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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________________ to _____________________
Commission File Number 0-19117
IMMULOGIC PHARMACEUTICAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3397957
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
610 Lincoln Street, Waltham, MA 02451
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (781) 466-6000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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 requirement for the past 90 days. Yes X No
Number of shares of $.01 par value common stock outstanding as of
August 5, 1998: 20,358,780
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IMMULOGIC PHARMACEUTICAL CORPORATION
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION Page No.
--------
Item 1. Unaudited Condensed Consolidated Financial Statements
and Notes
Unaudited Condensed Consolidated Balance Sheets 3
June 30, 1998 and December 31, 1997
Unaudited Condensed Consolidated Statements of Operations 4
Three and Six Months Ended June 30, 1998 and 1997
Unaudited Condensed Consolidated Statements of Cash Flows 5
Six Months Ended June 30, 1998 and 1997
Notes to Unaudited Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Matters 10
Item 6. Exhibits 11
Reports on Form 8-K 11
SIGNATURES 12
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
IMMULOGIC PHARMACEUTICAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 14,633 $ 8,437
Investments 11,672 19,068
Prepaid expenses and other current assets 601 561
--------- ---------
Total current assets 26,906 28,066
Property and equipment, net 5,709 6,685
Investments 22,669 24,788
Other assets 49 49
--------- ---------
Total assets $ 55,333 $ 59,588
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 284 $ 539
Deferred rent 823 1,016
Payroll and payroll taxes 422 1,796
Security deposit on sublease 500 --
Accrued expenses and other current liabilities 868 1,893
--------- ---------
Total current liabilities 2,897 5,244
Other long-term liabilities 275 325
--------- ---------
Total liabilities 3,172 5,569
Stockholders' equity:
Preferred stock - $.01 par value;
1,000,000 shares authorized; no shares issued
or outstanding -- --
Common stock - $.01 par value; 40,000,000 shares
authorized; 20,358,780 and 20,340,727 shares issued
and outstanding at June 30, 1998 and
December 31, 1997, respectively 204 203
Additional paid-in capital 185,284 185,250
Accumulated deficit (133,327) (131,434)
--------- ---------
Total stockholders' equity 52,161 54,019
--------- ---------
Total liabilities and stockholders' equity $ 55,333 $ 59,588
========= =========
</TABLE>
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
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IMMULOGIC PHARMACEUTICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
------- ------- ------- --------
<S> <C> <C> <C> <C>
Revenues:
Sponsored research revenues $ 432 $ 368 $ 962 $ 920
------- ------- ------- --------
Total revenues 432 368 962 920
Operating expenses:
Research and development 1,321 5,113 2,808 10,004
General and administrative 513 1,396 1,380 4,284
------- ------- ------- --------
Total operating expenses 1,834 6,509 4,188 14,288
------- ------- ------- --------
Operating loss (1,402) (6,141) (3,226) (13,368)
Interest income 630 851 1,333 1,742
------- ------- ------- --------
Net loss $ (772) $(5,290) $(1,893) $(11,626)
======= ======= ======= ========
Basic and diluted net loss per
common share $ (0.04) $ (0.26) $ (0.09) $ (0.57)
======= ======= ======= ========
Weighted average number of
common shares outstanding 20,359 20,242 20,357 20,241
======= ======= ======= ========
</TABLE>
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
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IMMULOGIC PHARMACEUTICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
SIX MONTHS ENDED
JUNE 30,
1998 1997
-------- --------
Cash flows for operating activities:
Net loss $ (1,893) $(11,626)
Adjustments used to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 976 1,318
Employer 401K match 34 85
Change in assets and liabilities:
Prepaid and other current assets (40) (260)
Accounts payable (255) (53)
Sublease deposit 500 --
Other liabilities (2,641) (1,283)
-------- --------
Total adjustments (1,426) (193)
-------- --------
Net cash used in operating activities (3,319) (11,819)
Cash flows from investing activities:
Purchase of equipment and improvements -- (588)
Purchase of short term investments (13,320) (20,450)
Redemption of short term investments 20,716 20,525
Purchase of long term investments -- (4,002)
Redemption of long term investments 2,119 12,240
-------- --------
Net cash provided by investing activities 9,515 7,725
Cash flows from financing activities:
Proceeds from exercise of stock options -- 6
-------- --------
Net cash provided by financing activities -- 6
-------- --------
Net increase (decrease) in cash and cash equivalents 6,196 (4,088)
Cash and cash equivalents, beginning of period 8,437 23,742
-------- --------
Cash and cash equivalents, end of period $ 14,633 $ 19,654
======== ========
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
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IMMULOGIC PHARMACEUTICAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements reflect
all adjustments (consisting of only normally recurring adjustments) which are
necessary, in the opinion of management, for a fair presentation of results of
the interim periods presented. The statements do not include all information and
footnote disclosures required by generally accepted accounting principles and
therefore should be read in conjunction with the consolidated financial
statements and footnotes included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1997. The results of operations and cash flows
for the interim periods presented are not necessarily indicative of the results
of operations and cash flows for the full fiscal year.
NOTE B - NEW ACCOUNTING PRONOUNCEMENTS
In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position (SOP
98-5), "Accounting for the cost of start-up activities". SOP 98-5 requires all
costs of start-up activities (as defined by the SOP) to be expensed as incurred.
The Company has determined that adoption of SOP 98-5 will have no impact on it's
consolidated financial statements.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. The Company
has determined that adoption of SFAS 133, which is effective for all fiscal
quarters of fiscal years beginning after June 15, 1999, will have no impact on
its consolidated financial statements.
NOTE C - NET LOSS PER SHARE
Basic net loss per share is the same as diluted net loss per common share for
the three and six months ended June 30, 1998 and 1997, respectively. Certain
securities were not included in the computation of the Company's diluted
earnings per share for the three and six months ended June 30, 1998 and 1997,
respectively because they would have an anti-dilutive effect due to the
Company's net loss for each period. For the three and six months ended June 30,
1998 and 1997, these securities included 1,412,665 stock options and 3,012,093
stock options respectively.
NOTE D - SUBLEASE SECURITY DEPOSIT
During the first quarter of 1998, the Company received a security deposit in the
amount of $500,000 in accordance with the sublease agreement for its Waltham, MA
facility.
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NOTE E - LICENSE AGREEMENTS
During the second quarter of 1998, the Company signed an exclusive license
agreement, except in Japan, with Heska Corporation. The Company licensed the
worldwide exclusive rights, except in Japan, to develop and commercialize its
recombinant allergen technology for diagnosis, immunotherapy, and gene therapy
for both companion animals and humans. The Company may receive license fees,
milestone payments, and royalties for both veterinary and human applications.
The license is non-exclusive in Japan, where ImmuLogic licensed its recombinant
allergen technology for Japanese cedar on a non-exclusive basis to Sankyo Co.,
Ltd in May 1998. Total revenues recorded under these two agreements totaled
$200,000 for the period ending June 30, 1998.
NOTE F - SUBSEQUENT EVENT
In July 1998, the Company entered into an agreement with Chesapeake Biological
Laboratories Inc. for the latter to provide manufacturing services for the
Company's cocaine and nicotine vaccine products.
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ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
REVENUES
Revenues for the second quarter of 1998 were $432,000 compared to $368,000 for
the second quarter of 1997. For the first six months of 1998, revenues were
$962,000 consisting primarily of sponsored research revenues from the National
Institute of Health (NIH) for a grant related to the research and development of
a cocaine vaccine and research funding from Schering AG, Germany (Schering)
related to a joint development and collaboration agreement in the Company's
multiple sclerosis program which ended as of March 31, 1998. For the first six
months of 1997, revenues were $920,000, consisting primarily of research funding
from Schering related to the aforementioned joint development and collaboration
agreement in the Company's multiple sclerosis program and research revenues from
the NIH.
OPERATING EXPENSES
Total operating expenses for the second quarter of 1998 decreased $4,675,000 or
71.8% to $1,834,000 as compared to the second quarter of 1997. On a year-to-date
basis, total expenses decreased by $10,100,000 or 70.7% to $4,188,000 as
compared to the first six months of 1997. The decrease in operating expenses in
both the three and six-month periods was primarily due to the Company's
restructuring which occurred during 1997. Specifically, reduced compensation and
related expenses as a result of lower headcount, the sublease of a portion of
the Company's facility and related savings and reduced expenditures for the
Company's discontinued ALLERVAX(R) CAT and RAGWEED programs contributed to the
savings.
INTEREST INCOME
Interest income for the second quarter of 1998 was $630,000 compared to $851,000
for the second quarter of 1997, a decrease of $221,000 or 26.0%. For the first
six months of 1998, interest income was $1,333,000 compared to $1,742,000 for
the first six months of 1997, a decrease of $409,000 or 23.5%. The decrease in
interest income for both the quarter and year-to-date periods resulted from a
lower available investment balance as compared to the prior year.
NET LOSS
The Company reported a net loss of $772,000 ($(0.04) per share) for the second
quarter of 1998 compared to a net loss of $5,290,000 ($(0.26) per share) for the
second quarter of 1997, a decrease of $4,518,000 or 85.4%. For the first six
months of 1998, the Company reported a net loss of $1,893,000 ($(0.09) per
share) compared to a net loss of $11,626,000 ($0.57) per share) for the
comparable 1997 period. The decrease in net loss in both the three and six-month
periods was primarily due to the Company's restructuring which occurred during
1997 offset in part by lower interest income as compared to the prior year.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents and investments were $48,974,000 at June 30, 1998
compared to $52,293,000 at December 31, 1997. Net cash used in operations for
the six months ended June 30, 1998 was $3,319,000 as compared to $11,819,000 in
the comparable 1997 period. The decrease of $8,500,000 was due primarily to the
Company's restructuring which occurred during 1997. In addition, the Company
received a security deposit in the amount of $500,000 in accordance with the
sublease agreement for its Waltham, MA facility. Offsetting these savings was a
decrease in accounts
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payable and accrued expenses of $2,896,000 due to the payment of expenses
accrued as of December 31, 1997 and reduced interest income for the first six
months of 1998 as compared to prior year.
The Company has funded its operations to date primarily through the sale of
equity securities, sponsored research revenues, license payments, and earnings
on invested capital. The Company has expended substantial funds for the research
and development of its product candidates, and may in the future expend
substantial funds for further research and development of its product
candidates. The Company may seek to obtain additional funds for these purposes
through equity or debt financings, collaborative arrangements with corporate
partners, or from other sources. No assurance can be given that such additional
funds will be available to the Company for such purposes on acceptable terms, if
at all. Insufficient funds could require the Company to delay, scale back, or
eliminate certain of its research and development programs or to license third
parties to develop products or technologies that the Company would otherwise
develop itself. The Company anticipates that its existing capital resources will
enable it to maintain its current and planned operations through at least
December 31, 2000.
YEAR 2000
The Company is conducting a software review of products used both within the
Company and by third parties which assist the Company in managing its business
to ensure that the software will be "Year 2000" compliant. The Year 2000
problem is the result of computer programs being written to recognize two
digits rather than four to define the applicable year causing computer programs
to interpret a date using "00" as the year 1900 rather than the year 2000,
which could result in product failures or miscalculations. The Company is
undertaking actions to ensure that software used to manage its business will
continue to function properly in the year 2000. While the Company believes that
software used to manage its business operations will be Year 2000 compliant,
the Company may experience disruptions in its business operations as a result
of use by customers and suppliers of software that is not Year 2000 compliant.
There can be no assurance that Year 2000 problems will not be encountered or
that the costs incurred to resolve such problems will not be material.
NEW ACCOUNTING PRONOUNCEMENTS
In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position (SOP
98-5), "Accounting for the cost of start-up activities". SOP 98-5 requires all
costs of start-up activities (as defined by the SOP) to be expensed as incurred.
The Company has determined that adoption of SOP 98-5 will have no impact on it's
consolidated financial statements.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. The Company
has determined that adoption of SFAS 133, which is effective for all fiscal
quarters of fiscal years beginning after June 15, 1999, will have no impact on
its consolidated financial statements.
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, the words "believes," "anticipates," "plans," expects," intends" and
similar expressions are intended to identify forward-looking statements. There
are a number of important factors that could affect the future operating results
of the Company, including, without limitation, the factors set forth in the
preceding paragraph with respect to availability of funds and those set forth
under the heading "Factors Which May Affect Future Operating Results" and
elsewhere in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, as filed with the Securities and Exchange Commission, and the
information contained in this Quarterly Report on Form 10-Q should be read in
light of such factors.
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
At the Annual Meeting of Stockholders held on June 17, 1998, the vote with
respect to the election of seven directors to the Board was as follows; C.
Garrison Fathman, M.D., 16,152,062 shares FOR and 331,364 shares WITHHELD;
Samuel C. Fleming, 16,156,604 shares FOR and 326,822 shares WITHHELD; Paul A.
Friedman, M.D., 16,157,012 shares FOR and 326,413 shares WITHHELD; Carl S.
Goldfischer, M.D., 16,148,642 shares FOR and 334,783 shares WITHHELD; Geraldine
A. Henwood, 16,148,862 shares FOR and 334,564 shares WITHHELD; J. Joseph Marr,
M.D., 16,146,609 shares FOR and 336,817 shares WITHHELD; and Richard F. Pops,
16,159,682 shares FOR and 323,743 shares WITHHELD. The vote with respect to
ratifying the selection of Price Waterhouse Coopers L.L.P. as the Company's
independent auditors for the current year was 16,366,142 shares FOR, 92,527
shares AGAINST and 24,757 shares ABSTAINING.
ITEM 5. OTHER INFORMATION
As set forth in the Company's Proxy Statement for its 1998 Annual Meeting of
Stockholders, stockholder proposals submitted pursuant to Rule 14a 8 under the
Exchange Act for inclusion in the Company's proxy materials for its 1999 Annual
Meeting of Stockholders must be received by the Secretary of the Company no
later than December 31, 1998.
In addition, in accordance with recent amendments to Rules 14a-4, 14a-5 and
14a-8 under the Exchange Act, written notice of stockholders proposals submitted
outside the processes of Rule 14a 8 for consideration at the 1999 Annual Meeting
of Stockholders must be received by the Company on or before March 20, 1999.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit:
Exhibit
Number Exhibit
------- -------
10.01* License Agreement With Heska Corporation
dated June 16, 1998
10.02* Clinical Supply and Process Development
Agreement with Chesapeake Biological
Laboratories, Inc. dated July 6, 1998
27 Financial Data Schedule
* Confidential Treatment requested as to certain portions
(b) Reports on Form 8-K: No Current Reports on Form 8-K were
filed during the quarter ended June 30,
1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
IMMULOGIC PHARMACEUTICAL CORPORATION
------------------------------------
(Registrant)
Date: 8/13/98 /s/ J. Joseph Marr
------- --------------------------------------------
J. Joseph Marr, M.D.
Chief Operating Officer
Date: 8/13/98 /s/ J. Richard Crowley
------- --------------------------------------------
J. Richard Crowley
Chief Financial Officer
(Principal Financial and Accounting Officer)
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Exhibit 10.01
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
LICENSE AGREEMENT
This Agreement is made and entered into as of the 16th day of June,
1998 ("Effective Date") by and between HESKA CORPORATION, a Delaware corporation
having its principal place of business at 1825 Sharp Point Drive, Fort Collins,
Colorado 80525 (facsimile: 970-484-9505) ("HESKA") and IMMULOGIC PHARMACEUTICAL
CORPORATION, a Delaware corporation having its principal place of business at
610 Lincoln Street, Waltham, Massachusetts 02154 (facsimile: 781-466-6050)
("IMMULOGIC").
WHEREAS, IMMULOGIC owns the rights to certain biological materials,
certain patent rights and certain related know-how, and has the right to grant
licenses in and to such rights and know-how, respectively; and
WHEREAS, HESKA desires to obtain an exclusive, worldwide license
(except as otherwise set forth herein) under IMMULOGIC's rights and know-how to
develop and commercialize products for use in connection with diagnosis,
prevention and treatment of disease in mammals (including but not limited to
humans) and IMMULOGIC is willing to grant HESKA such a license, all on the terms
contained in this Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1. - DEFINITIONS
1.1 For purposes of this Agreement, the following words and phrases
shall have the following meanings:
1.2 "Affiliate" shall mean, with respect to a party, all entities at
least fifty percent (50%) owned or controlled by such party, an entity which
directly or indirectly owns or controls more than fifty percent (50%) of the
voting stock of such party, and any entity, the majority ownership of which is
directly or indirectly common to the ownership of such party.
1.3 "ALLERVAX(TM) Technology" shall mean any of the patent rights under
the patents and patent applications listed on Exhibit C hereto relating
exclusively to the therapeutic use of T cell reactive synthetic peptides of 30
amino acids or less that have amino acid sequences derived from the
corresponding regions of corresponding natural allergens for cat, ragweed,
ryegrass and dog. Without limiting the generality
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of the foregoing, ALLERVAX(TM) Technology shall not include any of the foregoing
that relate to house dust mites.
1.4 "Biological Materials" shall mean the native and recombinant
allergens covered by the Licensed Patent Rights, including proteins and
peptides, genes and genetic materials encoding such allergens, proteins and
peptides, and antibodies and other inhibitors of such allergens, proteins and
peptides, including those on Exhibit A attached hereto, together with any and
all progeny, mutations or derivatives thereof.
1.5 "Field" shall mean the Human Field and the Veterinary Field.
1.6 "Human Field" shall mean the field of diagnosis, prevention and
treatment of allergic disease (including asthma) in humans.
1.7 "Know-How" shall mean the Biological Materials and all information
and data regarding the Biological Materials or the manufacture or use thereof in
the Field not included in the Licensed Patent Rights (including, but not limited
to, formulae, procedures, protocols, techniques, inventions, methods, processes,
systems, compositions of matter and results of experimentation and testing and
all documentation thereof). Know-How also shall include, but not be limited to
(i) medical, toxicological or other data or information relating to any
Biological Materials (including, without limitation, pre-clinical and clinical
data, notes, reports, models and samples), (ii) information and data with
respect to manufacture, production and purification procedures and processes, as
well as the analytical methodology, used in the development, testing, assaying,
analysis, production and packaging of any product or service based in whole or
in part on such Biological Materials, (iii) regulatory filings, data and
documentation and (iv) any other information and non-patented proprietary rights
with respect to the Biological Materials and the manufacture or use thereof in
the Field.
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1.8 "Licensed Know-How" shall mean all Know-How (a) which is not
generally known, but has actually been disclosed to HESKA by IMMULOGIC, (b)
which is necessary or useful to develop, make, use, sell or otherwise exploit
products or services based in whole or in part on the Biological Materials for
use in the Field, and (c) in which IMMULOGIC or any of its Affiliates has an
ownership or licensable interest during the term of this Agreement. A current
list of all documented Licensed Know-How is attached hereto as Exhibit B.
1.9 "Licensed Patent Rights" shall mean (a) those patents and patent
applications listed on Exhibit C hereto, (b) all patent applications heretofore
or hereafter filed or having legal force in any country which claims the
Biological Materials or the manufacture or use thereof, (c) all patents that
have issued or in the future issue from the applications referenced in (a) or
(b), including without limitation utility, model and design patents and
certificates of invention, and (d) all divisionals, continuations,
continuations-in-part, reissues, renewals, extensions or additions to any such
patent applications and patents, in each case which are directed to subject
matter specifically described in the United States patents and/or patent
applications described in (a), (b) or (c) above; all in which IMMULOGIC or any
of its Affiliates has an ownership or licensable interest during the term of
this Agreement The Licensed Patent Rights shall not include the ALLERVAX(TM)
Technology. IMMULOGIC will periodically update Exhibit C.
1.10 "Licensed Products" shall mean any product or part thereof which
incorporates or has been developed or made using any of the Licensed Technology,
including all Patented Products.
1.11 "Licensed Technology" shall mean, collectively, the Licensed
Patent Rights, the Licensed Know-How and Biological Materials; provided, that
Licensed Technology shall not include the ALLERVAX(TM) Technology.
1.12 "Net Sales" shall mean, with respect to any Patented Products sold
by HESKA, its Affiliates and Sublicensees, the invoiced sales price of such
Patented Products billed to independent customers who are not Affiliates or
Sublicensees of HESKA, less (a) credits, allowances, discounts and rebates to,
and chargebacks from the account of, such customers for damaged, rejected,
outdated or returned product returned in accordance with HESKA policies; (b)
freight and insurance costs incurred in transporting such Patented Products to
such customers; (c) quantity, trade and cash discounts and other price
reductions allowed; (d) discounts, fees and commissions payable to third party
sales agents or distributors (but not HESKA employees) with respect to orders or
sales of such Patented Products; (e) sales, use, value-added and other direct
taxes incurred (to the extent included in such invoiced sales price); and (f)
customs, duties, tariffs, surcharges and other governmental
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<PAGE> 4
charges incurred in connection with the exportation or importation of such
Patented Products (to the extent included in such invoiced sales price).
1.13 "New Technology" shall mean any technology (including but not
limited to patents, patent applications, inventions, formulae, procedures,
protocols, techniques, methods, processes, systems, compositions of matter,
results of experimentation and testing and other know-how) relating to the
diagnosis, prevention or treatment of allergic disease in mammals (including but
not limited to humans), other than the Licensed Technology.
1.14 "Patented Product" shall mean any Licensed Product which, at the
time of sale, but for the licenses granted under this Agreement, would infringe,
or the indicated use of which would infringe, any Valid Issued Claim contained
in the Licensed Patent Rights in the country in which any such Licensed Product
is sold.
1.15 "Sublicensee" shall mean a person or entity other than an
Affiliate to whom HESKA has sublicensed any rights hereunder. "Sublicensee"
shall not include any third party distributors who perform no more than
customary marketing and selling functions (including, in any foreign country,
any regulatory or other activities normally undertaken by third party
distributors in that country).
1.16 "Veterinary Field" shall mean the field of diagnosis, prevention
and treatment of allergic disease in mammals (other than humans).
1.17 "Valid Issued Claim" shall mean a claim of an issued and unexpired
patent included in the Licensed Patent Rights which has not been withdrawn,
canceled or disclaimed, or held permanently revoked, unenforceable or invalid by
the decision of a court or other governmental agency of competent jurisdiction,
unappealable or unappealed within the time allowed for appeal, and which has not
been admitted to be invalid or unenforceable through reissue, disclaimer or
otherwise, in the country where a Licensed Product is sold by HESKA, its
Affiliates or Sublicensees.
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ARTICLE 2. - LICENSE GRANT; REGULATORY
APPROVAL; ASSISTANCE
2.1 License Grant. IMMULOGIC hereby grants to HESKA and its Affiliates
the worldwide license, with the right to sublicense, under the Licensed
Technology to develop, have developed, make, have made, use, sell, have sold and
otherwise exploit Licensed Products, and services utilizing Licensed Products,
in the Field.
2.2 Exclusivity. The rights granted to HESKA in Section 2.1 shall be
exclusive worldwide, except that such rights shall be nonexclusive in Japan to
the extent of the nonexclusive license rights previously granted by IMMULOGIC to
Sankyo Co. Ltd. HESKA's exclusive rights under this Agreement shall also be
exclusive as against IMMULOGIC and its Affiliates with respect to all Licensed
Technology.
2.3 Regulatory Approval. HESKA shall determine in good faith in its
discretion whether regulatory approval or licensure is required in the United
States or any other jurisdiction with respect to any Licensed Product. HESKA
shall be responsible and use commercially reasonable efforts to obtain any
regulatory approval or license HESKA determines is required. All costs of
developing Licensed Products and all costs of obtaining regulatory approval or
licensure from any applicable governmental agency shall be borne by HESKA.
2.4 Assistance; Transfer of Biological Materials. At HESKA's reasonable
request, IMMULOGIC shall use its best efforts and make available its personnel
at reasonable times and places, without charge, to assist HESKA in the transfer
of Licensed Know-How to HESKA personnel, including, without limitation,
manufacturing know-how with respect to the Biological Materials. IMMULOGIC shall
maintain and transfer to HESKA on request the quantities of Biological Materials
set forth on Exhibit A.
2.5 Right of First Negotiation. During the term of this Agreement,
IMMULOGIC shall give HESKA prompt written notice of any New Technology in the
Field in which IMMULOGIC develops or acquires an ownership or licensable
interest during the term of this Agreement, which IMMULOGIC proposes to
commercialize, further develop, license or sell, either alone or in conjunction
with a third party ("New Technology Notice"). For a period of sixty (60) days
following HESKA's receipt of a New Technology Notice ("Negotiation Period"), at
HESKA's election, IMMULOGIC shall negotiate in good faith with HESKA to agree
upon a mutually acceptable arrangement for the commercialization of such New
Technology by HESKA. Such arrangements may include, without limitation, a
license or sale of the New Technology to HESKA, a distribution agreement, joint
development or marketing agreement between HESKA and IMMULOGIC or other mutually
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
acceptable arrangement. Each New Technology Notice shall specify in reasonable
detail all technical data, and other information in IMMULOGIC's possession
relating to the New Technology. IMMULOGIC shall provide HESKA prompt access to
its facilities and personnel during normal business hours and in a manner not
disruptive to IMMULOGIC's normal business operations to conduct reasonable due
diligence review of such New Technology throughout the Negotiation Period. At
HESKA's request, IMMULOGIC also shall supply reasonable research quantities of
any biological materials included within the New Technology. During the
Negotiation Period, IMMULOGIC shall not, and shall cause its Affiliates,
employees and agents not to, solicit, authorize the solicitation of or
participate in any discussion with any third party concerning any offer or
possible offer by a third party to commercialize or otherwise exploit the New
Technology or any interest therein, directly or indirectly, or make any
preparations for any of the foregoing.
2.6 Commercially Reasonable Efforts of HESKA. HESKA shall use its
commercially reasonable efforts to develop Licensed Products and in furtherance
thereof, shall use its commercially reasonable efforts to meet the milestones
for diagnostic product development more particularly described in Exhibit D
attached hereto. HESKA shall provide semi-annual written reports to IMMULOGIC
during the period set forth in Exhibit D with respect to the progress of such
development efforts.
ARTICLE 3. - ROYALTIES AND OTHER LICENSE CONSIDERATION
3.1 License Fees and Milestone Payments. In consideration of the
rights, privileges and licenses granted by IMMULOGIC hereunder, HESKA shall pay
the license and milestone fees as follows:
(a) Initial license fee, nonrefundable and noncreditable
against royalties, of [**], due within five (5) business days after execution of
this Agreement by both parties;
(b) Subject to Section 3.2(c) below, milestone license fees as
follows, nonrefundable and noncreditable against royalties, due within fifteen
(15) days after each of the following milestones:
(i) One-time fee of [**], after the first date
that [**];
(ii) One-time fee of [**], after the [**];
(iii) One-time fee of [**], after the [**].
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
3.2 Royalties. In further consideration of the rights, privileges and
licenses granted by IMMULOGIC hereunder, HESKA shall pay royalties as follows:
(a) Veterinary Field. With respect to Patented Products sold
in the Veterinary Field, royalties calculated as a percentage of quarterly Net
Sales, as follows:
(A) Net Sales in the Veterinary Field for gene
therapy or allergy prophylaxis applications [**]
(B) Net Sales in the Veterinary Field for
diagnostic or standard immunotherapy
applications:
- First [**] million of such Net
Sales in the Veterinary Field [**]
- Such Net Sales in excess of [**]
million up to [**] million in the
Veterinary Field [**]
- Such Net Sales in excess of [**]
million in the Veterinary Field [**]
(b) Human Field. Subject to Section 3.2(c) below, with respect
to Patented Products sold in the Human Field, royalties calculated as a
percentage of quarterly Net Sales as follows:
(A) Net Sales in the Human Field for gene
therapy or allergy prophylaxis applications [**]
(B) Net Sales in the Human Field for diagnostic
or standard immunotherapy applications:
- First [**] million of such Net
Sales in the Human Field [**]
- Such Net Sales in excess of [**]
million up to [**] million in the
Human Field [**]
- Such Net Sales in excess of [**]
million in the Human Field [**]
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
(c) Sublicense in Human Field. Notwithstanding the foregoing,
if HESKA sublicenses its rights to the Licensed Technology under this Agreement
with respect to diagnostic products, therapeutic products or both (as
applicable, the "Sublicensed Products") in the Human Field to one or more
sublicensees (collectively, a "Human Field Sublicensee") in one or more
countries (each, a "Territory'"), then HESKA shall make payments to IMMULOGIC
pursuant to this Section 3.2(c) ("In Lieu Payments"), in lieu of (i) all
royalties otherwise payable pursuant to Section 3.2(b) with respect to Net Sales
of Sublicensed Products in such Territory and (ii) the Pro Rata License Fee (as
defined below) applicable to such Territory otherwise payable pursuant to
Section 3.1(b). The parties shall negotiate in good faith to pro rate any
milestone license fees provided in Section 3.1(b) not previously earned by
IMMULOGIC between any such Human Field Sublicensee's Territory and HESKA's other
markets for Licensed Products, based on the relative size of such markets, and
the amount so determined shall be the "Pro Rata License Fee." In the case of
each sublicense to Human Field Sublicensee(s), the In Lieu Payment shall be an
amount equal to [**] of each license fee, milestone payment or royalty payment
received by HESKA from such Human Field Sublicensee pursuant to such
sublicense(s) for exploitation of the Licensed Technology with respect to
Sublicensed Products in the Human Field in the Territory.
3.3 Combination Products; Services. When any Patented Products are sold
in combination with other allergens or other products for a single unit price,
Net Sales for such Patented Products shall be an amount equal to a percentage of
the unit price determined by dividing the number of individual allergens
included in the combined product that constitute Patented Products by the total
number of individual allergens included in the combined product, adjusted as set
forth in Section 1.11. If any Patented Products are utilized in connection with
diagnostic or testing services performed for compensation by HESKA, its
Affiliates or Sublicensees, Net Sales for such Patented Products shall be an
amount equal to a percentage of the total compensation for such service,
determined by dividing the number of individual allergens utilized in the
service that constitute Biological Materials by the total number of individual
allergens utilized in the service, after the adjustments set forth in Section
1.11 and deduction of HESKA's direct labor cost for such diagnostic services.
3.4 Third Party Royalties.
(a) Stacking. If HESKA, its Affiliates or Sublicensees are
required to pay royalties to third parties on sales of Patented Products in
order to use any process or composition of matter other than the Licensed
Technology to develop, have developed, make, have made, use, sell, have sold or
otherwise exploit Licensed
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Products in any country, and the resulting aggregate royalty rate is [**] or
greater, then the royalty rate under Section 3.2 above will be adjusted so that
the combined royalty payments from HESKA to all of its licensors, including
IMMULOGIC, does not exceed [**] (assuming that such adjustment is also applied
to all third party royalty rates). The royalty rate payable to IMMULOGIC would
be reduced to a rate determined by multiplying the royalty rate under Section
3.2 above by a fraction, the numerator of which is [**] and the denominator of
which is the aggregate royalty rate. For example, if the aggregate royalty rate
was [**] the new royalty rate payable to IMMULOGIC would be determined by
multiplying the royalty rate under Section 3.2 above by [**]. Notwithstanding
the foregoing, if HESKA's agreement with any of such other licensors provides
for a royalty proration formula based on an aggregate royalty rate of greater
than [**], the parties will substitute such greater aggregate royalty rate for
the [**] rate set forth in this Section 3.4.
(b) Freedom to Operate. If HESKA, its Affiliates or
Sublicensees are required to pay royalties to third parties on sales of Licensed
Products in order to have the right to use any of the Licensed Technology to
develop, have developed, make, have made, use, sell, have sold or otherwise
exploit Licensed Products in any country, then HESKA shall have the right to
credit [**] of such third party royalty payments against (i) any royalties or
other payments otherwise owing to IMMULOGIC under Section 3.2 with respect to
sales of such Licensed Products in such country and (ii) any milestone license
fees otherwise owing to IMMULOGIC under Section 3.1(b). HESKA's offset rights
pursuant to this paragraph are in addition to its indemnification rights
pursuant to Article 7 of this Agreement.
(c) Procedure for Adjustments. In any case where both Section
3.4(a) and (b) apply, the royalty rates payable to IMMULOGIC shall first be
adjusted pursuant to Section 3.4(a) and then adjusted again as provided in
Section 3.4(b).
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ARTICLE 4. - REPORTS; PAYMENT
4.1 Royalty Reports; Payment. During the term of the Agreement, HESKA
shall furnish to IMMULOGIC a quarterly written report calculating in reasonably
specific detail the royalties and other payments payable, if any, for such
quarter pursuant to this Agreement. With respect to sales of Patented Products
(or third party payments pursuant to Section 3.2(c)) invoiced in United States
dollars, such calculations shall be expressed in United States dollars. With
respect to sales of Patented Products (or third party payments pursuant to
Section 3.2(c)) invoiced in a currency other than United States dollars, such
calculations shall be expressed in the domestic currency of the party making the
sale together with the United States dollar equivalent of the royalty payable,
at the rate of exchange used by HESKA for financial reporting purposes. Reports
provided in this Section 4.1 and payments provided in Section 3.2 shall be due
on the forty-fifth (45th day following the close of each calendar quarter. HESKA
shall keep complete and accurate records in sufficient detail to enable the
royalties and other payments payable hereunder to be determined.
4.2 Audits. Upon the written request of IMMULOGIC and not more than
once in each calendar year, HESKA shall permit an independent certified public
accounting firm selected by IMMULOGIC and reasonably acceptable to HESKA, at
IMMULOGIC's expense, to have access during normal business hours to such of the
records of HESKA as may be reasonably necessary to verify the accuracy of the
payment reports hereunder for any year ending not more than twenty-four (24)
months prior to the date of such request. The accounting firm shall disclose to
IMMULOGIC only whether the reports are correct or not and the specific details
concerning any discrepancies. No other information shall be shared. If such
accounting firm correctly concludes that additional royalties or other payments
were owed during such period, HESKA shall pay the additional payments plus
interest at the average of the prime rates set forth in the Wall Street Journal
during such period, payable within thirty (30) days of the date IMMULOGIC
delivers to HESKA such accounting firm's written report so concluding. The fees
charged by such accounting firm shall be paid by IMMULOGIC; provided, however,
if the audit correctly discloses that the royalties payable by HESKA for any
audited period are more than one hundred five percent (105%) of the royalties
actually paid for such period, then HESKA shall pay the reasonable fees and
expenses charged by such accounting firm.
4.3 Confidential Financial Information. IMMULOGIC shall treat all
financial information subject to review under this Article 4 as Confidential
Information, and shall cause its accounting firm to treat all such financial
information as Confidential Information, under Article 8 below.
4.4 Exchange Control. If at any time legal restrictions prevent the
prompt remittance of part or all royalties with respect to any country where a
Patented
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Product is sold, HESKA shall have the right, in its sole discretion, to make
such payments by depositing the amount thereof in local currency to IMMULOGIC's
account in a bank or other depository institution in such country. If the
royalty rate specified in this Agreement should exceed the permissible rate
established in any country, the royalty rate for sales in such country shall be
adjusted to the highest legally permissible or government-approved rate.
4.5 Withholding Taxes. To the extent required by law, HESKA shall be
entitled to deduct the amount of any withholding taxes, value-added taxes or
other taxes, levies or charges with respect to amounts payable by HESKA to
IMMULOGIC hereunder. HESKA promptly shall deliver to IMMULOGIC proof of payment
of all such taxes, levies and other charges, together with copies of all
communications from or with such governmental authority with respect thereto.
ARTICLE 5. - COVENANT NOT TO COMPETE
During the term of this Agreement, IMMULOGIC will not, and will cause
its officers, directors, employees, and Affiliates not to, develop, manufacture,
market, sell or otherwise distribute, directly or indirectly, any products or
services that compete with the Licensed Products in the Field worldwide.
IMMULOGIC specifically acknowledges that this covenant not to compete is a
condition precedent to HESKA's entering into this Agreement, that the foregoing
covenant not to compete is reasonable and necessary to protect the legitimate
interests of HESKA and that HESKA would not enter into this Agreement in the
absence of such restrictions. IMMULOGIC further agrees that any breach of the
foregoing covenant not to compete would cause irreparable injury to HESKA, not
fully compensable in damages, and that in addition to any other rights and
remedies available, HESKA shall have the right to seek and obtain injunctive,
declaratory or other equitable relief. The parties agree that, notwithstanding
the foregoing, the development, manufacturing, marketing, sale, distribution or
licensing by IMMULOGIC of any products or services based upon the ALLERVAX(TM)
Technology shall not be a violation of this Article 5.
ARTICLE 6. - PATENT PROSECUTION; INFRINGEMENT ACTIONS
6.1 Patent Prosecution for Licensed Patent Rights. HESKA shall, during
the term of this Agreement, at its sole expense, be responsible for and control
the preparation and filing for, prosecution of and maintenance of Licensed
Patent Rights in the United States and in foreign countries where HESKA, at its
discretion, determines any such filing, prosecution or maintenance should be
made. IMMULOGIC shall cooperate with HESKA, at HESKA's expense, in the filing,
prosecution and maintenance of such Licensed Patent Rights, all of which may be
filed, prosecuted and maintained by HESKA in the name of IMMULOGIC. If IMMULOGIC
requests in writing that HESKA file, prosecute or maintain Licensed
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<PAGE> 12
Patent Rights in any foreign country and HESKA determines, at its reasonable
discretion, not to pursue such filing, prosecution or maintenance within two (2)
months after receipt of such notice, IMMULOGIC may, at its expense, file,
maintain and prosecute such Licensed Patent Rights in said country. During the
term of this Agreement, each party shall, upon request, provide the other with
copies of all correspondence relating to such filing, prosecution and
maintenance.
6.2 Notice of Third-Party Infringement. Each party shall inform the
other party promptly in writing of any alleged infringement of the Licensed
Patent Rights by a third party of which such party becomes aware and of any
available evidence thereof.
6.3 Right to Enforce. During the term of this Agreement, HESKA shall
have the first right, but shall not be obligated, to prosecute at its own
expense all infringements of the Licensed Patent Rights and, in furtherance of
such right, IMMULOGIC hereby agrees that HESKA may include IMMULOGIC as a party
plaintiff in any such suit, without expense to IMMULOGIC. The total cost of any
such infringement action commenced or defended solely by HESKA shall be borne by
HESKA and HESKA shall keep any recovery or damages for past infringement derived
therefrom. HESKA will not enter into any settlement, consent judgment or other
voluntary final disposition of the suit affecting IMMULOGIC's rights under this
Agreement without the consent of HESKA, which consent shall not unreasonably be
withheld.
6.4 IMMULOGIC Right to Enforce. If within one year (1) after having
been notified of or having given notice of any alleged infringement, HESKA shall
have been unsuccessful in persuading the alleged infringer to desist and shall
not have brought and shall not be diligently prosecuting an infringement action,
or if HESKA shall notify IMMULOGIC at any time prior thereto of its intention
not to bring suit against any alleged infringer, then, and in those events only,
IMMULOGIC shall have the right, but shall not be obligated, to prosecute at its
own expense any infringement of the Licensed Patent Rights, and IMMULOGIC may,
for such purposes, use the name of HESKA as party plaintiff. The total cost of
any such infringement action commenced or defended solely by IMMULOGIC shall be
borne by IMMULOGIC and IMMULOGIC shall keep any recovery or damages for past
infringement derived therefrom. IMMULOGIC will not enter into any settlement,
consent judgment or other voluntary final disposition of the suit without the
consent of HESKA, which consent shall not unreasonably be withheld.
6.5 Defense of Certain Actions. In the event that an action or
counterclaim alleging invalidity or noninfringement of any of the Licensed
Patent Rights shall be brought against IMMULOGIC or any third party, IMMULOGIC
will promptly notify HESKA and HESKA shall have the right to participate in the
defense of such action at its own expense. No settlement, consent judgment or
other voluntary final
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disposition of such suit may be entered into without the consent of HESKA, which
consent shall not unreasonably be withheld.
6.6 Cooperation. In any suit brought or defended by either party under
this Article 6, the other party hereto shall, at the request and expense of the
party initiating such suit, cooperate in all respects and, to the extent
possible, have its employees testify when requested and make available relevant
records, papers, information, samples, specimens, and the like.
6.7 ALLERVAX(TM) Each party shall give the other at least sixty (60)
days prior written notice of any decision to stop using Lahive & Cockfield
exclusively as patent counsel with respect to (i) in the case of HESKA, Licensed
Patent Rights or (ii) in the case of IMMULOGIC, preparation and filing for,
prosecution of and maintenance of patents and patent applications in all
jurisdictions that are not included within the Licensed Patent Rights but that
relate directly or indirectly to the ALLERVAX(TM) Technology (the "IMMULOGIC
ALLERVAX Patents"). IMMULOGIC shall give HESKA sixty (60) days' prior written
notice of IMMULOGIC's intent to abandon any of the IMMULOGIC ALLERVAX Patents in
any jurisdiction. IMMULOGIC shall give HESKA five (5) days' notice of any
license of the ALLERVAX(TM) Technology to any third party.
ARTICLE 7. - REPRESENTATIONS; INDEMNIFICATION;
LIMITATION OF LIABILITY
7.1 Representations of IMMULOGIC. IMMULOGIC represents and warrants to
HESKA (a) that it has full right and authority to grant the licenses under this
Agreement, (b) that the execution and delivery of this Agreement will not
conflict with or require any consent under the terms of any other agreement to
which IMMULOGIC is a party or by which it is bound, (c) that the license
agreements, if any, pursuant to which IMMULOGIC licenses any of the Licensed
Technology are listed in Exhibit C hereto, are in full force and effect, no
default exists under such agreements and no event has occurred which (with
notice or the passage of time or both) would give the licensor the right to
terminate any such agreement, (d) that upon any termination of any such license
agreement for the default of IMMULOGIC, the rights granted hereunder to HESKA
shall continue in full force and effect according to their terms, (e) that the
Licensed Know-How listed on Exhibit B includes all the Know-How, except as
expressly set forth therein, (f) that to the best of IMMULOGIC's knowledge, the
Licensed Patent Rights include Valid Issued Claims in the jurisdictions
identified in Exhibit C with respect to all of the Biological Materials
described in Exhibit A hereto and the exploitation thereof to develop, make use
and sell Licensed Products, and (g) that it has no knowledge that any third
person or entity is currently infringing the Licensed Technology or that the
Licensed Technology infringes the intellectual property rights of any third
party. All license
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agreements, if any, pursuant to which IMMULOGIC licenses any of the Licensed
Technology are listed in Exhibit E and IMMULOGIC has provided correct and
complete copies thereof to HESKA.
7.2 HESKA Indemnification. HESKA hereby agrees to defend, indemnify and
hold harmless IMMULOGIC and its directors, officers, employees, agents and
Affiliates against any loss, claim, action, damage, expense or liability
(including defense costs and attorneys' fees) resulting from any third party
claim or suit arising out of or relating to HESKA's breach of any representation
or warranty of HESKA set forth in this Agreement or any third party claim or
suit alleging that any Licensed Product infringes the patent, copyright or other
intellectual property rights of any third party (except to the extent that any
such claim alleges that the Licensed Technology infringes such patent, copyright
or other intellectual property right); provided, however, that the foregoing
indemnity obligation shall not apply where such claim is the result of the
willful misconduct or negligent act of IMMULOGIC or its Affiliates, and there
shall be apportionment in accordance with responsibility when such obligation
derives in part from acts of HESKA and in part from acts of IMMULOGIC and its
Affiliates.
7.3 IMMULOGIC Indemnification. IMMULOGIC hereby agrees,to defend,
indemnify and hold harmless HESKA and its directors, officers, employees,
agents, Affiliates and Sublicensees against any loss, claim, action, damage,
expense or liability (including defense costs and attorneys' fees) resulting
from any third party claim or suit arising out of or relating to (i) IMMULOGIC's
breach of any representation or warranty of IMMULOGIC set forth in this
Agreement, or (ii) any claim that the Licensed Technology (or any portion of any
of the foregoing) infringes the patent, copyright or other intellectual property
rights of any third party; provided, however, that the foregoing indemnity
obligations shall not apply where such claim is the result of the willful
misconduct or negligent act of HESKA or its Affiliates or Sublicensees and in
the case of (i) above, there shall be apportionment in accordance with
responsibility when such obligation derives in part from the acts of IMMULOGIC
and in part from the acts of HESKA, its Affiliates or Sublicensees.
7.4 Indemnification Procedures. In the event that a third-party claim
is made or third-party suit is filed for which either party intends to seek
indemnification from the other party pursuant to this Article 7, the party
seeking indemnification (the "Indemnitee") shall promptly notify the other party
(the "Indemnitor") of said claim or suit The Indemnitor shall have the right to
control, through counsel of its choosing, the defense of such third-party claim
or suit, but may compromise or settle the same only with the consent of the
Indemnitee, which consent shall not be unreasonably withheld. The Indemnitee
shall cooperate fully with the Indemnitor and its counsel in the defense of any
such claim or suit and shall make available to the Indemnitor any books, records
or other documents necessary or appropriate for such defense. The Indemnitee
shall have the right to participate at
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the Indemnitee's expense in the defense of any such claim or suit through
counsel chosen by the Indemnitee.
7.5 Limitation of Warranties. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH
IN THIS AGREEMENT, NEITHER HESKA NOR IMMULOGIC MAKES ANY REPRESENTATIONS OR
EXTENDS ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT
LIMITED TO WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
7.6 Limitation of Liability. EXCEPT FOR THE EXPRESS INDEMNIFICATION
OBLIGATIONS OF THE PARTIES SET FORTH IN THIS AGREEMENT, IN NO EVENT SHALL EITHER
PARTY BE LIABLE TO THE OTHER PARTY OR ANY THIRD PARTY FOR COSTS OF PROCUREMENT
OF SUBSTITUTE PRODUCTS OR SERVICES, LOST PROFITS, LOSS OF GOODWILL, OR ANY
SPECIAL, INDIRECT, CONSEQUENTIAL OR INCIDENTAL DAMAGES, HOWEVER CAUSED AND ON
ANY THEORY OF LIABILITY, ARISING IN ANY WAY OUT OF THIS AGREEMENT. THIS
LIMITATION SHALL APPLY EVEN IF A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES, AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY
LIMITED REMEDY.
ARTICLE 8. - CONFIDENTIALITY
8.1 Maintenance of Confidentiality. Each party agrees to hold all
information given to it by the other party that is identified as confidential
(the "Confidential Information") in confidence with the same degree of care that
it would take with respect to its own proprietary information (but not less than
reasonable care), and not to make the Confidential Information available in any
form to any third party (provided that HESKA may disclose Confidential
Information to its Affiliates and sublicensees under appropriate confidentiality
agreements) or to use the Confidential Information for any purpose other than
the purposes described in this Agreement. Each party agrees to take all
reasonable steps to ensure that Confidential Information is not disclosed or
distributed by its employees or agents in violation of this Agreement, including
limiting disclosure to employees or other persons who have a need to know and
who have signed appropriate confidentiality agreements. This restriction on
disclosure shall not apply to the extent that any Confidential Information (a)
is or becomes a part of the public domain through no act or omission of the
receiving party; (b) was in the receiving party's lawful possession prior to the
disclosure (as may be proved by the receiving party) and had not been obtained
by the receiving party from the disclosing party; (c) is lawfully disclosed to
the receiving party by a third party without restriction on disclosure; (d) is
independently developed by the receiving party by personnel not having access to
the Confidential Information (as may be proved by the receiving party) or (e) is
required to be disclosed by law, order or regulation of a government agency or
court
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of competent jurisdiction; provided, that the disclosing party shall use
reasonable efforts to provide the other party notice in writing of any proposed
disclosure under this subsection (e) and an opportunity to object to the
disclosure or seek confidential treatment thereof. Notwithstanding the
foregoing, the parties agree that this Agreement may be filed as an exhibit to
any report or registration statement filed with the United States Securities and
Exchange Commission (the "SEC") without notice to the other party, provided that
the party filing this Agreement is advised by counsel that this Agreement is
required to be so filed and such party has obtained an order from the SEC
allowing for the confidential treatment of at least (i) the description of the
Licensed Know-How set forth on Exhibit B hereto, and (ii) the license fees,
milestone payments and royalty rates set forth in Article 3 hereof.
8.2 Terms of the Agreement. Except as otherwise provided in Section 8.1
above, IMMULOGIC and HESKA shall not disclose any terms or conditions of this
Agreement to any third party other than HESKA's Affiliates and sublicensees
without the prior consent of the other party, which shall not be unreasonably
withheld. Notwithstanding the foregoing, prior to execution of the Agreement,
HESKA and IMMULOGIC shall agree upon the substance of information that can be
used to describe the terms of this transaction, and HESKA and IMMULOGIC may
disclose such information, as modified by mutual agreement from time to time,
without the other party's consent. In addition, the parties each acknowledge
that the other may have disclosure obligations under applicable securities laws
and accounting principles and agree to cooperate in any disclosure of this
Agreement which one or both parties believe is required under such laws.
ARTICLE 9. - ASSIGNMENT
This Agreement is not assignable without the prior written consent of
the other party, which consent will not be unreasonably withheld; provided,
however, that either party may, without such consent, assign the Agreement and
its rights and obligations hereunder in connection with the transfer or sale of
all or substantially all of its business, or in the event of its merger or
consolidation or change in control or similar transaction. Any permitted
assignee shall assume all obligations of its assignor under the Agreement.
ARTICLE 10. - TERMINATION
10.1 Expiration. This Agreement shall expire upon the expiration of the
last Valid Issued Claim in the United States or Europe.
10.2 Termination for Default. IMMULOGIC shall have the right to
terminate this Agreement upon written notice to HESKA if:
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(a) HESKA shall default in the performance of any of the
material obligations herein contained (including, without limitation, its
obligations pursuant to Section 2.6) and such default has not been cured within
ninety (90) days after receiving written notice thereof from IMMULOGIC, or, if
any default is not capable of being cured within such ninety (90) day period,
such longer period as HESKA is diligently undertaking to cure such default.
(b) HESKA shall cease to carry out its business, shall be
adjudged bankrupt or insolvent, shall apply for or consent to the appointment of
a trustee, receiver or liquidator of its assets or shall voluntarily seek relief
under any law for the aid of debtors.
10.3 Termination for Convenience. HESKA may terminate this Agreement
upon sixty (60) days' prior written notice to IMMULOGIC and upon payment of all
amounts due IMMULOGIC through the effective date of termination.
10.4 Effect of Termination. Upon expiration of this Agreement under
Section 10.1 above, HESKA, its Affiliates and Sublicensees shall have a paid-up,
non-exclusive license under the Licensed Know-How to develop, have developed,
make, have made, use, sell, have sold and otherwise exploit Licensed Products in
the Field worldwide. Upon expiration or termination of this Agreement for any
reason neither party shall be released from any obligation that matured prior to
the effective date of such termination. HESKA, its Affiliates and any
Sublicensee may, however, after the effective date of such termination, sell all
Licensed Products in inventory provided that HESKA shall pay to IMMULOGIC the
royalties thereon as required herein.
10.5 Survival. Articles 6, 7, 8, 10 and 12 shall survive the expiration
or termination of this Agreement
ARTICLE 11. - NOTICES
Any notices required to be given or which shall be given under this
Agreement shall be in writing delivered personally or by first class mail or
facsimile, addressed to the parties at the addresses set forth on the first page
(or such other address as a party shall specify by notice given in accordance
with this paragraph), attention: President. Notices delivered personally or sent
by facsimile shall be deemed to have been given on the date sent; those sent by
mail shall be deemed to have been given three (3) days after mailing.
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<PAGE> 18
ARTICLE 12. - MISCELLANEOUS
12.1 Governing Law. The validity and interpretation of this Agreement
and the legal relation of the parties to it shall be governed by the laws of the
Commonwealth of Massachusetts, without regard to principles of choice of law.
12.2 Entire Agreement; Amendment. The parties acknowledge that this
Agreement sets forth the entire understanding and agreement of the parties
hereto as to the subject matter hereof and supersedes all previous
understandings, agreements or inducements between the parties, written or oral,
regarding such subject matter. This Agreement may be amended only by a written
document signed by both parties.
12.3 Publicity. Nothing contained in this Agreement shall be construed
as conferring any right to use in advertising, publicity or other promotional
activities any name, trade name, trademark, or other designation of the other
party (including any contraction, abbreviation, or simulation of any of the
foregoing). Without the express written approval of the other party, neither
party shall use any designation of the other party in any promotional activity
associated with this Agreement Subject to Section 8.2, neither party shall issue
any press release or make any public statement in regard to this Agreement
without the prior written approval of the other party.
12.4 Severability. If one or more of the provisions of this Agreement
shall be held invalid, illegal or unenforceable, the remaining provisions shall
not in any way be affected or impaired thereby. In the event any provision is
held illegal or unenforceable, the parties shall use reasonable efforts to
substitute a valid, legal and enforceable provision which, insofar as is
practical, implements purposes of the provision held invalid, illegal and
unenforceable.
12.5 No Waiver. Failure at any time to require performance of any of
the provisions herein shall not waive or diminish a party's right thereafter to
demand compliance therewith or with any other provision. Waiver of any default
shall not waive any other default. A party shall not be deemed to have waived
any rights hereunder unless such waiver is in writing and signed by a duly
authorized officer of the party making such waiver.
12.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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<PAGE> 19
IN WITNESS WHEREOF, the parties have executed this Agreement by their
duly authorized representatives, effective as of the date on which this
Agreement has been duly signed by both parties, which date will be inserted at
the top of this Agreement.
IMMULOGIC PHARMACEUTICAL
CORPORATION
By J. Joseph Marr
Title President and Chief Executive Officer
Date June 17, 1998
HESKA CORPORATION
By [illegible]
Title Vice President, Business Development
Date June 17, 1998
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<PAGE> 20
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
EXHIBIT A
Biological Materials Transferred from IMMULOGIC to HESKA
The following is a list of recombinant antigen constructs available for
transfer. Listed are expression vector into which the recombinant protein was
cloned, antibiotic resistance marker, and host bacterial strain. Nucleic acid
sequences coding for the recombinant protein are in the corresponding patent
applications.
<TABLE>
<CAPTION>
Species Protein Vector Resistance Host Reference
<S> <C> <C> <C> <C> <C>
Off-Site Storage
</TABLE>
[**]
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<PAGE> 21
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Exhibit A continued
Recombinant proteins
The following is a list of recombinant proteins available for transfer. Unless
specifically indicated, these are frozen solutions.
Protein Lot# Amount Remaining
[**]
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<PAGE> 22
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
EXHIBIT B
List of Documented Know-How
There exist written protocols for the expression and partial purification of the
recombinant allergens listed below. In other cases, the information exists as
raw data in archived laboratory notebooks.
Species Protein
[**] [**]
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<PAGE> 23
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
EXHIBIT D
Development of Licensed Products:
Milestones
HESKA shall use its commercially reasonable efforts to initiate
clinical trials in humans and animal studies in dogs or cats for diagnostic use
of recombinant allergens by [**].
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<PAGE> 24
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
EXHIBIT E
LICENSE AGREEMENTS
1. "License Agreement" between Massachusetts Institute of Technology and
ImmuLogic Pharmaceutical Corporation entered April 3, 1987, as amended
November 1, 1991, October 1, 1992 and April 1, 1994;
2. "License Agreement" between University of Melbourne and ImmuLogic
Pharmaceutical Corporation, entered December 15, 1989, as amended in
"Agreement to Vary License Agreement," entered December 15, 1992;
3. "Agreement" between ImmuLogic Pharmaceutical Corporation and the
University of North Carolina, entered July 27, 1989.
4. "Agreement" between ImmuLogic Pharmaceutical Corporation and Princess
Margaret Children's Medical Research Foundation (INC), entered June 1,
1990, as amended in "Agreement to Vary License Agreement," entered
December 18, 1991;
5. "Agreement" between ImmuLogic Pharmaceutical Corporation and TVW
Telethon Institute for Child Health Research, affiliated with The
University Of Western Australia and Princess Margaret Hospital for
Children, entered July 10, 1995;
6. "License Agreement" between University of Melbourne and Immulogic
Pharmaceutical Corporation, entered August 1, 1995, as amended August
18, 1995.
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<PAGE> 1
Exhibit 10.02
Confidential Materials omitted and filed seperately with the Securities and
Exchange Commission. Asterisks denote omissions.
CLINICAL SUPPLY AND PROCESS VALIDATION
AGREEMENT
THIS CLINICAL SUPPLY and PROCESS VALIDATION AGREEMENT (the "Agreement")
is entered into as of this 6th day of July, 1998, by and between IMMULOGIC
PHARMACEUTICAL CORPORATION, a Massachusetts corporation having an address at 610
Lincoln St., Waltham, MA 02154 ("ImmuLogic") and CHESAPEAKE BIOLOGICAL
LABORATORIES, INC., a Maryland corporation having an address at 1111 South Paca
Street, Baltimore, MD 21230 ("CBL"), with respect to the following:
RECITALS
A. ImmuLogic is in the business of developing and commercializing
drug products.
B. CBL is in the business of manufacturing, formulating,
sterilizing, filling, and packaging liquid injectable drug
products.
C. ImmuLogic desires that CBL assist ImmuLogic in further
development of the Product so that CBL can manufacture,
formulate, fill, test and package ImmuLogic's Product, and CBL
has agreed to do so subject to and upon the terms and
conditions set forth herein and in the exhibits attached
hereto and incorporated fully herein by this reference.
D. ImmuLogic intends, upon successful completion of any requisite
clinical trials, to file an application with the FDA to market
the Product and to name, in that application, CBL as a
manufacturing site for post-approval commercial production of
the Product. Both CBL and ImmuLogic intend to execute a
commercial supply agreement following CBL's successful
validation of the production process for the Product and prior
to ImmuLogic's filing of any application with the FDA for
market approval of the Product.
AGREEMENT
NOW THEREFORE, in consideration of the premises and the mutual promises
and covenants contained in this Agreement, and for other good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
<PAGE> 2
ARTICLE I.
DEFINITIONS
All references to particular Exhibits and Sections shall mean the
Exhibits to, and Sections of, this Agreement, unless otherwise specified. For
the purposes of this Agreement, the following words and phrases shall have the
following meanings:
1.01 "ACTIVE INGREDIENT" shall mean the active drug substance within
the meaning of 21 CFR part 21 0.3(b)(7), or the biological products within the
meaning of 21 CFR part 600.3(h), or its successor as in effect from time to
time.
1.02 "AFFILIATE" shall mean any corporation, firm, partnership or other
entity, whether de jure or de facto, which directly or indirectly owns, is owned
by or is under common ownership with a party to this Agreement to the extent of
at least fifty percent (50%) of the equity having the power to vote on or direct
the affairs of the entity and any person, firm, partnership, corporation or
other entity actually controlled by, controlling or under common control of a
party to this Agreement.
1.03 "AGREEMENT" shall mean this Clinical Supply and Process Validation
Agreement.
1.04 "BATCH OR LOT" shall mean a single run of Product produced by a
single execution of the instructions specified in the Batch Production and
Control Record within the meaning of 21 CFR part 210.3(b)(2) and/or within the
meaning of 21 CFR part 600.3(x), or its successor as in effect from time to
time.
1.05 "BATCH PRODUCTION AND CONTROL RECORD" OR "BATCH RECORD" shall mean
the set of detailed processing instructions which are to be followed by CBL to
produce one batch of Product within the meaning of 21 CFR part 211.188, or its
successor as in effect from time to time.
1.06 "FDA" shall mean the United States Food and Drug Administration.
1.07 "GOOD MANUFACTURING PRACTICES (GMP)" or the letters "GMP" or"cGMP"
shall mean the writings of the Code of Federal Regulations, Part 21, Section 210
and Section 211, or other sections so designated by the title "Good
Manufacturing Practices" promulgated under the Federal Food, Drug and Cosmetic
Act, as in effect from time to time.
1.08 "MASTER PRODUCTION AND CONTROL RECORD" or "MASTER BATCH RECORD"
shall mean a written description of the procedure to be followed for processing
a batch of product including but not limited to a complete list of all active
and inactive ingredients, components, weights and measures, descriptions of drug
product containers, closures, packaging materials, and labeling and complete
specifications for
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<PAGE> 3
each, within the meaning of 21 CFR part 211.186, or its successor as in effect
from time to time.
1.09 "MATERIALS" shall mean all active and inactive ingredients,
chemicals, components, excipients, vials, stoppers, seals, labels, inserts,
folding cartons and/or shipping cartons as are otherwise necessary to be
utilized in the Processing and to meet the Specifications.
1.10 "NEW DRUG APPLICATION (NDA)" shall mean that application, as
specified in 21 CFR 314.50, submitted to the FDA requesting approval to market
the Product. [If the Product is a biologic, the application as generally
described under 21 CFR 601.2 is termed a Product License Application. (PLA)].
1.11 "PROCESSING" shall mean processing Product in accordance with the
Master Batch Record for the Product. "Processed" and "Process" shall have
comparable meanings.
1.12 "PRODUCTS" shall mean the drug products, cocaine vaccine and
nicotine vaccine of ImmuLogic covered by this Agreement and produced as
contemplated and pursuant to the Project Summary.
1.13 "PROJECT SUMMARY" shall mean a document titled "Project Summary",
attached to this Agreement as Exhibit Al and A2, which provides specific details
about the work to be performed for ImmuLogic by CBL. Exhibit A2 will be attached
at a later date when mutually approved by the parties.
1.14 "SPECIFICATIONS" shall mean the acceptance criteria for the
Product as set forth in the Project Summary and/or Master Batch Record or as
developed in the course of the Agreement and mutually agreed upon in writing by
the parties from time to time.
ARTICLE II.
CLINICAL TRIAL SUPPLIES
2.01 GOOD MANUFACTURING PRACTICES. CBL agrees that, subject to the
terms and conditions of this Agreement, CBL shall manufacture, formulate, fill,
and package the Product at a facility validated in accordance with FDA
regulations, and shall produce the Product in accordance with cGMP, including
without limitation adherence to appropriate quality assurance and quality
control practices. So long and insofar as necessary to enable it to perform its
obligations hereunder, CBL shall maintain its Annual Registration of Drug
Establishment (form FDA 2656e or any successor form) granted by the FDA, updated
and in good order and will make the
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<PAGE> 4
related license and copies of all related documents available to ImmuLogic and
its designees for inspection, upon reasonable prior notice.
2.02 SPECIFICATIONS. CBL agrees that all Product released will meet the
Specifications. Any dispute as to whether the Product meets the Specifications
will be resolved by independent third party test as set forth in Section 5.05.
2.03 MASTER PRODUCTION RECORD. Subject to the terms and conditions of
this Agreement, CBL agrees to produce Product in accordance with a Master Batch
Record approved in writing by ImmuLogic. CBL further agrees that any substantive
changes to the Master Batch Record and the production process must receive
written approval of ImmuLogic prior to implementation, provided, however, that
any approvals shall not be unreasonably withheld by ImmuLogic and the parties
shall cooperate and act reasonably and in good faith in connection with their
respective activities under this Section.
2.04 IMMULOGIC SUPPLIED MATERIALS. ImmuLogic agrees to supply CBL with
any Active Ingredient, any Materials, and any production equipment in each case
to the extent specified in the Project Summary, in a timely manner so as not to
impede CBL's ability to comply with its obligations hereunder. ImmuLogic shall
retain title to any ImmuLogic supplied Active Ingredient and Materials including
all intellectual property rights relating thereto, as well as production
equipment, at all times. CBL will have the option to purchase equipment no
longer needed for the completion of the work detailed in Exhibit Al and A2.
ARTICLE III.
PROCESS VALIDATION
3.01 PROCESS VALIDATION. CBL has relied upon the accuracy,
completeness, and correctness of the data and information provided by ImmuLogic
and the understanding that the Product can be produced in a stable form in
accordance with typical and standard pharmaceutical production practices. CBL
will proceed with reasonable promptness to perform its obligations according to
Exhibits C1 and C2, but the parties acknowledge that process validation is a
demanding effort and unanticipated events beyond the control of the parties may
change the events and time schedule.
3.02 CBL RESPONSIBILITIES. CBL shall provide reasonable assistance to
ImmuLogic in its efforts to obtain and maintain all necessary regulatory
approvals and permits relating to the production of Product at CBL facilities.
Accordingly, insofar as relating to Product and CBL's production thereof, CBL
shall permit ImmuLogic, upon reasonable notice and during reasonable business
hours and so long as ImmuLogic does not interfere with CBL's day to day
operations (i) to inspect CBL's production facilities, (ii) to review
manufacturing and quality control records
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<PAGE> 5
relative to production by CBL of the Product, (iii) to audit CBL's production
efforts in respect of the Product for compliance with FDA requirements, and (iv)
to review any correspondence, reports, or other documents from CBL to the FDA,
or from the FDA to CBL, related to the Product.
3.03 IMMULOGIC RESPONSIBILITIES. ImmuLogic will be responsible for
obtaining all Federal and International regulatory approvals or permits
necessary for the production, distribution, use, and sale of the Product.
Additionally, ImmuLogic will be responsible for all other regulatory
requirements which are not specifically assigned to CBL in the Project Summary,
including the payment of any FDA user fees or other fees associated with the
review and approval to market the Product imposed by any regulatory agency.
ImmuLogic agrees to supply CBL with any documents, information, and/or data
specified as ImmuLogic responsibility in the Project Summary in a timely manner
so as not to impede CBL's ability to comply with its obligations hereunder.
ARTICLE IV.
ORDERS, PRICE, & TERMS OF PAYMENT
4.01 PURCHASE ORDERS. Unless otherwise specified in the Project
Summary, ImmuLogic shall submit a purchase order for Product(s) to CBL. Promptly
after the receipt of such purchase order, CBL will inform ImmuLogic of the date
by which CBL must receive from ImmuLogic any Active Ingredient and Materials to
be supplied by ImmuLogic for use in Processing in order to fulfill the purchase
order by the date specified by ImmuLogic.
4.02 PRICE. The price to be paid by ImmuLogic to CBL during the term of
this Agreement for all projects, validations, and each Batch of Product shall be
as specified in Exhibit B. All prices are FOB CBL's facility in Baltimore,
Maryland. Payment of all FDA fees specific to the Product will be the
responsibility of ImmuLogic. CBL's price does not include any other testing,
studies, product specific validations not presently required, or other
activities which ImmuLogic may deem necessary but which are not required of CBL
by this Agreement.
4.03 INVOICES. The invoice for the total amount shall be payable by
ImmuLogic to CBL within the terms of the Payment Schedule on Exhibit B. If
ImmuLogic requests or causes CBL to hold a Batch of Product for more than seven
days beyond when CBL could otherwise deliver pursuant to the terms of the
purchase order, ImmuLogic will be invoiced and payment terms will begin as
directed by the Payment Schedule.
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ARTICLE V.
SHIPMENTS, INSPECTION, & ACCEPTANCE
5.01 SHIPMENTS. CBL shall ship at ImmuLogic's expense the Product to
ImmuLogic or such destination(s) as ImmuLogic shall specify. A receipt signed by
ImmuLogic or ImmuLogic's agent at such destination will constitute delivery and
passage of title.
5.02 INVENTORY IN QUARANTINE. ImmuLogic may request in writing that CBL
ship the Product from CBL's inventory in quarantine, prior to the issuance by
CBL's Quality Assurance Department of the appropriate release; however,
ImmuLogic agrees not to introduce any of the Product into interstate commerce
until the receipt of a proper quality control release applicable to the Product.
Such a request will result in an invoice being sent as of the shipping date and
commencement upon invoice delivery of the thirty (30) day payment terms.
ImmuLogic shall indemnify and hold CBL harmless from any and all losses,
damages, claims, or costs, including reasonable attorney's fees, which CBL may
suffer or incur as a result of and arising out of the shipment or use of the
Product pursuant to the request of ImmuLogic hereunder prior to its release by
CBL's Quality Assurance Department.
5.03 CERTIFICATE OF CONFORMANCE. Upon completion of filling,
inspection, and quality assurance review, CBL shall promptly provide ImmuLogic a
Certificate of Conformance for each Batch of Product shipped, certifying that
the Product has met all Specifications set forth in this Agreement.
5.04 INSPECTION. ImmuLogic shall inspect all shipments of Product
received from CBL for proper labeling, packaging and count within fifteen (15)
days of actual receipt of shipment at its designated receiving facility.
However, any such inspection shall not relieve CBL of its obligation and
warranties under this Agreement. If any portion of the Product received fails to
conform with any applicable Specification, ImmuLogic may, subject to the terms
of Section 5.05 hereof, reject the same within thirty (30) days of the date of
actual receipt of (i) the Product; or (ii) a Certificate of Conformance.
5.05 REJECTION. In any case where ImmuLogic expects to reject or
otherwise make a claim against CBL with respect to damaged or otherwise
nonconforming Product, ImmuLogic shall notify CBL of such expected rejection and
CBL shall be offered a reasonable opportunity to offer proof or evidence as to
why such Product should not be rejected and to inspect and/or test such Product.
In the event of any dispute as to whether the Product may be rightfully rejected
by ImmuLogic, such Product shall be tested for conformance with the applicable
Specifications by an independent testing organization mutually acceptable to
both parties which analysis shall be binding on ImmuLogic and CBL solely for the
purpose of determining whether such Product may be rightfully rejected or not.
The fees and expenses of
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<PAGE> 7
such independent testing organization shall be paid by the party against whom
the determination is made. ImmuLogic shall not under any circumstances dispose
of any Product claimed by ImmuLogic or determined by independent testing
organization to be damaged or nonconforming, without CBL's prior written
consent. All or part of any shipment of Product determined to have been
rightfully rejected by ImmuLogic shall be held by ImmuLogic for disposal by CBL,
at CBL's expense.
ARTICLE VI.
REPRESENTATIONS & WARRANTIES
6.01 CBL warrants that all Product delivered to ImmuLogic (or shipped
to a third party at the direction of ImmuLogic) under this Agreement shall at
the time of delivery, be free of defects in material and workmanship; meet the
Specifications (except in the case of Product delivered in quarantine pursuant
to Section 5.02, in which case it shall meet the specifications upon release
from quarantine); and have been produced and maintained in conformance with
cGMPs and other applicable FDA regulations.
6.02 WARRANTIES BY IMMULOGIC. ImmuLogic warrants that its storage,
labeling, distribution, use, and sale of Product complies and will comply with
all applicable Federal, state and local laws, rules and regulations. If the
Product is intended for distribution, use, and/or sale outside of the United
States, ImmuLogic further warrants that all necessary US export licenses are in
place or will be in place at the time of export and that the export,
distribution and/or sale comply with all laws, rules and regulations of the
country where the Product will be used. ImmuLogic represents and warrants to CBL
that ImmuLogic is not aware that Product, or the processing or distribution
thereof, will violate the intellectual property rights of any third party, and
that ImmuLogic is not engaged in the theft or misuse of any third party's trade
secret information regarding the processing or use or distribution of Product or
Product, nor does ImmuLogic have notice of any claim of a third party regarding
any such theft or misuse.
6.03 LIMITATION ON WARRANTIES. THE WARRANTIES SET FORTH IN THIS ARTICLE
VI ARE EXPRESSLY STATED AND IN LIEU OF AND EXCLUDE, AND THE PARTIES DO EXPRESSLY
DISCLAIM, ALL OTHER WARRANTIES EXPRESSED OR IMPLIED, ARISING BY OPERATION OF LAW
OR OTHERWISE, INCLUDING IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE
AND ANY REPRESENTATION OR WARRANTY AS TO THE SUITABILITY OR EFFICACY OF PRODUCT.
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ARTICLE VII.
INDEMNITIES / LIMITATION ON LIABILITY
7.01 INDEMNIFICATION BY CBL. CBL shall defend, indemnify, and hold
ImmuLogic harmless from and against any and all claims, liability, damage, loss,
cost and expenses (including reasonable attorney's fees) arising from any third
party claims made or brought, or any proceedings of any sort initiated against
ImmuLogic which arise out of CBL's breach of any obligations or warranty under
this Agreement, subject, however, to the limitations set forth in Section 7.04
below.
7.02 INDEMNIFICATION BY IMMULOGIC. ImmuLogic will defend, indemnify,
and hold CBL harmless from and against any and all claims, liability, damage,
loss, cost and expenses (including reasonable attorney's fees) resulting from
any third party claims made or brought against, or proceedings of any sort
initiated against CBL which (i) arise out of ImmuLogic's breach of any
obligation under this Agreement or (ii) arise out of the promotion,
distribution, sale or use by ImmuLogic or any third party of Product, including
without limitation any product liability claim (except to the extent CBL is at
fault or has failed to deliver or such Product in accordance with the
Specifications), or (iii) arise out of any or are based upon any claim of
violation by ImmuLogic of any, patent, trade secret or other intellectual
property rights of any person or entity, subject, however, in each case to the
limitation set forth in Section 7.04 below.
7.03 CONDITIONS. Each party's indemnity obligations (the "Indemnifying
Party") under Sections 7.01 and 7.02 are conditioned upon the other party (the
"Indemnified Party") promptly notifying the Indemnifying Party of any such claim
or proceeding in writing, tendering to the Indemnifying Party the opportunity to
defend or settle such a claim or proceeding at its expense and cooperating with
the Indemnifying Party (at the expense of the Indemnifying Party) in defending
or settling any such claim or proceeding.
7.04 LIMITATION ON LIABILITY. Anything herein to the contrary
notwithstanding:
(i) Neither party hereto shall be liable to the other, or the
successors or permitted assigns of the other, or any other person, for
any loss of profits, loss of business or interruption of business, or
for any indirect, incidental, special or consequential damages, costs,
losses or expenses, suffered or incurred under this agreement or
otherwise, even if advised of the possibility of such loss; and
(ii) CBL's liability for the replacement or for the cost or
value of any Active Ingredient, Materials, or production equipment
supplied to CBL hereunder by ImmuLogic, including but not limited to
any Active Ingredient,
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Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
Materials, or production equipment lost or damaged or incorporated into
any rejected or nonconforming Batch of Product, shall be limited to the
actual value thereof, up to the extent of CBL's insurance coverage for
property of others which has a dollar value of [****************] in
the aggregate. ImmuLogic will be responsible to prove value of any
claimed loss to CBL's insurance carrier for losses covered by CBL's
insurance policy. The parties hereto agree that the limitation on
liability provided for under the terms of this Section 7.04 is an
integral part of the agreement of the parties as evidenced by this
Agreement and that the parties are entering into this Agreement in
reliance upon the terms and provisions of this Section 7.04, and that,
but for such terms and provisions, the parties would not be entering
into this Agreement.
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ARTICLE VIII.
CONFIDENTIALITY
8.01 CONFIDENTIALITY. During the term of this Agreement and for a
period of ten (10) years following termination of this Agreement, each party
shall maintain in confidence all information and materials disclosed by the
other party and marked as confidential or which the other party knows or has
reason to know are or contain trade secrets or other proprietary information of
the other, including without limitation the Specifications, Master Batch Record,
and other information relating to the Product, and shall not use such trade
secrets or proprietary information for any purpose except as permitted by this
Agreement or disclose them to anyone other than those of its employees,
consultants, agents or subcontractors as are necessary in connection with such
party's activities as contemplated in this Agreement. Each party shall be
responsible for ensuring compliance with these obligations by such party's
employees, consultants, agents and subcontractors. Each party shall use a
similar effort to that which it uses to protect its own most valuable trade
secrets or proprietary information, which effort shall involve at least a
reasonable standard of care, to ensure that its employees, consultants, agents
and subcontractors do not disclose or make any unauthorized use of trade secrets
or proprietary information of the other party. Each party shall notify the other
promptly upon discovery of any unauthorized use or disclosure of the other's
trade secrets or proprietary information.
8.02 EXCEPTIONS. The obligations of confidentiality set forth in this
Agreement shall not apply to the extent that (a) either party is required to
disclose information by order or regulation of a governmental agency or a court
of competent jurisdiction or (b) the recipient can demonstrate that (i) the
disclosed information is in the public domain other than as a result of the
actions of the recipient, its employees, consultants, agents or subcontractors
in violation of this Agreement, (ii) the disclosed information was already
rightfully known to the recipient (as shown by its written records) prior to the
date of disclosure to the recipient in connection with the negotiation or
performance of this Agreement or is developed or discovered by the recipient
independently and without relying on or with reference to the disclosure of the
information pursuant hereto, (iii) the disclosed information was received by the
recipient on an unrestricted basis from a source unrelated to any party of this
Agreement and not under a duty of confidentiality to the other party, or (iv)
disclosure is required to be made to the FDA as part of the FDA's product
approval process (or to an equivalent agency of a foreign country as part of
such country's product approval process).
8.03 INTELLECTUAL PROPERTY. All work, inventions, discoveries,
developments, findings reports and drawings resulting from the work performed
and in-so-far-as relating or directly or indirectly to the production and supply
of the Product under this Agreement ("Development"), other than general
pharmaceutical knowledge,
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techniques and technologies in the public domain ("the Excluded Items"), shall
be the property of ImmuLogic, and CBL hereby assigns, transfers and conveys all
of its right, title and interest in and to any and all Developments (other than
the Excluded Items) to ImmuLogic. If requested, CBL will promptly assist
ImmuLogic with any intellectual property filings related to Developments.
ImmuLogic will pay CBL, at its standard labor rates, for CBL's efforts in such
filings.
ARTICLE IX.
TERM AND TERMINATION
9.01 TERM. Unless terminated in accordance with the provisions of
Section 9.02, the term of this Agreement shall commence on the date hereof and
continue for a period of four (4) years. The term of this Agreement may be
extended by mutual written consent of both parties.
9.02 TERMINATION. ImmuLogic may terminate this Agreement at any time
upon written notice to CBL, subject to the obligations and duties set forth
under Section 9.03 hereof. Furthermore this Agreement may be terminated by
either party, in the event that the other party (a) files or has filed against
it a petition under the Bankruptcy Act and if filed against it, such petition is
not dismissed within 60 days, makes an assignment for the benefit of creditors,
has a receiver appointed for it or a substantial part of its assets, or
otherwise takes advantage of any statute or law designed for relief of debtors
or (b) fails to perform or otherwise breaches any of its obligations hereunder,
if, following the giving of notice by the terminating party of its intent to
terminate and stating the grounds therefor, the party receiving such notice
shall not have cured the failure or breach within thirty (30) days. In no event,
however, shall such notice or intention to terminate be deemed to waive any
rights to damages or any other remedy which the party giving notice of breach
may have as a consequence of such failure or breach.
9.03 OBLIGATIONS AND DUTIES UPON TERMINATION. If this Agreement is
terminated, both parties shall be released from all obligations and duties
imposed or assumed hereunder to the extent so terminated, except as expressly
provided to the contrary in this Agreement, and except for their obligations
under Article VIII. Upon termination, both parties shall cease any further use
of the confidential information disclosed to the receiving party by the other
party. Termination of this Agreement, for whatever reason, shall not affect the
obligation of either party to make any payments for which it is liable prior to
or upon such termination. Upon termination of this Agreement, ImmuLogic shall
purchase from CBL, at CBL's cost, any Materials purchased for the Product which
CBL has reasonably purchased or ordered (which order cannot be canceled) based
upon Project Summary. CBL shall immediately ship such materials to ImmuLogic in
accordance with ImmuLogic's instructions, provided that ImmuLogic has given
reasonable assurance of payment for such items.
-11-
<PAGE> 12
ARTICLE X.
MISCELLANEOUS
10.01 EXCLUSIVE RIGHTS. ImmuLogic and its Affiliates will purchase
Product and Product exclusively from CBL pursuant to the terms hereof for so
long as this Agreement remains in effect. For so long as ImmuLogic is ordering
and purchasing its requirements for Product exclusively from CBL, pursuant to
the terms of this Agreement, neither CBL nor its Affiliates will, without the
express written consent of ImmuLogic (i) manufacture or process the Product
covered by this Agreement or (ii) enter into any agreement or arrangement with
any other person, firm, corporation or entity to process and/or manufacture the
Product covered by this Agreement, other than for ImmuLogic; provided, however,
that CBL shall be relieved of its obligations under the foregoing clause of this
Section 10.01 with respect to the Product upon the earlier of (i) exercise by
ImmuLogic of its rights under Section 9.02, or (ii) breach by ImmuLogic of any
of its obligations hereunder and (iii) upon termination of this Agreement by
CBL.
10.02 INDEPENDENT CONTRACTOR. CBL shall at all times during the term of
this Agreement be an independent contractor, maintaining sole and exclusive
control over its personnel and operation. It is understood that all work
performed by CBL shall meet specifications set forth in this Agreement, and the
detailed manner and method of doing the same shall be under the control of CBL,
ImmuLogic being interested only in the results obtained. At no time will either
CBL or ImmuLogic hold itself out to be the agent, employee, lessee, sublessee,
partner, or joint venturer of the other, and it is further understood and agreed
between the parties that the full and exclusive relationship between them is
that of an independent contractor. Nothing in this Agreement shall be construed
to create any agency, employment, partnership, joint venture or similar
relationship between the parties other than that of an independent contractor.
Neither party shall have any right or authority whatsoever to incur any
liability or obligation (express or implied) or otherwise act in any manner in
the name or on the behalf of the other, or to make any promise, warranty or
representation binding on the other. All data, studies, protocols, report, and
documents prepared pursuant to this Agreement will become the property of
ImmuLogic. CBL and ImmuLogic agree not to use or refer to, the other without
prior written permission, in any public statements, whether oral or written,
related to this Agreement.
10.03 INSURANCE; LIABILITY TO THIRD PERSONS. CBL and ImmuLogic, each at
their own expense, shall obtain and thereafter maintain workers' compensation,
and comprehensive general liability (bodily injury and property damage)
insurance, with respect to performance under this Agreement. Each party shall
give the other or its representative immediately notice of any suit or action
filed, or prompt notice of any claim made, against them arising out of the
performance of this Agreement.
-12-
<PAGE> 13
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
10.04 PRODUCT LIABILITY INSURANCE. ImmuLogic and CBL each agree at its
own expense to maintain Product Liability insurance coverage of at least [****
*******] and to include the other as an additional named insured on the policy.
ImmuLogic and CBL will provide a Certificate of Insurance to the other upon
request, and such coverage will remain in effect indefinitely and so long as
either party has product liability exposure for any Product manufactured for
ImmuLogic. If such Product Liability insurance is underwritten on a "claims
made" basis, ImmuLogic and CBL agree that any change in underwriters during the
term of this agreement will require the purchase of "prior acts" coverage to
ensure that coverage will be continuous throughout the term of this Agreement.
10.05 GOVERNING LAW. This Agreement shall be construed, and legal
relations between the parties hereto shall be determined, in accordance with the
laws of the State of Maryland applicable to contracts solely executed and wholly
to be performed within the State of Maryland without giving effect to the
principles of conflicts of laws.
10.06 ARBITRATION. Any controversy or dispute by and between the
parties hereto or any of their Affiliates arising out of this Agreement which is
not resolved in good faith by the parties within sixty (60) days of first
becoming known to both parties, except as otherwise may be specifically provided
herein with respect to resort to remedies of injunction or other court order,
shall be submitted to binding arbitration in accordance with the Commercial
Arbitration Rules then pertaining of the American Arbitration Association, and
judgment upon the award rendered thereby may be entered in any court having
jurisdiction thereof. The place for arbitration shall be Baltimore, Maryland. In
any arbitration pursuant to this Section, the award shall be rendered by a
majority of the members of a board of arbitration consisting of three members,
one being appointed by each party and the third being appointed by mutual
agreement of the two arbitrators appointed by the parties. Nothing in this
Agreement shall be construed or interpreted as granting the arbitrators the
power to award punitive damages as part of any award rendered relating to this
Agreement or the transactions contemplated hereby. The costs and expenses of
such arbitration shall be shared equally by the parties.
10.07 NOTICE. All notices or communication required or permitted to be
given by either party hereunder shall be deemed sufficiently given if mailed by
registered mail or certified mail or sent by overnight courier, such as Federal
Express, to the other party at its respective address set forth below or to such
other address as one party shall give notice of to the other from time to time
hereunder. Mailed notices shall be deemed to be received on the third business
day following the date of mailing. Notices sent by overnight courier shall be
deemed received the following business day.
If to ImmuLogic:
-13-
<PAGE> 14
ImmuLogic Pharmaceutical Corporation
610 Lincoln St.
Waltham, MA 02154
Attn: J. Joseph Marr, M.D., President
If to CBL: Chesapeake Biological Laboratories, Inc.
1111 South Paca Street
Baltimore, MD 21230-2591
Attn: John C. Weiss, Ill, President
10.08 COMPLIANCE WITH ALL LAWS. In all activities undertaken pursuant
to this Agreement, both CBL and ImmuLogic covenant and agree that each will in
all material respects comply with such Federal, state and local laws and
statutes, as may be in effect at the time of performance and all valid rules,
regulations and orders thereof regulating such activities.
10.09 SUCCESSORS AND ASSIGNS. Neither this Agreement nor any of the
rights or obligations created herein, except for the right to receive any
remuneration hereunder, may be assigned by either party, in whole or in part,
without the prior written consent of the other party, except that either party
shall be free to assign this Agreement in connection with any sale of
substantially all of its assets or a merger without the consent of the other
party. This Agreement shall bind and inure to the benefit of the successors and
permitted assigns of the parties hereto.
10.10 NO WAIVERS; SEVERABILITY. No waiver of any breach of this
Agreement shall constitute a waiver of any other breach of the same or other
provision of this Agreement, and no waiver shall be effective unless made in
writing. Any provision hereof prohibited by or unenforceable under any
applicable law of any jurisdiction shall as to such jurisdiction be deemed
ineffective and deleted here from without affecting any other provision of this
Agreement. It is the desire of the parties hereto that this Agreement be
enforced to the maximum extent permitted by law, and should any provision
contained herein be held by any governmental agency or court of competent
jurisdiction to be void, illegal and unenforceable, the parties shall negotiate
in good faith for a substitute term or provision which carries out the original
intent of the parties. If the parties cannot reach agreement upon such a
substitute term or provision within sixty (60) days after the original term or
provision is held void, illegal or unenforceable, then the matter shall be
settled by binding arbitration in accordance with Section 10.06.
10.11 ENTIRE AGREEMENT; AMENDMENT. ImmuLogic and CBL acknowledge that
they have read this entire Agreement and that this Agreement, including the
attached Exhibits constitutes the entire understanding and contract between the
parties hereto and supersedes any and all prior or contemporaneous oral or
written communications with respect to the subject matter hereof, all of which
-14-
<PAGE> 15
communications are merged herein. It is expressly understood and agreed that (i)
there being no expectations to the contrary between the parties hereto, no usage
of trade, verbal agreement or another regular practice or method dealing within
any industry or between the parties hereto shall be used to modify, interpret,
supplement or alter in any manner the express terms of this Agreement; and (ii)
this Agreement shall not be modified, amended or in any way altered except by an
instrument in writing signed by both of the parties hereto.
10.12 DELAYS OR OMISSIONS. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to any party
hereto, shall impair any such right, power or remedy to such party nor shall it
be construed to be a waiver of any such breach or default, or an acquiescence
therein, or in any similar breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative.
10.13 FORCE MAJEURE. If either party fails to fulfill its obligations
hereunder (other than an obligation for the payment of money), when such failure
is due to an act of God, or other circumstances beyond its reasonable control,
including but not limited to fire, flood, civil commotion, riot, war (declared
and undeclared), revolution, action by government including delays in obtaining
governmental approvals or embargoes, then said failure shall be excused for the
duration of such event and for such a time thereafter as is reasonable to enable
the parties to resume performance under this Agreement.
10.14 FURTHER ASSURANCES. Each party shall, at any time, and from to
time, prior to or after the effective date of this Agreement, at reasonable
request of the other party, execute and deliver to the other such instruments
and documents and shall take such actions as may be reasonably required to more
effectively carry out the terms of this Agreement.
10.15 SURVIVAL. All representations, warranties, covenants and
agreements made herein and which by their express terms or by implication are to
be performed after the execution and or termination hereof, or are prospective
in nature, shall survive such execution and/or termination, as the case may be.
10.16 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement shall be
construed as giving any person, firm, corporation or other entity, other than
the parties hereto and their successors and permitted assigns, any right, remedy
or claim under or in respect of this Agreement or any provision hereof.
-15-
<PAGE> 16
10.17 HEADINGS. Section headings are for convenient reference and not a
part of this Agreement. All Exhibits are incorporated herein by this reference.
10.18 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original and all of which when taken together
shall be deemed but one instrument.
IN WITNESS WHEREOF, this Agreement shall take effect as of the date
first written above when it has been executed below by the duly authorized
representatives of the parties.
CHESAPEAK BIOLOGICAL LABORATORIES, INC.
By: /s/John C. Weiss
Title: John C. Weiss, III, President
IMMULOGIC PHARMACEUTICAL CORPORATION
By: /s/J. Joseph Marr
Title: J. Joseph Marr, M.D., President
Exhibits:
Exhibit A: Project Summary
Exhibit B: Pricing and Payment Schedule
Exhibit C: Timeline
-16-
<PAGE> 17
EXHIBIT A1
PROJECT SUMMARY DOCUMENT
Exhibit A1 contains Confidential Materials which have been omitted and filed
separately with the Securities and Exchange Commission.
-17-
<PAGE> 18
EXHIBIT A2
PROJECT SUMMARY DOCUMENT
Exhibit A2 contains Confidential Materials which have been omitted and filed
separately with the Securities and Exchange Commission.
-18-
<PAGE> 19
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
EXHIBIT B
Pricing
The project has been quoted within the context of the ten cost areas detailed
below. Some of the costs are fixed and some are variable.
Costs have been broken down into ten areas.
1. Fees
2. Capital costs for equipment
3. Manufacturing Labor and Materials for bulk Active
4. Process Validation
5. Assay Costs
6. Regulatory Costs
7. Area changed for cGMP compliance to bulk manufacturing regulations
8. Final Fill into Vials
9. Stability Studies
10. Miscellaneous
1. FEES:
Commencement Fee: [**] per product (nonrefundable, due at contract
signing)
Management Fee: [**] per product year
This management fee is a per year fee. This fee will be prorated to cover
any partial year.
2. CAPITAL COSTS FOR EQUIPMENT. CBL will work with Immulogic to acquire
cost-effective equipment as needed to perform the project. In some
instances, Immulogic has extra equipment that can be moved to CBL without
incurring capital expenses. In all cases, Immulogic can consult with CBL on
what equipment to purchase for the purpose of adequately performing their
work. Likely pieces of equipment identified at this time include the
following:
[**]
Estimate = [**] INVOICED AT [**]
Immulogic to Cover [**].
-19-
<PAGE> 20
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
3. MANUFACTURING LABOR AND MATERIALS FOR BULK ACTIVE
Labor Estimate = [**] INVOICED AT [**]
Materials Estimate = [**] INVOICED AT [**]
4. PROCESS VALIDATION: Bulk Active Validation: [**].
CBL anticipates that the costs associated with this validation are covered
within the estimates for "Manufacturing Labor and Materials for Bulk Active" and
"Assay Costs". We have estimated [**]. There may be additional lots, depending
on the successful outcome of the demonstration lot and the validation lots
following.
At the clinical scale, CBL does not anticipate validating the aseptic process
for anything other than sterility. One Sterile manipulation media process is
required annually to maintain the current validation and it will be charged at
CBL's prevailing rate for media fills at the time. For the purpose of this
proposal it is estimated at [**].
Validation of sterile fill for commercial scale has not been included in this
Agreement. That would be part of a commercial Agreement.
5. ASSAY COSTS (EXCLUDING CAPITAL EQUIPMENT).
Laboratory work will be invoiced at CBL Labor Rates with materials [**]. We have
identified multiple areas of laboratory work defined as follows:
[**]
Labor + Materials Estimate = [**] per month for the first 4 months. These
initial laboratory costs include substantial one time charged related to IQ/OQ
of equipment, validation of assays, and preparation of new testing standards and
testing protocols. Ongoing assay costs will occur with manufacture of lots, and
is expected to be less than or about [**] per lot of bulk active.
Labor: [**]
Materials: [**]
6. OTHER ANTICIPATED LABOR COSTS
Preparation of Documents for Regulatory Filings: [**] for CMC preparation.
-20-
<PAGE> 21
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
7. MANUFACTURING AREA CHANGES NEEDED TO COMPLY WITH BULK DRUG REGULATORY
requirements include improvements to an existing class 100,000 area
for the purpose of restricted access and better flow control. Also,
CBL will require the installation of a suitable safe/vault for the
purpose of storing the succinylnorcocaine in adherence with DEA
regulations.
Estimate = [**] INVOICED [**]
8. STERILE FILLING. [**]/[CLINICAL FILL] - [Unit Costing to be Developed
For Commercial Mnfg.] - Beyond [**] units/fill, the price per unit
will decrease while the price per lot will increase. These will be
quoted separately.
9. STABILITY STUDIES. Study Protocol, Study Management, Incubation in
adherence with ICH guidelines and Reports are included for a fixed
fee. Assay Costs are variable since the stability assays and their
associated costs are yet to be considered.
Stress Studies (1 month study)
[**]
Outside assays: Invoiced [**]
CBL assays: Invoiced [**]
Accelerated (3 month study)
[**]
Price: [**]
Outside assays: Invoiced [**]
CBL assays: Invoiced [**}
Ongoing (3 year study)
[**]
Price: [**]
Outside assays: Invoiced [**]
CBL assays: Invoiced [**}
-21-
<PAGE> 22
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
10. MISCELLANEOUS. Should related work arise, which has not been directly
anticipated by this contact, then CBL and Immulogic will agree on the
scope of work and L will charge Immulogic at the Labor Rates included
below and CBL will charge Immulogic for materials at a rate of [**].
Labor Rates:
[**]
-22-
<PAGE> 23
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Payment Schedule
Fee Amount Payment Term
[**] [**] [**]
-23-
<PAGE> 24
EXHIBIT C1
TIMELINE FOR IPC-14,551
[Graph]
-24-
<PAGE> 25
EXHIBIT C2
TIMELINE FOR IPC-14,607
[Graph]
-25-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FILED IN Q2 1998 QUARTERLY REPORT ON FORM 10Q CONDENSED CONSOLIDATED
BALANCE SHEET, STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10Q JUNE 30, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> $14,633
<SECURITIES> 34,341<F1>
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 26,906
<PP&E> 19,899
<DEPRECIATION> 14,190
<TOTAL-ASSETS> 55,333
<CURRENT-LIABILITIES> 2,897
<BONDS> 0
0
0
<COMMON> 204
<OTHER-SE> 51,957
<TOTAL-LIABILITY-AND-EQUITY> 52,161
<SALES> 0
<TOTAL-REVENUES> 432
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,834
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (772)
<INCOME-TAX> (772)
<INCOME-CONTINUING> (772)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (772)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
<FN>
<F1>MARKETABLE SECURITIES INCLUDE $22,669 IN LONG-TERM INVESTMENTS.
</FN>
</TABLE>
