanded Leased Premises in Building D was expanded by adding space
adjacent thereto (the "Building D Expansion Space") (the Third Expanded Leased
Premises, as expanded by the Building D Expansion Space, is hereinafter referred
to as the "Fourth Expanded Leased Premises"; the Rent was adjusted, and certain
other changes were made to the Original Lease, as amended.
G. Landlord purchased the Project from Original Landlord.
H. Landlord and Tenant entered into a Sixth Amendment of Lease dated as of
September 10, 1997 (the "Sixth Amendment") pursuant to which the portion of the
Fourth Expanded Leased Premises in Building B was expanded by adding 10,073
rentable square feet of space (the "1997 Additional Space") (the Fourth Expanded
Leased Premises, as expanded by the 1997 Additional Space, is hereinafter
referred to as the "Fifth Expanded Leased Premises"; the Rent was adjusted, and
certain other changes were made to the Original Lease, as amended.
I. The Original Lease, the First, Second, Third, Fourth, Fifth and Sixth
Amendments are hereinafter collectively referred to as the "Lease".
J. Landlord now desires to lease to Tenant and Tenant desires to lease from
Landlord additional space in Building B located at 25 West Watkins Mill Road;
K. Landlord and Tenant also desire to adjust the Rent payable under the Lease
and make certain other changes to the Lease, all as more specifically set forth
below.
NOW, THEREFORE, in consideration of the Explanatory Statement, which shall be
deemed a substantive part of this Seventh Amendment, the covenants of the
parties herein and in the Lease, and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Landlord and Tenant
hereby agree as follows:
1. Effective Date of Seventh Amendment. From and after the date of this
Seventh Amendment, the Lease shall be amended as set forth below.
2. Capitalized Terms. All capitalized terms in this Seventh Amendment shall
have the same meanings as those in the Lease, unless specifically set forth
otherwise herein.
3. 1998 Additional Space. Landlord hereby leases to Tenant, and Tenant hereby
leases from Landlord, in addition to the Fifth Expanded Leased Premises, ap
proximately Three Thousand Three Hundred Seventy (3,370) rentable square feet of
space in Building B located at 25 West Watkins Mill Road (the "1998 Additional
Space") (collectively, the Fifth Expanded Leased Premises and the 1998
Additional Space shall be deemed the "Leased Premises"). The 1998 Additional
Space is shown more particularly on Exhibit A attached hereto and made a part
hereof.
Landlord hereby agrees that the Second Expansion Space, the VAD Space, the 1997
Additional Space and the 1998 Additional Space need not be separate and distinct
premises and, subject to compliance by Tenant with the provisions of the Lease
governing alterations, may be altered, reconfigured or redesigned to comprise a
single integrated premises.
4. Construction Of 1998 Additional Space
(a) Landlord shall use its best efforts to deliver the 1998 Additional Space to
Tenant within sixty (60) days following execution and delivery of this Seventh
Amendment by Landlord and Tenant. In the event that Landlord has not delivered
the 1998 Additional Space to Tenant before the close of business on December 31,
1998, Tenant shall have the right to terminate the Lease with respect to the
1998 Additional Space upon five (5) days prior written notice to Landlord by
Tenant. The date of delivery of the 1998 Additional Space to Tenant shall be
the "1998 Additional Space Commencement Date". Tenant hereby acknowledges that
it has inspected the 1998 Additional Space and that it is in an unfinished state
and Tenant hereby agrees to accept the 1998 Additional Space in "as is"
condition on the date hereof reasonable wear and tear excepted between the date
hereof and the date of delivery to Tenant. The 1998 Additional Space shall be
"broom clean" on the 1998 Additional Space Commencement Date.
(b) Tenant shall cause the improvements for the 1998 Additional Space (the
"1998 Additional Space Construction") to be constructed in accordance with the
plans and specifications for the 1998 Additional Space (the "1998 Additional
Space Plans"). The 1998 Additional Space Plans shall be approved and initialed
by the parties before construction begins. Landlord shall not unreasonably
withhold or delay its approval of the 1998 Additional Space Plans. Tenant shall
provide Landlord one copy of all the 1998 Additional Space Plans at Tenant's ex
pense, before construction begins.
Tenant shall have received a building permit from the City of Gaithersburg for
the 1998 Additional Space, and shall have provided a copy to Landlord, before
Tenant shall be authorized to begin construction under this Seventh Amendment.
Before construction begins Tenant shall have furnished to Landlord insurance
certificates evidencing the existence of all insurance policies required to be
carried by Tenant pursuant to the Lease.
(c) (i) Subject to Landlord's approval, which approval shall not be
unreasonably withheld or delayed, Tenant shall select a contractor (the "Third
Party Contractor") to construct the 1998 Additional Space improvements. Tenant
will not change the Third Party Contractor to another party without the prior
written consent of Landlord, which consent shall not be unreasonably withheld or
delayed. The Third Party Contractor shall provide all work, labor and materials
in support of the 1998 Additional Space Construction in accordance with the 1998
Additional Space Plans. The Third Party Contractor shall also perform its work
in strict compliance with all laws, rules, regulations, orders, codes and other
requirements of all governmental and quasi-governmental authorities having
jurisdiction with respect to the 1998 Additional Space and/or the performance of
the 1998 Additional Space Construction, and shall comply with all of Landlord's
reasonable rules and regulations provided to the Third Party Contractor.
(ii) In addition, Tenant shall obtain or cause the Third Party Contractor to
obtain Builder's Risk insurance naming Landlord and Tenant as additional
insureds and public liability insurance with limits of $1,000,000/ $2,000,000
for the 1998 Additional Space Construction. No later than the date of commence
ment of the 1998 Space Construction, Tenant shall cause the Third Party Contrac
tor to provide to Landlord original insurance certificates evidencing all such
insurance policies and proof that the Third Party Contractor maintains a policy
of Worker's Compensation Insurance in accordance with applicable law.
(iii) Landlord, without charge to Tenant, shall have the right to observe the
Third Party Contractor's work on the 1998 Additional Space Construction.
(d) Landlord shall contribute $10.00 per rentable square foot of The 1998
Additional Space ($10.00 x 3,370 = $33,700.00) (the "Allowance") toward the
costs and expenses incurred in connection with the performance of the 1998
Additional Space Construction. The Allowance shall be paid by Landlord to
Tenant upon the completion of the 1998 Additional Space Construction. The 1998
Additional Space Construction shall be completed at such time as Tenant, at its
sole cost and expense and without cost to Landlord (except for the Allowance)
shall (1) furnish evidence satisfactory to Landlord that all of the 1998
Additional Space Construction has been completed and paid for in full (which may
be evidenced by the architect's certificate of completion and final waiver and
release of liens from all contractors, subcontractors and materialmen (and such
work has been accepted by Landlord); that any and all liens therefor that have
been or might be filed have been discharged of record (by payment, bond, order
of a court of competent jurisdiction or otherwise) or waived and that no
security interests relating thereto are outstanding; (2) furnish to Landlord all
certifications and approvals with respect to the 1998 Additional Space
Construction that may be required from any governmental authority and any board
of fire underwriters or similar body for the use and occupancy of the 1998 Addi
tional Space; and (3) furnish an affidavit from Tenant's architect certifying
that all work performed in the 1998 Additional Space is in substantial
accordance with the 1998 Additional Space Plans approved by Landlord.
5. Certain Construction Provisions Not Applicable to 1998 Additional Space.
Article I.B of the Original Lease, Paragraphs 4 through 7 of the First Amendment
and Paragraph 5 of the Second Amendment shall not apply to the 1998 Additional
Space, except as may be specifically set forth in this Seventh Amendment.
6. Term of 1998 Additional Space Lease. The 1998 Additional Space Lease Term
will commence on the 1998 Additional Space Commencement Date, and will end on
November 30, 2006, subject to Paragraph 7 below. From and after the 1998
Additional Space Commencement Date, the term "Lease Term" will include the 1998
Additional Space Lease Term.
7. Cancellation Option
(a) Paragraph II.B of the Original Lease, as amended by the First Amendment,
and as amended by the Second Amendment (with respect only to the Expanded Leased
Premises (as defined in the Second Amendment) shall not apply to the 1998
Additional Space.
(b) Provided that no event of default shall have occurred and be continuing,
Tenant shall have the right to terminate the Lease with respect to the 1998
Additional Space at any time from and after November 30, 2001 upon at least 180
days prior written notice to Landlord, which notice shall be accompanied by a
termination fee in an amount equal to $32,903 plus an amount equal to three (3)
months Basic Annual Rent payable hereunder on the date of Tenant's notice in
respect of the 1998 Additional Space, if the termination date is November 30,
2001. The termination fee payable by Tenant to Landlord shall be reduced by
$548.38 per month after December 1, 2001. So long as Tenant pays the Basic
Annual Rent and Additional Rent payable under the Lease through the termination
date set forth in Tenant's notice, the Lease as it relates to the 1998
Additional Space shall expire and come to an end on such termination date as if
such date were the end of the Lease Term.
8. Basic Annual Rent for the 1998 Additional Space. Basic Annual Rent for the
1998 Additional Space shall equal Forty Four Thousand Two Hundred Forty Eight
and 10/100 Dollars ($44,248.10) per annum, payable in equal monthly installments
of Three Thousand Six Hundred Eighty Seven and 34/100 Dollars ($3,687.34).
Payment of Basic Annual Rent shall commence on the ninetieth (90th) day after
the 1998 Additional Space Commencement Date.
9. Rent.
(a) The Basic Annual Rent shall be increased each year by an amount equal to
three percent (3%) of the Basic Annual Rent then in effect. The first such
adjustment shall become effective December 1, 1999, and subsequent adjustments
shall become effective on December 1 of every calendar year thereafter for so
long as the Lease continues in effect.
(b) The above amounts of Basic Annual Rent for the 1998 Additional Space shall
be paid at the same time and in addition to the payment of Basic Annual Rent for
the balance of the Leased Premises, and otherwise in the manner set forth in
Article III.B of the Lease.
(c) There shall be no Security Deposit required hereunder for the 1998
Additional Space.
10. Adjustments to Square Footages and Percentages.
(a) Paragraph III.C(1)(c) of the Lease shall be amended so that the term
"Rentable Area of the Leased Premises" shall be deemed to be 84,668 square feet
(being Sixty and Ninety Four One Hundredths Percent (60.94%) of the Buildings)
so that the term includes the 1997 Additional Space. This amended square
footage number shall apply throughout the Lease to all references to the square
footage of the Leased Premises.
(b) Notwithstanding anything to the contrary contained in the Lease, including
this Amendment, for the purpose of calculating Additional Rent payments in
respect of Common Area Expenses, Taxes and Insurance Tenant's Portion shall be
Fifty Eight and Fifty One One Hundredths Percent (58.51%) and the term Tenant's
Portion shall not include the 1998 Additional Space. The term "Tenant's 1998
Additional Space Portion" shall mean Two and Forty Three One Hundredths Percent
(2.43%). Tenant shall pay to Landlord, as Additional Rent in respect of the
1998 Additional Space, Tenant's 1998 Additional Space Portion of Common Area
Expenses, Taxes and Insurance. Payments by Tenant of Additional Rent in respect
of the 1998 Additional Space shall be made monthly commencing on the date upon
which Basic Annual Rent in respect of the 1998 Additional Space commences and
shall be payable on the first day of each calendar month thereafter, each such
payment to be in an amount equal to one-twelfth (1/12th) of the amount of such
expenses for the applicable calendar year as estimated by Landlord. Payments of
Tenant's 1998 Additional Space Portion in respect of Common Area Expenses shall
not increase in any one year by more than eight percent (8%).
11. Use Restrictions and Rules. Paragraph IV.A of the Original Lease shall
apply to the 1998 Additional Space.
12. Improvements by Tenant. Subsection (i) of the second paragraph of
Paragraph IV.B of the Lease shall be stricken in its entirety and replaced with
the following:
"(i) the aggregate cost of the same does not exceed One Hundred Thousand Dollars
($100,000) with respect to the Expanded Leased Premises, Fifty Thousand Dollars
($50,000) with respect to the Second Expansion Space, Fifty Thousand Dollars
($50,000) with respect to the VAD Space, Fifty Thousand Dollars ($50,000) with
respect to the Building D Expansion Space, Fifty Thousand Dollars ($50,000) with
respect to the 1997 Additional Space or Fifty Thousand Dollars ($50,000) with
respect to the 1998 Additional Space...."
13. Insurance. Paragraph IV.E of the Original Lease shall apply to the 1998
Additional Space.
14. Damage and Destruction. The last two paragraphs of Article VI of the Lease
shall be amended to read as follows:
"Notwithstanding the preceding three (3) paragraphs of this Article VI, if
Landlord or Tenant has the right to terminate the Lease pursuant to this Article
VI due to damage or destruction to the Expanded Leased Premises and Building D
Expansion Space only (excluding the Second Expansion Space, the VAD Space, the
1997 Additional Space and the 1998 Additional Space) by fire, other casualty, or
any other cause (except condemnation), then Landlord or Tenant automatically
shall have the right pursuant to this Article VI to terminate the Lease with
respect to the Second Expansion Space, the VAD Space, the 1997 Additional Space
and the 1998 Additional Space regardless of whether the Second Expansion Space
and/or the VAD Space and/or the 1997 Additional Space and/or the 1998 Additional
Space has suffered any damage or destruction. However, if Landlord or Tenant
has the right to terminate the Lease pursuant to this Article VI due to damage
or destruction to the Second Expansion Space and/or the VAD Space and/or the
1997 Additional Space and/or the 1998 Additional Space only, (excluding the
Expanded Leased Premises and Building D Expansion Space), Landlord or Tenant
shall not have any right to terminate the Lease with respect to the Expanded
Leased Premises and Building D Expansion Space. If Landlord or Tenant duly
terminates the Lease under Article VI with respect to the Second Expansion Space
and/or the VAD Space and/or the 1997 Additional Space and/or the 1998 Additional
Space, the Lease shall remain in full force and effect with respect to the
Expanded Leased Premises and Building D Expansion Space, and the Second
Expansion Space and/or the VAD Space and/or the 1997 Additional Space and/or the
1998 Additional Space shall be stricken from the definition of "Leased Premises"
under the Lease. Upon such damage or destruction to the Second Expansion Space
and/or the VAD Space and/or the 1997 Additional Space and/or the 1998 Additional
Space, the parties agree to enter into an amendment to the Lease setting forth
the reduced Leased Premises and other related changes to the Lease, including,
without limitation, reduction of Basic Annual Rent and Tenant's Portion of
Common Area Expenses, Taxes and Insurance.
Notwithstanding anything set forth above in this Article VI, if Landlord or
Tenant has the right to terminate the Lease pursuant to this Article VI due to
damage or destruction to one of the Second Expansion Space or the VAD Space or
the 1997 Additional Space or the 1998 Additional Space, then Landlord or Tenant
shall not have the right to terminate the Lease under this provision with
respect to the non-damaged Space in Building B, or with respect to the Expanded
Leased Premises."
15. Condemnation. The last sentence of the second paragraph of Article VII of
the Lease shall only apply to the Expanded Leased Premises and Building D
Expansion Space and shall not apply to the Second Expansion Space, the VAD
Space, the 1997 Additional Space or the 1998 Additional Space. In addition, the
last two paragraphs of Article VII of the Lease shall be amended to read as
follows:
"Notwithstanding the preceding two (2) paragraphs of this Article VII, if
Landlord or Tenant has the right to terminate the Lease pursuant to this Article
VII due to taking or condemnation of the Expanded Leased Premises and Building D
Expansion Space only (excluding the Second Expansion Space, the VAD Space, the
1997 Additional Space and the 1998 Additional Space), then Landlord or Tenant
automatically shall have the right pursuant to this Article VII to terminate the
Lease with respect to the Second Expansion Space, the VAD Space, the 1997
Additional Space and the 1998 Additional Space, regardless of whether the Second
Expansion Space and/or the VAD Space and/or the 1997 Additional Space and/or the
1998 Additional Space has been condemned in whole or in part. However, if
Landlord or Tenant has any right to terminate the Lease pursuant to this Article
VII due to condemnation or taking of the Second Expansion Space and/or the VAD
Space and/or the 1997 Additional Space and/or the 1998 Additional Space only (ex
cluding the Expanded Leased Premises and Building D Expansion Space), Landlord
or Tenant shall not have the right to terminate the Lease with respect to the
Expanded Leased Premises and Building D Expansion Space. If Landlord or Tenant
duly terminates the Lease under Article VII with respect to the Second Expansion
Space and/or the VAD Space and/or the 1997 Additional Space and/or the 1998
Additional Space the Lease shall remain in full force and effect with respect to
the Expanded Leased Premises and Building D Expansion Space and the Second
Expansion Space and/or VAD Space and/or the 1997 Additional Space and/or the
1998 Additional Space shall be stricken from the definition of "Leased Premiss"
under the Lease. Upon such condemnation of the Second Expansion Space and/or
the VAD Space and/or the 1997 Additional Space and/or the 1998 Additional Space
the parties agree to enter into an amendment to the Lease setting forth the
reduced Leased Premises and other related changes to the Lease, including,
without limitation, a reduction of Basic Annual Rent and Tenant's Portion of
Common Area Expenses, Taxes and Insurance.
Notwithstanding anything set forth above in this Article VII, if Landlord or
Tenant has the right to terminate the Lease pursuant to this Article VII due to
taking or condemnation of one of the Second Expansion Space or the VAD Space or
the 1997 Additional Space or the 1998 Additional Space, then Landlord or Tenant
shall not have the right to terminate the Lease under this provision with
respect to the non-condemned Space in Building B, or with respect to the
Expanded Leased Premises.
16. Parking. Parking under the Lease shall be modified by adding Tenant's
right to the non-exclusive use of an additional eight parking spaces.
17. Renewal Option. Rider No. 1 to the Lease shall apply to the 1998
Additional Space.
18. Tenant Authorization. Tenant represents and warrants to Landlord that this
Seventh Amendment has been validly authorized and is executed by an authorized
officer of Tenant and that its terms are binding upon and enforceable against
Tenant in accordance herewith.
19. Brokers. Landlord and Tenant represent and warrant that there is no real
estate broker or agent representing Tenant in connection with this Seventh Amend
ment.
20. Lease as Amended. From and after the full execution of this Seventh
Amendment, the Lease shall be amended and in full force and effect in such
respects as are set forth in this Seventh Amendment, and all other provisions,
terms, conditions and riders of and to the Lease shall in all respects remain as
set forth in the Lease, in full force and effect and applicable to the 1998
Additional Space, except as specifically set forth in this Amendment.
21. Reaffirmation of Lease. Each of Tenant and Landlord hereby reaffirms and
restates, and agrees to be bound by, the covenants, promises, representations
and agreements set forth in the Lease (except to the extent that they are
expressly superseded by this Seventh Amendment) as if made herein.
LANDLORD:
ARE-QRS CORP.
By: /s/ Lynn Anne Shapiro
Name: Lynn Anne Shapiro
Title: General Counsel
MEDIMMUNE, INC.,
a Delaware corporation
By: /s/ David M. Mott
Name: David M. Mott
Title: President
_______________________________
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