<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM 10-Q
-----------
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
--
Exchange Act of 1934
FOR THE PERIOD ENDED SEPTEMBER 30, 1997
OR
Transition report pursuant to Section 13 or 15(d) of the Securities
--
Exchange Act of 1934
COMMISSION FILE NUMBER: 0-28324
BIOTRANSPLANT INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 04-3119555
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
CHARLESTOWN NAVY YARD, BUILDING 75 THIRD AVENUE
CHARLESTOWN, MASSACHUSETTS 02129
(Address of principal executive offices)
(617) 241-5200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes X No .
-- --
As of November 7, 1997, there were 8,572,390 shares of the Registrant's
Common Stock outstanding.
<PAGE>
BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE NO.
-------
<S> <C> <C>
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheets as of December 31, 1996 and September 30, 1997.......................... 3
Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 1996
and 1997, and for the period from inception (March 20, 1990) to September 30, 1997......................... 4
Condensed Consolidated Statement of Cash Flows for nine months ended September 30, 1996 and 1997,
and for the period from inception (March 20, 1990) to September 30, 1997................................... 5
Notes to Condensed Consolidated Financial Statements.......................................................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................................................................... 8
PART II. OTHER INFORMATION
ITEM 1.--6............................................................................................................. 11
SIGNATURES................................................................................................. 12
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, 1997
1996 (UNAUDITED)
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................ $ 6,563,957 $ 5,118,707
Short-term investments........................................................... 13,001,472 13,038,769
Deposits and other prepaid expenses.............................................. 1,087,516 925,022
------------- -------------
Total current assets........................................................... 20,652,945 19,082,498
Property and equipment--net........................................................ 1,285,535 1,089,749
Long-term investments.............................................................. 10,310,778 11,070,883
Other assets....................................................................... 66,377 41,486
------------- -------------
TOTAL ASSETS....................................................................... $ 32,315,635 $ 31,284,616
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current obligation under capital leases.......................................... $ 425,986 $ 285,752
Accounts payable................................................................. 126,003 233,787
Accrued expenses................................................................. 1,312,964 2,506,933
Deferred revenue................................................................. 1,000,000 3,000,000
------------- -------------
Total current liabilities...................................................... 2,864,953 6,026,472
------------- -------------
Long-term obligation under capital leases.......................................... 188,974 12,816
------------- -------------
Stockholders' equity:
Preferred stock, $.01 par value, authorized 2,000,000 shares; issued and
outstanding--no shares......................................................... -- --
Common stock, $.01 par value, authorized 25,000,000 shares; issued and
outstanding 8,558,902 shares at December 31, 1996 and 8,572,390 shares at
September 30, 1997............................................................ 85,589 85,709
Additional paid-in capital....................................................... 65,285,038 65,322,899
Accumulated deficit.............................................................. (36,108,919) (40,163,280)
------------- -------------
Total stockholders' equity..................................................... 29,261,708 25,245,328
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......................................... $ 32,315,635 $ 31,284,616
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
<PAGE>
BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, CUMULATIVE
---------------------------- ---------------------------- SINCE
1996 1997 1996 1997 INCEPTION
------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues:
License fees....................... $ -- $ -- $ 2,000,000 $ 3,000,000 $ 12,000,000
Research and development........... 1,250,000 1,750,000 4,500,000 4,750,000 19,000,000
Interest income.................... 493,333 427,303 874,345 1,300,105 3,121,725
------------- ------------- ------------- ------------- --------------
Total revenues................... 1,743,333 2,177,303 7,374,345 9,050,105 34,121,725
------------- ------------- ------------- ------------- --------------
Expenses:
Research and development........... 3,244,848 3,583,909 8,923,289 10,815,197 59,358,666
General and administrative......... 794,423 637,293 1,810,598 2,239,530 13,185,509
Interest........................... 27,776 13,093 110,557 49,740 1,740,830
------------- ------------- ------------- ------------- --------------
Total expenses................... 4,067,047 4,234,295 10,844,444 13,104,467 74,285,005
------------- ------------- ------------- ------------- --------------
Net loss............................. $ (2,323,714) $ (2,056,992) $ (3,470,099) $ (4,054,362) $ (40,163,280)
------------- ------------- ------------- ------------- --------------
------------- ------------- ------------- ------------- --------------
Net loss per common share............ $ (0.27) $ (0.24) $ (0.50) $ (0.47)
------------- ------------- ------------- ------------- --------------
------------- ------------- ------------- ------------- --------------
Shares used in computing net loss per
common share....................... 8,548,756 8,570,916 6,999,687 8,567,136
------------- ------------- ------------- ------------- --------------
------------- ------------- ------------- ------------- --------------
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
<PAGE>
BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, CUMULATIVE
---------------------------- SINCE
1996 1997 INCEPTION
------------- ------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.......................................................... $ (3,470,099) $ (4,054,362) $ (40,163,280)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.................................... 504,160 439,243 2,983,829
Noncash interest expense......................................... 15,583 -- 465,477
Noncash expenses related to options and warrants................. 24,890 24,891 1,143,761
Changes in current assets and liabilities:
Accounts receivable............................................. 99,159 -- --
Deposits and prepaid expenses................................... (415,717) 162,494 (925,022)
Accounts payable................................................ 35,709 107,783 233,786
Accrued expenses................................................ 219,478 1,193,970 2,506,934
Deferred revenue................................................ 250,000 2,000,000 3,000,000
------------- ------------- --------------
Net cash used in operating activities............................ (2,736,837) (125,981) (30,754,515)
------------- ------------- --------------
Cash flows from investing activities:
Purchases of property and equipment............................... (96,100) (243,457) (3,448,845)
Disposal of property and equipment, net........................... -- -- 28,040
Purchases of investments.......................................... (17,632,072) (16,115,728) (54,316,420)
Proceeds from investments......................................... -- 15,318,327 30,206,768
------------- ------------- --------------
Net cash used in investing activities........................... (17,728,172) (1,040,858) (27,530,457)
------------- ------------- --------------
Cash flows from financing activities:
Proceeds from convertible notes payable to stockholders........... -- -- 9,400,000
Payments of obligations under capital leases...................... (340,797) (316,392) (1,895,642)
Proceeds from sale/leaseback of equipment......................... -- -- 771,968
Net proceeds from equipment leases................................ -- -- 1,422,240
Net proceeds from sale of redeemable convertible preferred stock.. 5,889,530 -- 25,661,526
Proceeds from sale of common stock................................ 27,964,287 37,981 28,043,587
------------- ------------- --------------
Net cash provided by (used in) financing activities............. 33,513,020 (278,411) 63,403,679
------------- ------------- --------------
Net increase (decrease) in cash and cash equivalents................ 13,048,011 (1,445,250) 5,118,707
Cash and cash equivalents, beginning of period...................... 2,848,549 6,563,957 --
------------- ------------- --------------
Cash and cash equivalents, end of period............................ $ 15,896,560 $ 5,118,707 $ 5,118,707
------------- ------------- --------------
------------- ------------- --------------
Supplemental disclosures and noncash transactions:
Increase in equipment under capital leases........................ $ -- $ -- $ (2,210,270)
------------- ------------- --------------
------------- ------------- --------------
Conversion of convertible notes payable to stockholders and
accrued interest into redeemable convertible preferred stock.... $ 1,055,816 $ -- $ 9,905,710
------------- ------------- --------------
------------- ------------- --------------
Issuance of warrants.............................................. $ -- $ -- $ 741,737
------------- ------------- --------------
------------- ------------- --------------
Interest paid during the period................................... $ 94,901 $ 45,706 $ 1,379,535
------------- ------------- --------------
------------- ------------- --------------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
5
<PAGE>
BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. OPERATIONS AND BASIS OF PRESENTATION
BioTransplant Incorporated (the "Company") was incorporated on March 20,
1990. The Company is developing proprietary anti-rejection pharmaceuticals
and organ transplantation systems which represent a comprehensive approach to
inducing long-term specific transplantation tolerance in humans.
The Company is in the development stage and is devoting substantially all
of its efforts toward product research and development and raising capital.
The Company is subject to a number of risks similar to those of other
development stage companies, including dependence on key individuals,
competition from larger companies, the development of commercially usable
products, obtaining regulatory approval for products under development, the
development and marketing of commercial products, and the need to obtain
adequate additional financing necessary to fund the development of its
products.
The interim financial statements herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC") and include, in the opinion of
management, all adjustments, consisting of normal, recurring adjustments,
necessary for a fair representation of interim period results. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. The results for the interim periods presented are not
necessarily indicative of results to be expected for the fiscal year or any
future period. These condensed consolidated financial statements should be
read in conjunction with the audited consolidated financial statements and
the notes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1996, as filed with the Securities and Exchange
Commission.
2. CASH EQUIVALENTS AND INVESTMENTS
Cash equivalents include short-term, highly liquid investments with
original maturities of less than three months from the date of purchase.
Short-term investments consist primarily of corporate notes and securities
issued by the United States Treasury or other United States government
agencies with maturities of less than one year from the date of purchase.
Long-term investments consist primarily of corporate notes with maturities of
greater than one year. In accordance with Financial Accounting Standards
Board Statement No. 115, "Accounting for Certain Investments in Debt and
Equity Securities", the Company's investments are classified as
held-to-maturity and are stated at amortized cost, which approximates market
value.
The Company held the following investments at December 31, 1996 and
September 30, 1997:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------- -------------
<S> <C> <C>
Short-term:
United States Treasury and Agency Securities
(average maturity of 12 months)................................................. $ -- $ 2,000,000
Corporate Bonds (average maturity of seven and eight months)..................... 12,015,442 10,039,221
Commercial Paper (average maturity of 93 days and twelve months)................. 986,030 999,548
------------- -------------
$ 13,001,472 $ 13,038,769
------------- -------------
------------- -------------
Long-term:
Corporate Bonds (average maturity of 13 months).................................. $ 10,310,778 $ 11,070,883
------------- -------------
------------- -------------
</TABLE>
6
<PAGE>
BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited)
3. NET LOSS PER COMMON SHARE
Net loss per common share is based on the pro forma weighted average
number of common shares outstanding during the periods presented, assuming
the automatic conversion of all shares of Series A, B, D and E redeemable
convertible preferred stock into shares of common stock on the date of
issuance. Pursuant to the requirements of the SEC, common stock and preferred
stock issued during the 12 months immediately preceding the initial public
offering, plus shares of common stock that became issuable during the same
period pursuant to the grant of common stock options and warrants, have been
included in the calculation of pro forma weighted average number of common
shares outstanding for all periods presented until the effective date of the
Company's initial public offering using the treasury stock method.
4. NEW ACCOUNTING STANDARD
In March 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share", ("SFAS 128"). SFAS 128 establishes standards
for computing and presenting earnings per share and applies to entities with
publicly held common stock or potential common stock. This statement is
effective for fiscal years ending after December 15, 1997 and early adoption
is not permitted. When adopted, this statement will require restatement of
prior years' earnings per share. The Company will adopt this statement for
its fiscal year ended December 31, 1997. The Company believes that the
adoption of SFAS 128 will not have a material effect on its financial
statements.
5. REVENUE RECOGNITION
Substantially all of the Company's license and research and development
revenues are derived from two collaborative research arrangements. Annual
research and development payments are recognized on a straight-line basis
over the period of the contract, which approximates when work is performed
and costs are incurred. License fee revenue represents technology transfer
fees received for rights to certain technology of the Company. License fees
are recognized as revenue is earned. Deferred revenue represents amounts
received in advance for research and development. Research and development
expenses in the accompanying consolidated statements of operations include
funded and unfunded expenses.
6. TERM NOTE
In September 1997, the Company entered into a term note with a bank,
whereby the Company may borrow up to $500,000 for certain equipment and
fixtures during a specified drawdown period, after which time the outstanding
balance will become payable in 36 equal monthly principal installments plus
interest. This term note bears annual floating interest at the Bank's Prime
Rate (8.50% at September 30, 1997) during the drawdown period with an option
to convert during the repayment period to an annual fixed rate at the three
month London Interbank Offered Rate ("LIBOR") (5.78% at September 30, 1997)
plus 2.25%. This term note is secured by equipment and fixtures purchased
under these borrowings. There were no borrowings outstanding under this term
note at September 30, 1997.
7
<PAGE>
BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
(A Development Stage Company)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company for the three and nine months ended September 30,
1996 and 1997 should be read in conjunction with the accompanying unaudited
condensed consolidated financial statements and the related notes thereto.
This report may contain certain forward looking statements which involve
risks and uncertainties. Such statements are subject to certain factors which
may cause the Company's plans and results to differ significantly from the
plans and results discussed in forward looking statements. Factors that may
cause such differences include, but are not limited to, the progress of the
Company's research and development programs, the Company's ability to compete
successfully, the Company's ability to attract and retain qualified
personnel, the Company's ability to enter into and maintain collaborations
with third parties, the Company's ability to enter into and progress in
clinical trials, the time and costs involved in obtaining regulatory
approvals, the costs involved in obtaining and enforcing patents, proprietary
rights and any necessary licenses, the ability of the Company to establish
development and commercialization capacities or relationships, the costs of
manufacturing, the Company's ability to obtain additional funds, and those
other risks discussed under the heading "Business--Factors Which May Affect
Results" in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, as filed with the Securities and Exchange Commission.
OVERVIEW
Since commencement of operations in 1990, the Company has been a
development stage company engaged primarily in the research and development
of proprietary pharmaceuticals and organ transplantation systems which
represent a comprehensive approach to inducing long-term specific
transplantation tolerance in humans. The major sources of the Company's
working capital have been the proceeds of equity placements, sponsored
research funding and license fees and capital lease financings. The Company
has not generated any revenues from the sales of products to date, and does
not expect to receive any product revenues for several years. The Company
will be required to conduct significant research, development, testing and
regulatory compliance activities that, together with general and
administrative expenses, are expected to result in significant and increasing
operating losses for at least the next several years.
In 1993, and as amended and restated in September 1995, the Company and
Novartis entered into a collaboration agreement for the development and
commercialization of xenotransplantation products utilizing gene
transduction. Under the agreement, Novartis has committed research funding
through March 1998 of $20.0 million, all of which had been received as of
September 30, 1997, and agreed to pay license fees of $10.0 million, all of
which had been received as of September 30, 1997. The $9.0 million payment
from Novartis which was received during March 1997 is comprised of $6.0
million in research funding for the gene transduction approach to
xenotransplantation, which is being recognized as revenue on a straight-line
basis over the one-year period from April 1, 1997 to March 31, 1998, and $3.0
million in license fees which was recognized as revenue in April 1997.
Novartis has also agreed to fund certain development and premarketing costs
of such products, portions of which, under certain circumstances, may be
repayable from the Company's operating profits from sales of such products.
In October 1997, the Company and Novartis expanded their relationship in
xenotransplantation by entering into a collaboration and license agreement
for the development and commercialization of xenotransplantation products
utilizing the Company's proprietary mixed bone marrow chimerism technology.
Under the agreement, Novartis has committed up to $36.0 million in research
funding, license fees and milestone payments, beginning in October 1997.
In October 1995, the Company and MedImmune formed a collaborative
research agreement for the development of products to treat and prevent organ
rejection. MedImmune paid the Company a $2.0 million license fee at the time
of execution of the agreement, and agreed to fund and assume responsibility
for clinical testing and commercialization of BTI-322 and other related
products. MedImmune has agreed to provide research support and make milestone
payments which could total up to an additional $14.0 million, of which $2.0
million had been recognized as of September 30, 1997.
8
<PAGE>
BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
(A Development Stage Company)
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Revenues increased to $2.2 million for the three months ended September
30, 1997 from $1.7 million for the three months ended September 30, 1996. The
increase in revenues was primarily due to $1.5 million in sponsored research
funding from Novartis during the three months ended September 30, 1997,
compared to $1.0 million during the three months ended September 30, 1996, as
a result of the amendment and restatement of the collaboration agreement with
Novartis in September, 1995.
Research and development expenses increased to $3.6 million for the three
months ended September 30, 1997 from $3.2 million for the three months ended
September 30, 1996. This increase was primarily due to increases in sponsored
research, research and development staff and associated increases in supplies
and support services.
General and administrative expenses decreased to $637,000 for the three
months ended September 30, 1997 from $794,000 for the three months ended
September 30, 1996. This decrease was primarily due to decreases in outside
professional services in connection with market research and business
development partially offset by increased administrative costs as a
publicly-traded company.
Interest income decreased to $427,000 for the three months ended
September 30, 1997 from $493,000 for the three months ended September 30,
1996. The decrease was due primarily to lower average cash balances available
for investment.
Interest expense decreased to $13,000 for the three months ended
September 30, 1997 from $28,000 for the three months ended September 30,
1996. The decrease was primarily due to decreasing balances on existing
obligations under capital leases
As a result of the above factors the Company generated a net loss for the
three months ended September 30, 1997 of $2.1 million, or $0.24 per share,
compared to a net loss of $2.3 million, or $0.27 per share for the three
months ended September 30, 1996.
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Revenues increased to $9.1 million for the nine months ended September
30, 1997 from $7.4 million for the nine months ended September 30, 1996. The
increase in revenues was due to increased research and development revenues
which primarily consisted of funding from Novartis of $7.0 million for the
nine months ended September 30, 1997 compared to $5.8 million for the nine
months ended September 30, 1996, as a result of the amendment and restatement
of the collaboration agreement. Interest income increased to $1.3 million for
the nine months ended September 30, 1997 from $874,000 for the nine months
ended September 30, 1996. The increase was due primarily to higher cash
balances available for investment.
Research and development expenses increased to $10.8 million for the nine
months ended September 30, 1997 from $8.9 million for the nine months ended
September 30, 1996. This increase was primarily due to increases in sponsored
research programs and increases in research and development staff together
with the associated increases in supplies and support services, partially
offset by decreased expenditures related to the human clinical safety trials
for BTI-322, which are currently being primarily conducted and funded by
MedImmune.
General and administrative expenses increased to $2.2 million for the
nine months ended September 30, 1997 from $1.8 million for the nine months
ended September 30, 1996. This increase was primarily due to increases in
outside professional services in connection with market research and business
development, increased headcount and related expenses for general and
administrative personnel and increased administrative costs as a
publicly-traded company.
9
<PAGE>
BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
(A Development Stage Company)
LIQUIDITY AND CAPITAL RESOURCES
In May 1996, the Company completed an initial public offering of
3,220,000 shares of common stock at a price of $9.50 per share, and received
net proceeds of approximately $28.0 million. In addition, all outstanding
shares of redeemable convertible preferred stock were automatically converted
into 5,202,154 shares of common stock upon the closing of the initial public
offering.
Since its inception and prior to the completion of the Company's initial
public offering, the Company's operations have been funded principally
through the net proceeds of an aggregate of $36.2 million from private
placements of equity securities. The Company has also received $30.0 million
from a research and development and collaboration agreement with Novartis,
$3.8 million from an alliance agreement with MedImmune and $2.2 million in
equipment lease financing. The proceeds of the private placements, notes
payable and capital leases and cash generated from the corporate
collaborations with Novartis and MedImmune have been used to fund operating
losses of approximately $40.2 million and the investment of approximately
$4.0 million in equipment and leasehold improvements through September 30,
1997. In October 1997, the Company and Novartis expanded their relationship
in xenotransplantation by entering into a collaboration and license agreement
for the development and commercialization of xenotransplantation products
utilizing the Company's proprietary mixed bone marrow chimerism technology.
Under the agreement, Novartis has committed up to $36.0 million in research
funding, license fees and milestone payments, beginning in October 1997. In
September 1997, the Company entered into a term note with a bank, whereby the
Company may borrow up to $500,000 for certain equipment and fixtures. There
were no borrowings outstanding under this term note at September 30, 1997.
The Company had no significant commitments as of September 30, 1997 for
capital expenditures.
During the nine months ended September 30, 1996, the Company paid Stem
Cell Sciences $676,000 for research support for calendar year 1997 and to
maintain its pro rata equity interest in Stem Cell Sciences. In addition, the
Company has an option to purchase additional shares of Stem Cell Sciences
prior to December 1997, to maintain its pro rata equity interest. If the
Company does not make such further investment, its rights to certain
technologies become nonexclusive.
The Company had cash and cash equivalents and investments of $29.2
million as of September 30, 1997.
The Company anticipates that its existing funds and interest earned
thereon should be sufficient to fund its operating and capital requirements
as currently planned through the end of 1998. However, the Company's cash
requirements may vary materially from those now planned, due to many factors,
including, but not limited to, the progress of the Company's research and
development programs, the scope and results of preclinical and clinical
testing, changes in existing and potential relationships with corporate
collaborators, the time and cost in obtaining regulatory approvals, the costs
involved in obtaining and enforcing patents, proprietary rights and any
necessary licenses, the ability of the Company to establish development and
commercialization capacities or relationships, the costs of manufacturing and
other factors.
The Company expects to incur substantial additional costs, including
costs related to research and development activities, preclinical studies,
clinical trials, obtaining regulatory approvals, manufacturing and the
expansion of its facilities. The Company will need to raise substantial
additional funds, through additional financings including public or private
equity offerings and collaborative arrangements with corporate partners.
There can be no assurance that funds will be available on terms acceptable to
the Company, if at all. If adequate funds are not available, the Company may
be required to delay, scale back or eliminate certain of its product
development programs or to license to others the right to commercialize
products or technologies that the Company would otherwise seek to develop and
commercialize itself, any of which would have a material and adverse effect
on the Company.
10
<PAGE>
BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
(A Development Stage Company)
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Response: None
ITEM 2. CHANGES IN SECURITIES
Response: None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Response: None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
Response: None
ITEM 5. OTHER INFORMATION
Response: None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
+10.1 Collaboration and License Agreement between the Company and Novartis
Pharma AG, dated October 6, 1997.
10.2 Promissory Note and Security Agreement between the Company and Fleet
National Bank, dated September 5, 1997.
11.1 Statement: Computation of Pro Forma Net Loss Per Common Share
27 Financial Data Schedule.
b) Reports on Form 8-K
None.
+ Confidential materials omitted and filed separately with the Securities
and Exchange Commission.
11
<PAGE>
BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
(A Development Stage Company)
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.
BioTransplant Incorporated
(Registrant)
Date: November 12, 1997 /s/ Elliot Lebowitz
------------------------------
Elliot Lebowitz
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Richard V. Capasso
-------------------------------
Richard V. Capasso
Vice President, Finance and Treasurer
(Principal Financial and Accounting Officer)
12
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Exhibit 10.1
COLLABORATION AND LICENSE AGREEMENT
THIS AGREEMENT, effective as of the 6th day of October, 1997 (the
"EFFECTIVE DATE") between BIOTRANSPLANT, INCORPORATED (previously
BIOTRANSPLANT, INC.), a corporation having a place of business at 3rd Avenue,
Bldg. 75, Charlestown Navy Yard, Charlestown, MA 02129, ("BTI"), and NOVARTIS
PHARMA AG, a Swiss corporation having a place of business at Lichtstrasse 35,
CH-4002 Basel, Switzerland ("NOVARTIS").
WHEREAS each of the parties has substantial ongoing research and
development programs in the field of xenotransplantation;
WHEREAS the parties have determined that it is in their mutual
interests to enter into a collaborative research and development program as
soon as possible in order to accelerate the availability of
xenotransplantation products to the public;
WHEREAS the parties have therefore agreed on a collaborative
research and development program under certain terms and conditions;
NOW THEREFORE, in consideration of the faithful performance of the
covenants herein contained, the parties hereto agree as follows:
<PAGE>
SECTION 1.
DEFINITIONS
1.1 "ADVERTISING" shall mean promotion of a CO-PROMOTION PRODUCT
through any means including, without limitation, (i) television and radio
advertisements, (ii) advertisements appearing in journals, newspapers,
magazines or other media, including direct mail, (iii) seminars and
conventions, (iv) sample drops, visual aids, three dimensional promotional
items, and other selling materials, (v) hospital formulary presentations,
(vi) presentations to state and other governmental formularies, (vii)
external market research projects and (viii) symposia and leader development
activities, (ix) marketing clinical studies (other than for drug regulatory
approvals), (x) promotional allowances granted to managed health care
accounts, (xi) sales force training.
1.2 "AFFILIATE" with respect to a PARTY shall mean any corporation
or other entity which controls, is controlled by, or is under common control
with such PARTY. A corporation or other entity shall be regarded as in
control of another corporation or entity if it owns or directly or indirectly
controls more than fifty percent (50%) of the voting stock or other ownership
interest of the other corporation or entity, or if it possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of the corporation or other entity or the power to elect or appoint
fifty percent (50%) or more of the members of the governing body of the
corporation or other entity. A corporation or entity which is under common
control with BTI as a result of a common venture capital entity is not an
AFFILIATE of BTI.
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1.3 "AGREEMENT YEAR" shall mean the twelve-month period beginning on
the EFFECTIVE DATE and each subsequent twelve-month period thereafter.
1.4 "BTI BACKGROUND INVENTION" shall mean any new and useful
process, use, article of manufacture, or composition of matter applicable
within the FIELD and owned by BTI or an AFFILIATE of BTI or licensed to BTI
or an AFFILIATE of BTI as of the EFFECTIVE DATE.
1.5 "BTI BACKGROUND PATENT RIGHT" shall mean any patent or patent
application, or equivalent thereof, anywhere in the world, having one or more
claims to a BTI BACKGROUND INVENTION.
1.6 "BTI BACKGROUND TECHNOLOGY" shall mean any data, substances,
processes, materials, formulas, or information useful in the FIELD owned by
BTI or an AFFILIATE of BTI or licensed to BTI or an AFFILIATE of BTI as of
the EFFECTIVE DATE.
1.7 "BTI INVENTION" shall mean a BTI BACKGROUND INVENTION and/or a
FUNDED INVENTION.
1.8 "BTI OTHER PRODUCT" shall mean XENOGRAFT PRODUCT(S) for a HUMAN
XENOGRAFT SYSTEM in a country(ies) in which the license granted to NOVARTIS
for HUMAN XENOGRAFT SYSTEM under this Agreement has been terminated.
1.9 "BTI PATENT RIGHT" shall mean a BTI BACKGROUND PATENT RIGHT
and/or a FUNDED PATENT RIGHT.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
1.10 "BTI TECHNOLOGY" shall mean BTI BACKGROUND TECHNOLOGY and/or
FUNDED TECHNOLOGY.
1.11 "CLINICAL STEERING COMMITTEE" shall mean the clinical committee
composed of representatives of BTI and NOVARTIS described in Section 4 hereof.
1.12 "COMPLETION OF THE RESEARCH STAGE" shall mean in the case of
each XENOGRAFT PRODUCT, the completion of work which is sufficient to enable
initiation of preclinical development of the XENOGRAFT PRODUCT for subsequent
filing of an IND application to the United States Food and Drug
Administration (or its equivalent to the appropriate regulatory agency in any
other nation in the TERRITORY).
1.13 "CO-PROMOTION AGREEMENT" shall mean the Co-Promotion Agreement
provided for in Section 6.1 of this Agreement.
1.14 "CO-PROMOTION PERCENTAGE" for each CO-PROMOTION PRODUCT shall
mean the percentage of co-promotion elected by BTI pursuant to Section 6.1.
1.15 "CO-PROMOTION PRODUCT" shall mean each and every XENOGRAFT
PRODUCT for use in a HUMAN XENOGRAFT SYSTEM which derive the xenograft from a
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************************ as to which NOVARTIS has rights and which
contributes to acceptance of the xenograft.
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<PAGE>
1.16 "COPROMOTION PROFIT" with respect to a CO-PROMOTION PRODUCT
shall mean NET SALES of that CO-PROMOTION PRODUCT by NOVARTIS or its
AFFILIATE in the COPROMOTION TERRITORY less the sum of (i) COST OF GOODS
SOLD; (ii) MARKETING EXPENSES; and (iii) royalties paid to a third-party with
respect to sales of the CO-PROMOTION PRODUCT by NOVARTIS in the COPROMOTION
TERRITORY.
1.17 "COPROMOTION TERRITORY" shall mean the United States of
America and Canada.
1.18 "COST OF GOODS SOLD" shall mean the amount paid to a third
party for manufacture and supply of CO-PROMOTION PRODUCT if neither BTI nor
NOVARTIS is the supplier. Where BTI or NOVARTIS is the supplier of the
CO-PROMOTION PRODUCT, COST OF GOODS SOLD shall mean the aggregate amount of
the following costs incurred in manufacturing a CO-PROMOTION PRODUCT
(determined in a reasonable manner consistent with that PARTY's internal cost
accounting methods for other similar products and in accordance with
generally accepted accounting principles):
(i) direct labor (salaries, wages and employee benefits);
(ii) direct materials;
(iii) depreciation, repairs and maintenance and other
operating costs of production machinery utilized in the manufacture of
CO-PROMOTION PRODUCTS;
(iv) quality and in-process control;
(v) building operating costs assigned to the production
area;
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(vi) production and material overhead incurred in the
manufacturing process, including:
manufacturing administration;
manufacturing personnel department;
manufacturing technology;
packaging development; material management, storage and
handling;
purchase and import area;
industrial engineering (including non-capital mandated
environmental costs); and
manufacturing and employee training.
1.19 "DEVELOPMENT COST" shall mean the aggregate amount of the
following costs incurred in preclinical development, clinical development and
regulatory approval of a DEVELOPMENT PRODUCT in which BTI has elected to
co-promote such CO-PROMOTION PRODUCT determined in a reasonable manner
consistent with NOVARTIS' internal cost accounting methods and in accordance
with generally accepted accounting principles, including but not limited to:
(i) direct labor (salaries, wages and employee benefits); (ii) materials and
supplies; (iii) depreciation, repairs and maintenance and other operating
costs of machinery and equipment utilized in preclinical and clinical
development and regulatory approval; (iv) building operating costs assigned
to the development area; (v) overhead incurred in clinical and preclinical
research and
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<PAGE>
development including administration costs, and regulatory approval costs;
and (vi) payments made to third parties or for services in connection with
preclinical and clinical development and regulatory approval.
1.20 "DEVELOPMENT PRODUCT" shall mean a CO-PROMOTION PRODUCT for the
CO-PROMOTION TERRITORY which has reached COMPLETION OF THE RESEARCH STAGE.
1.21 "FIELD" shall mean xenotransplantation wherein as part of the
xenotransplantation procedure (including pre-operative and post-operative
treatment), in order to facilitate acceptance of a xenograft, the recipient
of the xenograft is provided with bone marrow cells from the same species as
the xenograft donor.
1.22 "FUNDED INVENTION" shall mean any new and useful process, use,
article of manufacture, or composition of matter conceived or reduced to
practice in the course of FUNDED RESEARCH and which is owned by BTI or an
AFFILIATE of BTI or which is licensed to BTI or an AFFILIATE of BTI.
1.23 "FUNDED PATENT RIGHT" shall mean any patent or patent
application, or equivalent thereof, any where in the world, having one or
more claims to a FUNDED INVENTION.
1.24 "FUNDED RESEARCH" shall mean research performed by or on behalf
of BTI during the RESEARCH TERM in accordance with the FUNDED RESEARCH PLAN
and funded by NOVARTIS.
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<PAGE>
1.25 "FUNDED RESEARCH PLAN" shall mean the annual research plan
approved by each PARTY for FUNDED RESEARCH described in Section 2.3 of this
Agreement.
1.26 "FUNDED TECHNOLOGY" shall mean any data, substances, processes,
materials, formulas, or information developed in the course of FUNDED
RESEARCH and which is owned by BTI or an AFFILIATE of BTI or licensed to BTI
or an AFFILIATE of BTI.
1.27 "FUNDED XENOGRAFT PRODUCT" shall mean a XENOGRAFT PRODUCT which
is the subject of FUNDED RESEARCH.
1.28 "HUMAN XENOGRAFT SYSTEM" shall mean any product, process,
article, apparatus, substance, chemical, material or service used prior to,
during or after a human xenotransplantation procedure wherein as part of such
xenotransplantation procedure acceptance of a xenograft in a human is
facilitated by providing the human with bone marrow cells from the animal
species from which the xenograft is obtained.
1.29 "IND" shall mean an Investigational New Drug Application in the
United States or its equivalent in a MAJOR COUNTRY.
1.30 "LO-CD-2A ANTIBODY TECHNOLOGY" shall mean the antibody known as
LO-CD-2A and/or fragments, derivatives or analogs thereof; and compounds and
materials whether or not antibodies which are based on such antibody, as well
as all information, data, technology and patent rights directed thereto,
which exists as of April 1, 1993 or which may exist after April 1, 1993 and
which is owned by or licensed to BTI.
1.31 "MAJOR COUNTRY" means the United States of America, United
Kingdom, France, Italy, Germany, Japan and Canada.
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<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
1.32 "MARKETING EXPENSES" shall mean *********************************
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********************************************************************(determined
in a reasonable manner************* *******************************************
**** and in accordance with generally accepted accounting principles) in ******
connection with: **************************************************************
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*********************************************incurred in the marketing of
CO-PROMOTION PRODUCT. It is expressly understood that marketing and market
function does not include selling or selling function.
1.33 "NET SALES" shall mean with respect to any XENOGRAFT PRODUCT or
BTI OTHER PRODUCT the invoiced sales price of such XENOGRAFT PRODUCT or BTI
OTHER PRODUCT, as the case may be, billed to independent third party
customers in bona fide arms length transactions *******************************
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**************
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<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
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************.
In the event a sale is made between a PARTY and its AFFILIATE or a
sublicensee for resale, then NET SALES for determining a payment under this
Agreement shall be the higher of (i) net sales to the AFFILIATE or
sublicensee, as the case may be, calculated in the manner of NET SALES or
(ii) the NET SALES of the AFFILIATE or sublicensee, as the case may be.
1.34 "PARTY(S)" shall mean NOVARTIS and/or BTI, as the case may be.
1.35 "PLA" shall mean a Product License Application in the United
States or its equivalent in a MAJOR COUNTRY or any equivalent application
which is used to obtain regulatory approval for marketing of a XENOGRAFT
PRODUCT in a MAJOR COUNTRY.
1.36 "PRE-MARKETING EXPENSES" shall mean the costs incurred by a
PARTY for ADVERTISING prior to commercial sale of a CO-PROMOTION PRODUCT
1.37 "RESEARCH COSTS" shall mean the aggregate amount of the
following costs incurred in research determined in a reasonable manner
consistent with BTI's
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<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
internal cost accounting methods and in accordance with generally accepted
accounting principles, including but not limited to: **************************
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*******************************************************************************
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********************************************.
1.38 "RESEARCH STEERING COMMITTEE" shall mean the research committee
composed of representatives of BTI and NOVARTIS described in Section 4 hereof.
1.39 "RESEARCH TERM" shall mean unless earlier terminated the
three-year period beginning on the EFFECTIVE DATE and any extension thereof
agreed to by the parties.
1.40 "NOVARTIS COLLABORATION PATENT RIGHT" shall mean any patent or
patent application or equivalent thereof, anywhere in the world, having one
or more claims based on NOVARTIS COLLABORATION TECHNOLOGY, which is owned by
NOVARTIS or its AFFILIATES or as to which NOVARTIS or its AFFILIATES have
transferable rights.
1.41. "NOVARTIS COLLABORATION TECHNOLOGY" shall mean any data,
substances, processes, materials, formulas or information useful in the FIELD
which is developed or created by or on behalf of NOVARTIS or its AFFILIATES
or its
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<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
sublicensee(s) which incorporate or are based on or derived by use of BTI
TECHNOLOGY. An incidental, immaterial or insubstantial use of BTI TECHNOLOGY
by NOVARTIS or its AFFILIATES or sublicensees in the development of data,
substances, processes, materials, formulas or information shall not cause
such to become NOVARTIS COLLABORATION TECHNOLOGY.
1.42. "SELLING EXPENSES" shall mean amounts paid or incurred in
connection with:***************************************************************
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*******************************************************************************
*******************************************************************************
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************************************.
1.43. "TERRITORY" shall mean all countries of the world.
1.44. "XENOGRAFT PRODUCT" shall mean any and all articles,
compositions, apparatuses, substances, chemicals, materials, processes,
methods or services for a HUMAN XENOGRAFT SYSTEM (i) covered by one or more
claims of a BTI PATENT ********************************************************
*******************************************************************************
*******************************************************************************
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<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
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******************************************************. With respect to item
(v) above, the PARTIES will mutually agree as to which, if any, products of
item (v) shall be included as XENOGRAFT PRODUCT and on the terms applicable
thereto and if the PARTIES cannot reach mutual agreement, either PARTY can
submit same to binding arbitration in accordance with Appendix D.
1.45. "XENOGRAFT TECHNOLOGY" shall mean BTI TECHNOLOGY and/or
NOVARTIS COLLABORATION TECHNOLOGY.
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<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
SECTION 2.
FUNDED RESEARCH
2.1 Subject to the termination provisions of Section 14, NOVARTIS
shall make the following payments to support FUNDED RESEARCH:
<TABLE>
<CAPTION>
AGREEMENT YEAR PAYMENT
-------------- -------
<S> <C>
1 *********
2 **********
3 **********
</TABLE>
The payment in respect of the first AGREEMENT YEAR shall be due and
payable within ten (10) days of the EFFECTIVE DATE. The payments in respect
of AGREEMENT YEARS 2 and 3 shall be due and payable by the first day of the
AGREEMENT YEAR in question.
2.2 BTI shall perform FUNDED RESEARCH in accordance with the FUNDED
RESEARCH PLAN. NOVARTIS understands and agrees that the FUNDED RESEARCH PLAN
is BTI's best estimate of the FUNDED RESEARCH to be performed and of the cost
and the timing of expenditures required for such FUNDED RESEARCH and,
therefore, BTI shall not be obligated to perform FUNDED RESEARCH beyond the
RESEARCH COSTS set forth in the FUNDED RESEARCH PLAN. The RESEARCH COSTS for
the first AGREEMENT YEAR shall not exceed *********************
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<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
********** and for each of the second and the third AGREEMENT YEARS shall not
exceed **************************. If in any Agreement Year, the amounts set
forth in paragraph 2.1 above exceed ***** of the actual RESEARCH COSTS of BTI
for FUNDED RESEARCH in year 1, ***** in year 2, and ***** in year 3, the
excess for such year shall be used for FUNDED RESEARCH in the following
year(s). Any excess remaining at the end of the RESEARCH TERM shall be
reimbursed promptly to NOVARTIS.
2.3 During the RESEARCH TERM, at least three months prior to the end
of an AGREEMENT YEAR, BTI shall prepare and submit to the RESEARCH STEERING
COMMITTEE a plan for research in the FIELD which is to be performed by BTI in
the next AGREEMENT YEAR with funds provided by NOVARTIS pursuant to Section
2.1. The FUNDED RESEARCH PLAN shall provide for the performance of research
in the FIELD and a total budget for such research, having RESEARCH COSTS
which are the amount funded by NOVARTIS pursuant to Section 2.1 plus the
amount to be funded by BIOTRANSPLANT for the applicable AGREEMENT YEAR. Such
RESEARCH COSTS shall include direct costs categorized in accordance with
Section 2.4 hereinafter, and a fixed sum for indirect costs, if included. The
RESEARCH PLAN as approved by the PARTYS, and the RESEARCH STEERING COMMITTEE
for an AGREEMENT YEAR shall be the FUNDED RESEARCH PLAN for the AGREEMENT
YEAR. In the event that the PARTYS do not reach agreement as to a research
plan prepared by BTI in accordance with this Section 2.3 within thirty (30)
days after submission thereof, the plan shall be
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determined by binding arbitration in accordance with Appendix D. The FUNDED
RESEARCH PLAN for the first and second AGREEMENT YEARS is attached as
Appendix C. It is expressly understood that the dates in the FUNDED RESEARCH
PLAN contemplated a start date of January 1, 1997 and will be amended in a
manner consistent with the EFFECTIVE DATE.
2.4 BIOTRANSPLANT shall keep accurate records in a separate FUNDED
RESEARCH account of the budget and costs incurred in each year of FUNDED
RESEARCH, categorized according to the following line items: personnel
expenses, laboratory materials, electronic data processing expenses, travel
expenditures, depreciation, occupancy fees, third-party contract research
payments, other expenses. Such records shall also provide the basis for any
indirect cost allocation. NOVARTIS shall have the right, no more frequently
than once in respect of each AGREEMENT YEAR of FUNDED RESEARCH, to inspect
the accounts of BIOTRANSPLANT, and to the extent permitted by its agreement
with MGH and to the extent BTI sub-contracts FUNDED RESEARCH to MGH, at
pre-agreed times convenient to BIOTRANSPLANT and MGH, in order to verify and
determine the disposition of its funding pursuant to Section 2.1.
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<PAGE>
SECTION 3.
RESEARCH PRODUCT
3.1 BTI shall provide to the RESEARCH STEERING COMMITTEE quarterly
written summaries and annual detailed written reports of the FUNDED RESEARCH
and the results thereof carried out in the reporting period in question.
3.2 At least six (6) months prior to the end of the RESEARCH TERM,
the PARTYS shall review the FUNDED RESEARCH and shall discuss extension of
the RESEARCH TERM. The RESEARCH TERM shall be extended upon mutual agreement
of the PARTYS which shall include agreement as to a FUNDED RESEARCH PLAN and
the funding obligations of the PARTYS in the extended period.
SECTION 4.
MANAGEMENT OF RESEARCH AND DEVELOPMENT
4.1 A joint research committee comprised of two named
representatives of NOVARTIS and two named representatives of BTI, and a
chairman appointed by BTI, which is reasonably acceptable to NOVARTIS, with
the initial chairman being Dr. David Sachs (the "RESEARCH STEERING
COMMITTEE"), shall meet at least once each calendar quarter during the
RESEARCH TERM. Such meeting shall be at times and places agreed to by the
PARTY(S). At such meetings, the RESEARCH STEERING COMMITTEE will discuss and
determine the FUNDED RESEARCH as well as preclinical development matters
relating thereto, and will provide advice with respect to XENOGRAFT PRODUCTS.
In addition, the RESEARCH STEERING COMMITTEE shall,
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together with the PARTYS, approve the FUNDED RESEARCH PLAN, and shall discuss
and determine when a XENOGRAFT PRODUCT(s) has reached COMPLETION OF THE
RESEARCH STAGE. During the RESEARCH TERM each PARTY shall provide the
RESEARCH STEERING COMMITTEE with sufficient information and data with respect
to each XENOGRAFT PRODUCT to enable the RESEARCH STEERING COMMITTEE to
determine if and when a XENOGRAFT PRODUCT has reached COMPLETION OF THE
RESEARCH STAGE in the CO-PROMOTION TERRITORY. In the event that, without
considering the vote of the chairman, there is a deadlock, NOVARTIS shall
have the right to cast the deciding vote, except in the case of research
performed under the control of Dr. Sachs at MGH, in which case Dr. Sachs
shall have the right to cast the deciding vote.
4.2 A joint clinical committee comprised of two named
representatives of NOVARTIS and two named representatives of BTI, and chaired
by a fifth person designated by NOVARTIS and reasonably acceptable to BTI
(the "CLINICAL STEERING COMMITTEE") shall meet at least once each calendar
quarter (or at such less frequent intervals as the CLINICAL STEERING
COMMITTEE determines) beginning when a CO-PROMOTION PRODUCT for which
regulatory approval is to be sought in the CO-PROMOTION TERRITORY has reached
the COMPLETION OF THE RESEARCH STAGE at times and places agreed to by the
PARTY(S). At such meetings, the CLINICAL STEERING COMMITTEE shall discuss and
determine clinical and regulatory matters with respect to the CO-PROMOTION
PRODUCTS in the CO-PROMOTION TERRITORY and shall also advise the RESEARCH
STEERING COMMITTEE, with respect to proposed
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clinical trials and regulatory matters relating thereto. NOVARTIS shall
provide to the members of the CLINICAL STEERING COMMITTEE written and oral
reports which shall reasonably detail and evaluate the work NOVARTIS has
performed, or intends to perform, with respect to clinical and regulatory
matters as it relates to a CO-PROMOTION PRODUCT, as requested by the CLINICAL
STEERING COMMITTEE. The CLINICAL STEERING COMMITTEE shall manage clinical,
regulatory matters with respect to CO-PROMOTION PRODUCTS in the CO-PROMOTION
TERRITORY.
4.3 Decisions of each of the RESEARCH STEERING COMMITTEE and the
CLINICAL STEERING COMMITTEE shall be decided by a majority vote and shall
require the presence of at least one representative of each PARTY. The PARTYS
agree to use their best efforts to cause their respective representatives to
attend such meetings.
4.4 During the RESEARCH TERM, BTI and NOVARTIS shall each appoint a
primary contact person to coordinate matters between BTI and NOVARTIS with
respect to FUNDED RESEARCH and with respect to development under Section 5.
Each PARTY shall notify the other within thirty (30) days of the date of this
Agreement of the appointment of its contact person and shall notify the other
PARTY as early as practical before changing this appointment, which it shall
be free to do at any time.
4.5 To the extent not prohibited by confidentiality obligations to
third parties, representatives of NOVARTIS may, upon reasonable notice and at
times reasonably acceptable to BTI, visit the facilities where FUNDED
RESEARCH is being conducted by BTI and consult informally with BTI during
such visits and by telephone with respect to XENOGRAFT PRODUCT.
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<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
SECTION 5.
DEVELOPMENT PRODUCT
5.1 With respect to each DEVELOPMENT PRODUCT in the CO-PROMOTION
TERRITORY, the CLINICAL STEERING COMMITTEE shall determine the work to be
performed by NOVARTIS for preclinical, clinical development and regulatory
approval thereof.
5.2 With respect to each DEVELOPMENT PRODUCT in the CO-PROMOTION
TERRITORY, NOVARTIS shall promptly submit to the CLINICAL STEERING COMMITTEE
a plan(s) for the preclinical, clinical development and/or regulatory filings
for such DEVELOPMENT PRODUCT, as the case may be, which shall be updated as
required and at least once an AGREEMENT YEAR ninety (90) days prior to the
end of an AGREEMENT YEAR, which plan shall include a budget for the
applicable AGREEMENT YEAR. The committee shall consider such plan, and
updates thereof and such plan and updates as approved by such steering
committee shall be the DEVELOPMENT PLAN for such DEVELOPMENT PRODUCT.
5.3 NOVARTIS shall develop and secure regulatory approval for each
DEVELOPMENT PRODUCT in the CO-PROMOTION TERRITORY in accordance with the
DEVELOPMENT PLAN therefor. Subject to reimbursement of a portion thereof by
BTI if BTI elects to copromote as set forth herein, NOVARTIS shall
pay************* ********** of the DEVELOPMENT COST for each DEVELOPMENT
PRODUCT both inside and outside the CO-PROMOTION TERRITORY.
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5.4 The clinical development and regulatory filings of a DEVELOPMENT
PRODUCT in the CO-PROMOTION TERRITORY shall be managed by NOVARTIS and
regularly assessed and reviewed by the CLINICAL STEERING COMMITTEE.
5.5 To the extent not prohibited by confidentiality obligations to a
third party, NOVARTIS shall provide to the members of the CLINICAL STEERING
COMMITTEE written and oral reports which shall reasonably detail and evaluate
development work relating to a DEVELOPMENT PRODUCT performed by or for
NOVARTIS. Such written reports shall be sent to each member of the CLINICAL
STEERING COMMITTEE as required by the CLINICAL STEERING COMMITTEE but no less
than at three (3) month intervals.
5.6 For each DEVELOPMENT PRODUCT, within sixty (60) days after the
end of each calendar year, NOVARTIS shall provide to BTI details as to the
DEVELOPMENT COSTS incurred for the calendar year for the CO-PROMOTION
TERRITORY.
SECTION 6.
CO-PROMOTION
6.1 BTI shall have the right to co-promote each CO-PROMOTION PRODUCT
with NOVARTIS in the CO-PROMOTION TERRITORY in accordance with a copromotion
agreement which includes the terms attached hereto as Appendix B. If BTI
wishes to copromote a CO-PROMOTION PRODUCT in accordance with this
subsection, BTI shall advise NOVARTIS of its intention to do so no later than
ten (10) business days after NOVARTIS provides BTI with written notice that
NOVARTIS filed a Product
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
License Application or New Drug Application to the United States Food and
Drug Administration (or the equivalent thereof in Canada) for a CO-PROMOTION
PRODUCT. The PARTYS shall promptly initiate discussions with respect to the
terms and conditions of the CO-PROMOTION AGREEMENT, in addition to those
specified in Appendix B which have been agreed to by the parties, and shall
mutually agree to the CO-PROMOTION AGREEMENT. The election shall include the
percentage which BTI elects to co-promote which percentage shall not exceed
*********************. In the event that the PARTYS do not reach an agreement
within ninety (90) days after BTI elects to co-promote, the PARTYS shall
submit to binding arbitration in accordance with Appendix D, the terms of the
Agreement as to which agreement has not been reached.
6.2 With respect to each CO-PROMOTION PRODUCT in each country as to
which BTI exercises its right to co-promote in order to retain such
co-promotion rights, BTI shall ************************************************
************** of the DEVELOPMENT COSTS and ***********************************
********************** of the PRE-MARKETING EXPENSES spent for such
CO-PROMOTION PRODUCT with respect to such country up to the time of the filing
of the PLA and in each case together with accrued interest at the rate of six
percent (6%) compounded annually, which shall be due and payable on the later
of (i) thirty (30) days after BTI receives from NOVARTIS a written invoice
therefor including details as to the DEVELOPMENT COSTS and PRE-MARKETING
EXPENSES for each year and an appropriate allocation thereof as in the
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
next sentence or (ii) ninety (90) days after written notification to BTI of
the filing of a PLA or its equivalent or NDA or its equivalent in such
country. In the event that DEVELOPMENT COSTS and PRE-MARKETING EXPENSES
incurred with respect to a CO-PROMOTION PRODUCT are attributable to work
which is useful in developing such CO-PROMOTION PRODUCT for countries other
than the country(ies) in which BTI elects to co-promote, then for the purpose
of determining the amount thereof which BTI is to ********** under this
Agreement and the Co-Promotion Agreement, such DEVELOPMENT COSTS and
PRE-MARKETING EXPENSES shall be fairly allocated between the country in which
BTI elects to co-promote and such other countries. If the parties do not, in
good faith, reach agreement on the DEVELOPMENT COSTS and PRE-MARKETING
EXPENSES, including such allocation, either can submit same to arbitration in
accordance with Appendix D except that in such arbitration the arbitrators
shall have the right to determine as the DEVELOPMENT COST and PRE-MARKETING
EXPENSES the position of either PARTY or an amount therebetween. In the event
a PARTY elects to submit the dispute to arbitration, **********************the
amount which is not in dispute within the time set forth in this Section 6.2,
and as to the amount in dispute BTI can elect to pay or not to pay such amount
to NOVARTIS. If BTI pays the amount in dispute, and in the arbitration it is
determined that a lesser amount was payable by BTI, NOVARTIS shall reimburse
the excess together with interest at the rate of six percent (6%) compounded
annually, ***********************************************.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
If BTI does not pay the amount in dispute and in the arbitration it is
determined that an amount greater than the amount paid by ********** should
have been paid, **************** ********************************* the
greater amount determined in the arbitration with interest at the rate of six
percent (6%) compounded annually, *********************************************
************* or (ii) not pay such greater amount in which case the
CO-PROMOTION PERCENTAGE shall be the CO-PROMOTION PERCENTAGE elected by BTI
multiplied by a fraction, the numerator of which is the DEVELOPMENT COSTS and
PRE-MARKETING EXPENSES paid by BTI which was not in dispute, and the
denominator of which is the DEVELOPMENT COSTS and PRE-MARKETING EXPENSES
determined in such arbitration.
SECTION 7.
SUPPLY
7.1 NOVARTIS understands that BTI is a party to an agreement with
Charles River Laboratories with respect to the supply of certain organs and
NOVARTIS acknowledges receipt of a copy of such agreement. The supply and use
of organs under this Agreement is subject to the terms and conditions of such
agreement with Charles River Laboratories. All organs required by NOVARTIS
under such agreement shall be supplied to NOVARTIS at the price provided in
such agreement.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
7.2 If requested by NOVARTIS, BTI shall use reasonable efforts to
amend such Supply Agreement to obtain commercial terms acceptable to both
PARTIES.
7.3 Subject to Section 7.1, NOVARTIS shall have the right to choose
suppliers of XENOGRAFT PRODUCT to which NOVARTIS is licensed and BTI shall
not be required to supply without BTI's consent.
SECTION 8.
ADDITIONAL PAYMENTS AND PAYMENT CONDITIONS
8.1 In addition to all other payments provided for under this
Agreement, in consideration for the BTI BACKGROUND TECHNOLOGY which resulted
from research previously performed by BTI and which is being made available
pursuant to the terms and conditions of this Agreement, NOVARTIS agrees to
make the following payments:
<TABLE>
<CAPTION>
AGREEMENT YEAR PAYMENT
-------------- -------
<S> <C>
1 **********
2 ***********
3 ***********
</TABLE>
The payment for the first AGREEMENT YEAR shall be due and payable within ten
(10) days after the EFFECTIVE DATE. The remaining payments are due and
payable on the first day of the applicable AGREEMENT YEAR.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
8.2 NOVARTIS shall pay to BTI the following:
(i) ********** dollars upon the first filing of **** for a
XENOGRAFT PRODUCT in a MAJOR COUNTRY which involves ***************************
*******************************************************************************
*****************************************;
(ii) *********** dollars upon the first filing of ***** for
a XENOGRAFT PRODUCT in a MAJOR COUNTRY which involves *************************
*******************************************************************************
*******************************************;
(iii) ********** dollars upon the first approval of *******
for a XENOGRAFT PRODUCT in a MAJOR COUNTRY which involves *********************
*******************************************************************************
*****************************************.
The above stated amounts shall be due and payable fifteen
(15) days after the specified event has occurred.
For the purposes of this Section 8.2, the filing of an IND
or PLA or approval of a PLA with respect to a XENOGRAFT PRODUCT in a MAJOR
COUNTRY in Europe shall be deemed to have occurred if such IND or PLA, as the
case may be, is filed in a country of Europe which is not a MAJOR COUNTRY and
such filing is sufficient for obtaining approval in a MAJOR COUNTRY of Europe.
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8.3 NOVARTIS shall pay to BTI the Research Milestones of
Appendix E.
The amounts set forth in Appendix E shall be due and
payable on the later of fifteen (15) days after the event specified in
Appendix E is achieved or fifteen (15) days after BTI provides NOVARTIS
written notice that the specified event has been achieved, together with
sufficient information to allow NOVARTIS to confirm that the specified event
has been achieved. If NOVARTIS does not agree that the specified event has
been achieved, then NOVARTIS shall notify BTI in writing prior to the payment
date specifying the reasons for such disagreement, and if the PARTIES can not
reach agreement within thirty (30) days after such written notice by
NOVARTIS, then either PARTY may submit the issue to binding arbitration
pursuant to Appendix D.
SECTION 9.
LICENSES AND RIGHTS AND COVENANTS
9.1 NOVARTIS grants to BTI a sole and exclusive royalty bearing
license in the TERRITORY under NOVARTIS COLLABORATION PATENT RIGHTS and
NOVARTIS COLLABORATION TECHNOLOGY to make, have made, use and sell BTI OTHER
PRODUCT, including the right to grant sublicenses with respect to BTI OTHER
PRODUCT, all limited to the FIELD.
9.2 BTI grants to NOVARTIS a sole and exclusive royalty bearing
license in the TERRITORY under BTI PATENT RIGHTS and BTI TECHNOLOGY to make,
have made, use and sell XENOGRAFT PRODUCT for use in HUMAN XENOGRAFT SYSTEMS,
all limited to the FIELD. The license includes the right to grant
sublicenses, except that no
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sublicense will be granted with respect to a CO-PROMOTION PRODUCT in the
CO-PROMOTION TERRITORY without the written consent of BTI, which consent
shall not be unreasonably withheld. If a sublicense is granted, such
sublicense shall require the sublicensee to be bound to NOVARTIS under the
terms and conditions of this Agreement (other than the payment provisions),
with BTI being made a third-party beneficiary thereof.
9.3 NOVARTIS agrees that NOVARTIS and its AFFILIATES and
sublicensees will use XENOGRAFT TECHNOLOGY only for development, making,
using and selling of XENOGRAFT PRODUCT as to which NOVARTIS retains a license
under this Agreement and only in those countries in which NOVARTIS retains a
license under this Agreement.
9.4 The parties understand and agree that NOVARTIS has no rights in
and to LO-CD-2A ANTIBODY TECHNOLOGY except if sold in combination with a
XENOGRAFT PRODUCT which does not incorporate LO-CD-2A ANTIBODY TECHNOLOGY.
The parties likewise understand and agree that BTI has no rights in and to
NOVARTIS drugs, including, but not limited to, Cyclosporin A and other
NOVARTIS immunosuppressant drugs or cytokines (whether originally developed
by or licensed to NOVARTIS) except if sold in combination with a XENOGRAFT
PRODUCT which is not such a drug.
9.5 To the extent that any property is licensed from a third party
under an agreement with a third party ("Third Party Agreement"), subject to
the warranties and representations of Section 21 the PARTIES understand and
agree as follows:
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(a) The rights granted under this Agreement with respect to
such property are subject to the terms, limitations, restrictions and
obligations of the Third Party Agreement.
(b) The PARTYS will comply with the terms, obligations,
limitations and restrictions of the Third Party Agreements.
9.6 BTI shall promptly transfer to NOVARTIS, if so requested by
NOVARTIS and at the expense of NOVARTIS, all BTI TECHNOLOGY licensed to
NOVARTIS under this Agreement and reasonably required by NOVARTIS for the
development, manufacture, use or sale of a XENOGRAFT PRODUCT licensed to
NOVARTIS under this Agreement. If so requested by NOVARTIS and at the cost of
NOVARTIS, representatives of BTI shall visit NOVARTIS or its AFFILIATES or
sublicensees in order to assist in the transfer and implementation of such
BTI TECHNOLOGY.
9.7 NOVARTIS shall promptly transfer to BTI, if so requested by
BTI and at the expense of BTI, all NOVARTIS COLLABORATION TECHNOLOGY licensed
to BTI under this Agreement and reasonably required by BTI for the
development, manufacture, use or sale of a BTI OTHER PRODUCT licensed to BTI
under this Agreement. If so requested by BTI and at the cost of BTI,
representatives of NOVARTIS shall visit BTI or its AFFILIATES or of
sub-licensees in order to assist in the transfer and implementation of such
NOVARTIS COLLABORATION TECHNOLOGY.
9.8 BTI agrees that BTI and its AFFILIATES will use NOVARTIS
COLLABORATION TECHNOLOGY only for (i) development, making, using and selling
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
of BTI OTHER PRODUCT as to which BTI retains a license under this Agreement
and only in those countries in which BTI retains a license under this
Agreement and/or (ii) FUNDED RESEARCH.
9.9 (a) In the event that during the RESEARCH TERM BTI decides
to enter into negotiations with a third party with respect to BTI technology
directed to ********** ********* for use in xenotransplantation, then BTI
shall notify NOVARTIS in writing thereof. BTI shall provide NOVARTIS with all
information available to BTI with respect to such technology. If NOVARTIS
desires to obtain such rights, then NOVARTIS shall promptly notify BTI in
writing thereof. If NOVARTIS fails to notify BTI of its interest in obtaining
such rights within thirty (30) days of receiving such written notice from BTI
or if BTI and NOVARTIS fail to enter into an agreement within ninety (90)
days after BTI receives written notice from NOVARTIS of its interest in such
rights, then BTI shall be free to grant such rights to a third party under
terms and conditions which are within the sole discretion of BTI. Such ninety
(90) day period shall be extended as required for as long as both PARTIES
desire to negotiate an agreement in good faith.
(b) Notwithstanding anything else herein to the contrary,
it is expressly understood and agreed that no rights or licenses are granted
to NOVARTIS with respect to information, materials, inventions, patents or
patent applications of BTI or its AFFILIATES involving genetically modified
animals and/or the creation, manufacture or use thereof, other than those
granted pursuant to Section 9.9(a) of this Agreement.
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SECTION 10.
DEVELOPMENT EFFORTS
10.1 (a) NOVARTIS at its cost and expense will use all
reasonable efforts in each country of the TERRITORY (i) to complete as
expeditiously as possible and in good faith any necessary research and
development of a HUMAN XENOGRAFT SYSTEM as might be required to obtain a
saleable HUMAN XENOGRAFT SYSTEM (ii) to obtain as expediently as possible the
regulatory approval which is required to market and sell a HUMAN XENOGRAFT
SYSTEM; and (iii) to develop in good faith the market for a HUMAN XENOGRAFT
SYSTEM and (iv) to market and to sell and to continue to market and sell in
good faith a HUMAN XENOGRAFT SYSTEM.
(b) In the event that at any time NOVARTIS does not have a
significant interest in developing, marketing and selling and/or in
continuing, developing, marketing and selling a HUMAN XENOGRAFT SYSTEM
licensed hereunder in any nation(s) of the TERRITORY, NOVARTIS shall promptly
advise BTI of such fact.
(c) NOVARTIS shall provide written reports to BTI on June
30th and December 31st of each year concerning the efforts being made in
accordance with this Section 10.1 and NOVARTIS shall provide BTI with any
additional information reasonably requested by BTI in this respect, all to
the extent not prohibited by confidentiality obligations to any third party.
(d) In the event that NOVARTIS fails to meet any of its
obligations under this Section 10.1 with respect to a HUMAN XENOGRAFT SYSTEM
in a MAJOR
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COUNTRY, or NOVARTIS notifies BTI that NOVARTIS does not have a significant
interest in continuing to develop a HUMAN XENOGRAFT SYSTEM in a MAJOR
COUNTRY, BTI shall have the right and option to terminate the rights and
licenses granted to NOVARTIS under this Agreement with respect to a HUMAN
XENOGRAFT SYSTEM in such country(ies) by sixty (60) days' prior written
notice and such rights and licenses shall be terminated after such sixty (60)
days unless such failure is cured prior thereto or in the event such failure
cannot be cured within such sixty (60) day period, NOVARTIS has initiated
steps to cure such failure within such sixty (60) day period and in good
faith continues to work toward curing such failure as expeditiously as
possible and such failure is in fact cured within six (6) months after such
notice.
(e) In the event that (i) NOVARTIS fails to meet any of its
obligations under this Section 10.1 with respect to a HUMAN XENOGRAFT SYSTEM
in a MAJOR COUNTRY, or (ii) its right are terminated with respect to such a
XENOGRAFT PRODUCT in a MAJOR COUNTRY, or (iii) NOVARTIS notifies BTI that
NOVARTIS does not have a significant interest in continuing to develop such a
HUMAN XENOGRAFT SYSTEM in a country other than a MAJOR COUNTRY, then BTI
shall also have the right and option to terminate the rights and licenses
granted to NOVARTIS under this Agreement with respect to a HUMAN XENOGRAFT
SYSTEM in each country other than a MAJOR COUNTRY for which NOVARTIS has not
met its obligations under this Section 10.1 by sixty (60) days' prior written
notice and such rights and licenses shall be terminated after such sixty (60)
days unless such failure is cured prior thereto or in the event such failure
cannot be cured within such sixty (60) day period, NOVARTIS has
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<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
initiated steps to cure such failure within such sixty (60) day period and in
good faith continues to work toward curing such failure as expeditiously as
possible and such failure is in fact cured within six (6) months after such
notice.
(f) BTI acknowledges and agrees that BTI shall not have the right to
market or sell or to grant a third party the right to market and sell BTI
OTHER PRODUCT in a country if such sale in such country would adversely
affect marketing and selling of HUMAN XENOGRAFT SYSTEM in a country where
NOVARTIS retains rights to a HUMAN XENOGRAFT SYSTEM.
10.2 In the event that there is a CO-PROMOTION AGREEMENT, such
CO-PROMOTION AGREEMENT shall require diligent efforts on the part of both
parties and a remedy for failure to carry out such diligence efforts.
SECTION 11.
ROYALTIES
11.1(a) NOVARTIS shall pay BTI royalties on the NET SALES of
XENOGRAFT PRODUCTS sold or distributed by NOVARTIS or its AFFILIATES or its
permitted sublicensees, as follows:
(i) ********** of NET SALES of XENOGRAFT PRODUCT for use in
a HUMAN XENOGRAFT SYSTEM where the xenograft is obtained from *****************
*******************************************************************************
****
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
*******************************************************************************
*******************************************************************************
**********************;
(ii) ********** of NET SALES of XENOGRAFT PRODUCT for use in
a HUMAN XENOGRAFT SYSTEM where the xenograft is obtained from *****************
*******************************************************************************
****************************************************************************.
(iii) ****************** of NET SALES of XENOGRAFT PRODUCTS
other than those covered by Section 11.1(a)(i) or 11.1(a)(ii).
(b) With respect to any year in which BTI is co-promoting a
CO-PROMOTION PRODUCT in a country of the CO-PROMOTION TERRITORY, NOVARTIS
shall not be required to pay any royalty to BTI with respect to such
CO-PROMOTION PRODUCT in such country in such year.
(c) In addition to the royalties owed to BTI under Section
11.1(a)(i) and 11.1(a)(ii), if royalties are owed by BTI to a third party as
a result of a license granted to NOVARTIS hereunder and NOVARTIS has been
advised of and has agreed to such obligation, NOVARTIS shall pay royalties
owed to third parties by BTI with respect to such XENOGRAFT PRODUCTS.
NOVARTIS acknowledges that it has been advised of and agrees to third party
royalty obligations with respect to the agreements of Appendix
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F. It is expressly understood that no license is conveyed to third-party
rights under this Agreement unless NOVARTIS agrees to pay the royalty
obligations therefor.
(d) Subject to Section 11.1(e), BTI shall pay royalties owed to
third parties by BTI with respect to XENOGRAFT PRODUCTS for which royalties
are due to BTI pursuant to Section 11.1(a)(iii).
(e) NOVARTIS shall pay royalties owed to third parties by BTI with
respect to CO-PROMOTION PRODUCT which is being co-promoted by BTI.
(f) It is expressly understood that payments owed to Charles River
for mini-swine or organs thereof are not royalties for the purposes of this
Agreement.
(g) NOVARTIS agrees that it will not artificially discount the price
of XENOGRAFT PRODUCTS for the purpose of promoting sales or increasing the
price of products which are not XENOGRAFT PRODUCTS.
(h) In the event that XENOGRAFT PRODUCTS are sold in combination
with products which are not XENOGRAFT PRODUCTS, for the purpose of
calculating royalties due on XENOGRAFT PRODUCTS, the PARTIES shall mutually
agree to an allocation of the NET SALES of the combination between XENOGRAFT
PRODUCTS and products which are not XENOGRAFT PRODUCTS. If the PARTIES do not
mutually agree, either PARTY may submit the issue to binding arbitration in
accordance with Appendix D.
11.2 NOVARTIS' obligation to pay royalties under Section 11.1 shall
continue on a country-for-country basis and XENOGRAFT PRODUCT by XENOGRAFT
PRODUCT basis beginning on the EFFECTIVE DATE of this Agreement and ending ten
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(10) years after the first commercial sale of each XENOGRAFT PRODUCT in a
country as part of a plan to make XENOGRAFT PRODUCT available in the country
which, in the United States, at the minimum, will require that the XENOGRAFT
PRODUCT be available on both the East and West coasts, provided, however,
that if the manufacture, use or sale of XENOGRAFT PRODUCT is covered by a
granted BTI PATENT RIGHT and/or NOVARTIS COLLABORATION PATENT RIGHT after the
expiration of such period, then the obligation to pay royalties thereon shall
continue until such XENOGRAFT PRODUCT is no longer covered by such granted
BTI PATENT RIGHT and/or NOVARTIS COLLABORATION PATENT RIGHT.
11.3 NOVARTIS shall keep, and shall cause each of its AFFILIATES and
sublicensees to keep, full and accurate books of account containing all
particulars that may be necessary for the purpose of calculating all
royalties payable to BTI. Such books of account shall be kept at their
principal places of business and, with all necessary supporting data, shall,
during normal business hours be open for inspection by an independent
certified accountant reasonably acceptable to NOVARTIS upon reasonable notice
and no more than once a calendar year for the sole purpose of verifying and
auditing royalty statements or compliance with this Agreement. Such
accountant shall report to BTI only as to the accuracy of the royalty
calculation and as to the amount of any under- or over-payment. BTI shall be
responsible for the costs of any such verification and audit, except that
NOVARTIS shall be responsible for the costs of any such audit in the event
that as a result of such verification and/or audit royalties due
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and payable to BTI are determined in any calendar quarter to exceed by five
percent (5%) those actually paid by NOVARTIS.
11.4 With quarterly payments, NOVARTIS shall deliver to BTI a
full and accurate accounting to include at least the following information:
(a) Quantity of each XENOGRAFT PRODUCT subject to royalty
sold (by country) by NOVARTIS and its AFFILIATES and sub-licensees;
(b) Total receipts for each XENOGRAFT PRODUCT subject to
royalty (by country);
(c) An accounting for amounts deductible, if any, against
total overall receipts in calculating total overall NET SALES; and
(d) Total royalties payable to BTI.
NOVARTIS shall provide any other information reasonably requested by
BTI to determine the calculation and amount of royalties.
11.5 In each year the amount of royalty due shall be calculated
quarterly as of March 31, June 30, September 30 and December 31 and shall be
paid quarterly within the thirty (30) days next following such date, every
such payment shall be supported by the accounting prescribed in Section 11.4
and shall be made in United States currency. Whenever for the purpose of
calculating royalties conversion from any foreign currency shall be required,
all amounts will first be calculated in the currency of sale and then
converted into Swiss Francs using as rates of exchange NOVARTIS exchange
rates which are established by NOVARTIS in the ordinary course of business
monthly on the basis of an average of rates during each month from external
unaffiliated banks which will
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
then be converted into United States Dollars, using as the rate of exchange
the average exchange rate at a major Swiss bank on the last business day of
the calendar quarter to which the payment relates.
11.6 Any tax required to be withheld by NOVARTIS under the laws of
any foreign country for the account of BTI, shall be promptly paid by
NOVARTIS for and on behalf of BTI to the appropriate governmental authority,
and NOVARTIS shall furnish BTI with proof of payment of such tax. Any such
tax actually paid on BTI's behalf shall be deducted from royalty payments due
BTI.
11.7 Subject to Section 14.6(b), BTI shall pay NOVARTIS a royalty
based on the NET SALES of BTI OTHER PRODUCTS sold, or distributed by BTI, its
AFFILIATES or its sublicensees, provided that such BTI OTHER PRODUCT
incorporates NOVARTIS COLLABORATION TECHNOLOGY and/or is covered by a granted
NOVARTIS COLLABORATION PATENT RIGHT which royalty shall be *********** of NET
SALES until NOVARTIS is reimbursed for its DEVELOPMENT COSTS and payments
made under Section 2.1(a), in each case as allocated to such BTI OTHER
PRODUCT, and thereafter ********** of NET SALES. NOVARTIS shall be
responsible for royalties that NOVARTIS owes to third parties in respect of
such sales.
11.8 BTI's obligation to pay royalties under Section 11.7 shall
continue on a country-for-country basis and BTI OTHER PRODUCT by BTI OTHER
PRODUCT basis beginning on the EFFECTIVE DATE of this Agreement and ending on
ten (10) years
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after the first commercial sale of each BTI OTHER PRODUCT in a country as
part of a plan to make BTI OTHER PRODUCT available in the country which, in
the United States, at the minimum, will require that the BTI OTHER PRODUCT be
available on both the East and West coasts, provided however, that if at the
end of such period the manufacture, use or sale of BTI OTHER PRODUCT is
covered by a granted NOVARTIS COLLABORATION PATENT RIGHT at the end of such
period, then the obligation to pay royalties shall continue until such BTI
OTHER PRODUCT is no longer covered by a granted NOVARTIS COLLABORATION PATENT
RIGHT.
11.9 BTI shall keep, and shall cause each of its AFFILIATES and
sublicensees to keep, full and accurate books of account containing all
particulars that may be necessary for the purpose of calculating all
royalties payable to NOVARTIS. Such books of account shall be kept at their
principal places of business and, with all necessary supporting data shall,
during normal business hours be open for inspection by an independent
certified accountant reasonably acceptable to BTI upon reasonable notice and
no more than once a calendar year for the sole purpose of verifying and
auditing royalty statements or compliance with this Agreement. Such
accountant shall report to NOVARTIS only as to the accuracy of the royalty
calculation and as to the amount of any under-or over-payment. NOVARTIS shall
be responsible for the costs of any such verification and audit, except that
BTI shall be responsible for the costs of any such audit in the event that as
a result of such verification and/or audit royalties due and payable to
NOVARTIS are determined in any calendar quarter to exceed by five percent
(5%) those actually paid by BTI.
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11.10 With quarterly payments, BTI shall deliver to NOVARTIS a
full and accurate accounting to include at least the following information:
(a) Quantity of each BTI OTHER PRODUCT subject to royalty
sold (by country) by BTI and its AFFILIATES;
(b) Total receipts for each BTI OTHER PRODUCT subject to
royalty (by country);
(c) An accounting for amounts deductible, if any, against
total overall receipts in calculating total overall NET SALES; and
(d) Total royalties payable to NOVARTIS.
BTI shall provide any other information reasonably requested by
NOVARTIS to determine the calculation of royalties.
11.11 In each year the amount of royalty due to NOVARTIS shall be
calculated quarterly as of March 31, June 30, September 30 and December 31
and shall be paid quarterly within the thirty (30) days next following such
date, every such payment shall be supported by the accounting prescribed in
Section 11.10 and shall be made in Swiss currency. Whenever for the purpose
of calculating royalties conversion from any foreign currency shall be
required, such conversion shall be at the rate of exchange thereafter
published in the Wall Street Journal for the business day closest to the
applicable March 31, June 30, September 30, or December 31, as the case may
be.
11.12 Any tax required to be withheld by BTI under the laws of
any foreign country for the account of NOVARTIS, shall be promptly paid by
BTI for and on behalf of NOVARTIS to the appropriate governmental authority,
and BTI shall furnish
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NOVARTIS with proof of payment of such tax. Any such tax actually paid on
NOVARTIS's behalf shall be deducted from royalty payments due NOVARTIS.
11.13 In the event that NOVARTIS or BTI is prohibited in any country
by applicable law from paying royalties for any portion of the term required
by Section 11.2 or 11.8, as the case may be, then NOVARTIS or BTI as the case
may be, shall not be obligated to pay such royalty for such portion provided
that the party receiving the royalty is notified in writing and that NOVARTIS
and BTI shall negotiate an amendment so that the PARTY who is to receive such
royalty receives essentially the same economic benefit as if the royalty was
paid for the full term. If the PARTIES do not reach agreement within ninety
(90) days after such notification, either PARTY may submit the issue to
binding arbitration in accordance with Appendix D.
SECTION 12.
PATENTS
12.1 BTI shall own any inventions and patents based thereon made by
BTI employees.
12.2 NOVARTIS shall own the inventions and patents based thereon
made by NOVARTIS employees.
12.3 BTI and NOVARTIS shall jointly own any inventions and patents
based thereon jointly made by employee(s) of BTI and employee(s) of NOVARTIS.
12.4 BTI shall effect filing, prosecution and maintenance of patent
applications and patents which are BTI PATENT RIGHTS at BTI's cost and
expense with patent counsel selected by BTI and shall keep NOVARTIS advised
with respect thereto.
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NOVARTIS shall have the option to request that BTI shall effect filing,
prosecution, or maintenance of BTI PATENT RIGHTS in any additional country
and BTI shall do so at the cost and expense of NOVARTIS. With respect to
patents and patent applications which are jointly owned by BTI and NOVARTIS,
such patents and patent applications shall be filed, prosecuted and
maintained by BTI at the cost and expense of BTI in the United States and by
NOVARTIS at the cost and expense of NOVARTIS outside of the United States.
12.5 NOVARTIS shall effect filing, prosecution and maintenance of
patent applications and patents which are NOVARTIS COLLABORATION PATENT
RIGHTS at NOVARTIS's cost and expense with patent counsel selected by
NOVARTIS and shall keep BTI advised with respect thereto.
12.6 To the extent not prohibited by confidentiality obligations to
a third-party, the PARTYS shall keep each other advised with respect to BTI
PATENT RIGHTS and NOVARTIS COLLABORATION PATENT RIGHTS.
SECTION 13.
LICENSE OPTION
13.1 BTI grants to NOVARTIS an option to obtain a license under
FUNDED PATENT RIGHTS owned by BTI which results from FUNDED TECHNOLOGY owned
by BTI with respect to any product or process outside the field of
Xenotransplantation in accordance with a LICENSE AGREEMENT to be negotiated
by the PARTYS which includes the terms and conditions of attached hereto
Appendix A. With respect to each such FUNDED PATENT RIGHT, NOVARTIS shall
exercise the option by written notice
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to BTI within six (6) months of receipt from BTI of a copy of the first
filing of such FUNDED PATENT RIGHT, together with details of FUNDED
TECHNOLOGY relating thereto, including available research results and
substance samples, if available. The failure to provide such written notice
of the exercise of such option to BTI within such six (6) month period shall
result in termination of the option, and the termination of any and all
rights which NOVARTIS may have with respect to such FUNDED PATENT RIGHT, and
corresponding FUNDED TECHNOLOGY for product or process outside the field of
xenotransplantation.
13.2 The option granted under this Section 13 does not include the
right to obtain a license under any FUNDED RESEARCH PATENT RIGHT or FUNDED
RESEARCH TECHNOLOGY with respect to products or processes outside the field
of Xenotransplantation which products or processes are as of the EFFECTIVE
DATE being researched and/or developed by or on behalf of BTI, including but
not limited to the LO-CD-2A ANTIBODY TECHNOLOGY.
SECTION 14.
TERM AND TERMINATION
14.1 Except as otherwise specifically provided herein and unless
sooner terminated pursuant to Section 14.2 or 14.3 of this Agreement, this
Agreement shall remain in full force and effect until NOVARTIS and BTI have
fully paid the royalties due hereunder for the full royalty term hereunder.
As of such time that a party has paid
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royalties for the full royalty term under this Agreement for a XENOGRAFT
PRODUCT or BTI OTHER PRODUCT, as the case may be, such party shall have a
fully paid up non-exclusive license for such XENOGRAFT PRODUCT or BTI OTHER
PRODUCT.
14.2 (a) If either PARTY materially breaches this Agreement or
the CO-PROMOTION AGREEMENT, the other party may terminate this Agreement by
written notice to the breaching party specifying the breach and this
Agreement shall be terminated thirty (30) business days after such written
notice if the material breach is a material payment breach and sixty (60)
business days thereafter for material breaches other than a payment breach,
unless prior to the expiration of such period such breach is cured. In the
event that a material breach other than a payment breach cannot be cured
within such sixty (60) day period and a PARTY has initiated steps to cure
such breach within such sixty (60) day period and notified the other PARTY in
writing thereof within such sixty (60) day period and in good faith continues
to work toward curing such breach as expeditiously as possible than this
agreement shall not be terminated if such breach is in fact cured within six
(6) months after such notice.
(b) In the event that this Agreement is terminated by BTI
under Section 14.2(a), the amounts which have not yet been paid by NOVARTIS
under Sections 2.1 and 8.1 shall be immediately due and payable to BTI.
14.3 This Agreement shall be subject to immediate termination by
a PARTY upon service of written notice to the other PARTY in the event that
(i) the other PARTY shall become insolvent or shall make an assignment for
the benefit of creditors or that proceedings in voluntary or involuntary
bankruptcy shall be instituted on behalf of or
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against such PARTY, or a receiver or trustee of such PARTY'S property shall
be appointed.
14.4 (a) The obligations of Sections 9.3, 9.4, 14.1, 14.2, 14.3,
14.4, 14.5, 14.6, 16, 17, 19.2 and 20.3 and any other provision which by its
nature is intended to survive, shall survive any termination of this
Agreement.
(b) If this Agreement is terminated under Section 14.2 by
BTI, Sections 9.1, 9.7, 11.7, 11.8, 11.9, 11.10, 11.11, 11.12, 11.13 and 15.4
shall also survive termination.
(c) If this Agreement is terminated by NOVARTIS under
Section 14.6, Sections 9.1, 9.7, 14.6(b) and 15.4 shall also survive
termination.
14.5. In the event that NOVARTIS' rights and licenses with
respect to a HUMAN XENOGRAFT SYSTEM are terminated in the entirety or with
respect to a country, then for the purposes of this Agreement, XENOGRAFT
PRODUCTS shall be BTI OTHER PRODUCT in all countries, or in such
country(ies), respectively.
14.5 (a) Within its sole discretion, NOVARTIS shall have the
right to terminate this Agreement effective at the end of the last day of the
second AGREEMENT YEAR by providing written notice to BTI at least six (6)
months prior to the end of the second AGREEMENT YEAR.
(b) In the event that this AGREEMENT is terminated under
Section 14.6(a), then no royalties shall be due or payable to NOVARTIS under
Section 11.7.
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SECTION 15.
INFRINGEMENT
15.1 (a) If a third party makes, uses or sells a product for use in
a HUMAN XENOGRAFT SYSTEM which competes with XENOGRAFT PRODUCT licensed to
NOVARTIS hereunder and such third party product infringes any of the BTI
PATENT RIGHTS under which NOVARTIS is licensed, NOVARTIS shall have the right
and option but not the obligation to bring an action for infringement, at its
sole expense, against such third party in the name of BTI and/or in the name
of NOVARTIS, and to join BTI as a party plaintiff if required. NOVARTIS shall
promptly notify BTI of any such infringement and shall keep BTI informed as
to the prosecution of any action for such infringement and shall not
institute any infringement action without providing BTI with thirty (30) days
prior written notice. No settlement, consent judgment or other voluntary
final disposition of the suit may be entered into without the consent of BTI,
which consent shall not unreasonably be withheld.
Any recovery of damages by NOVARTIS for any such suit shall be
applied first in satisfaction of expenses and legal fees of NOVARTIS relating
to the suit. The balance remaining from any such recovery shall be divided
between NOVARTIS and BTI, such that BTI receives the lesser of 30% of such
recovery or the royalty BTI would have received under this Agreement if such
sales had been made by NOVARTIS.
15.2 In the event that NOVARTIS elects not to pursue an action for
infringement pursuant to Section 15.1, or does not do so within sixty (60)
days after written notice by BTI that an unlicensed third party is an
infringer of a BTI PATENT RIGHT licensed
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to NOVARTIS, BTI shall have the right and option, but not the obligation at
its cost and expense to initiate infringement litigation and to retain any
recovered damages.
15.3 In any infringement suit either party may institute to enforce
the BTI PATENT RIGHTS pursuant to this Agreement, the other party hereto
shall, at the request 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. All reasonable out-of-pocket costs of the other
party incurred in connection with rendering such cooperation shall be paid by
the requesting party.
15.4 (a) If a third party makes, uses or sells a product for use in
the FIELD which competes with BTI OTHER PRODUCT licensed to BTI and such
third party product infringes any of the NOVARTIS PATENT RIGHTS and/or
NOVARTIS COLLABORATION PATENT RIGHTS under which BTI is licensed, with prior
written notice to NOVARTIS, and if NOVARTIS does not institute action within
sixty (60) days, BTI shall have the right and option but not the obligation
to bring an action for infringement, at its sole expense, against such third
party in the name of NOVARTIS and/or in the name of BTI, and to join NOVARTIS
as a party plaintiff if required. BTI shall promptly notify NOVARTIS of any
such infringement and shall keep NOVARTIS informed as to the prosecution of
any action for such infringement and shall not institute any infringement
action without providing NOVARTIS with thirty (30) days prior written notice.
No settlement, consent judgment or other voluntary final disposition of
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
the suit may be entered into without the consent of NOVARTIS, which consent
shall not unreasonably be withheld.
Any recovery of damages by BTI or NOVARTIS for any such suit shall
be applied first in satisfaction of expenses and legal fees paid by the party
bringing the suit relating to the suit and the balance remaining from any
such recovery shall be divided between BTI and NOVARTIS, such that NOVARTIS,
receives the lesser of the royalty NOVARTIS would have received under this
Agreement if such sales had been made by BTI or ***** ********** of such
remaining amount.
15.5 In any infringement suit either party may institute to enforce
patents pursuant to this Agreement, the other party hereto shall, at the
request 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. All reasonable out-of-pocket costs of the other party incurred in
connection with rendering such cooperation shall be paid by the requesting
party. In addition, such party shall keep the other party advised of any such
litigation.
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SECTION 16.
INDEMNIFICATION
16.1 NOVARTIS shall defend, indemnify and hold harmless BTI,
AFFILIATES of BTI, licensors of BTI, and their respective directors,
officers, shareholders, agents and employees, from and against any and all
liability, loss, damages and expenses (including attorneys' fees) as the
result of claims, demands, costs or judgments which may be made or instituted
against any of them arising out of the manufacture, possession, distribution,
use, testing, sale or other disposition of XENOGRAFT PRODUCT by or through
NOVARTIS or its AFFILIATES or sublicensees. NOVARTIS' obligation to defend,
indemnify and hold harmless shall include claims, demands, costs or
judgments, whether for money damages or equitable relief by reason of alleged
personal injury (including death) to any person or alleged property damage,
provided, however, the indemnity shall not extend to any claims against an
indemnified party which result from the gross negligence or willful
misconduct of such indemnified party. NOVARTIS shall have the exclusive right
to control the defense of any action which is to be indemnified in whole by
NOVARTIS hereunder, including the right to select counsel acceptable to BTI
to defend BTI, and to settle any claim, provided that, without the written
consent of BTI (which shall not be unreasonably withheld or delayed),
NOVARTIS shall not agree to settle any claim against BTI to the extent such
claim has a material adverse effect on BTI. The provisions of this paragraph
shall survive and remain in full force and effect after any termination,
expiration or cancellation of this Agreement and
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NOVARTIS' obligation hereunder shall apply whether or not such claims are
rightfully brought.
16.2 BTI shall defend, indemnify and hold harmless NOVARTIS,
AFFILIATES of NOVARTIS, licensors of NOVARTIS, and their respective
directors, officers, shareholders, agents and employees, from and against any
and all liability, loss, damages and expenses (including attorneys' fees) as
the result of claims, demands, costs or judgments which may be made or
instituted against any of them arising out of the manufacture, possession,
distribution, use, testing, sale or other disposition of BTI OTHER PRODUCT by
or through BTI or its AFFILIATES or sublicensees. BTI's obligation to defend,
indemnify and hold harmless shall include claims, demands, costs or
judgments, whether for money damages or equitable relief by reason of alleged
personal injury (including death) to any person or alleged property damage,
provided, however, the indemnity shall not extend to any claims against an
indemnified party which result from the gross negligence or willful
misconduct of such indemnified party BTI shall have the exclusive right to
control the defense of any action which is to be indemnified in whole by BTI
hereunder, including the right to select counsel acceptable to NOVARTIS to
defend NOVARTIS, and to settle any claim, provided that, without the written
consent of NOVARTIS (which shall not be unreasonably withheld or delayed),
BTI shall not agree to settle any claim against NOVARTIS to the extent such
claim has a material adverse effect on NOVARTIS. The provisions of this
paragraph shall survive and remain in full force and effect after any
termination, expiration or cancellation of
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this Agreement and BTI's obligation hereunder shall apply whether or not such
claims are rightfully brought.
16.3 A person or entity that intends to claim indemnification under
this Article 16 (the "Indemnitee") shall promptly notify the other PARTY (the
"Indemnitor") of any loss, claim, damage, liability or action in respect of
which the Indemnitee intends to claim such indemnification, and the
Indemnitor, after it determines that indemnification is required of it, shall
assume the defense thereof with counsel mutually satisfactory to the PARTYS;
provided, however, that an Indemnitee shall have the right to retain its own
counsel, with the fees and expenses to be paid by the Indemnitor if
Indemnitor does not assume the defense; or, if representation of such
Indemnitee by the counsel retained by the Indemnitor would be inappropriate
due to actual or potential differing interests between such Indemnitee and
any other PARTY represented by such counsel in such proceedings. The
indemnity agreement in this Article 16 shall not apply to amounts paid in
settlement of any loss, claim, damage, liability or action if such settlement
is effected without the consent of the Indemnitor, which consent shall not be
withheld unreasonably. The failure to deliver notice to the Indemnitor within
a reasonable time after the commencement of any such action, if prejudicial
to its ability to defend such action, shall relieve such Indemnitor of any
liability to the Indemnitee under this Article 16, but the omission so to
deliver notice to the Indemnitor will not relieve it of any liability that it
may have to any Indemnitee otherwise than under this Article 16. The
Indemnitee under this Article 16, its employees and agents, shall cooperate
fully with the Indemnitor and its legal representatives in the investigations
of
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any action, claim or liability covered by this indemnification. In the event
that each PARTY claims indemnity from the other and one PARTY is finally held
liable to indemnify the other, the Indemnitor shall additionally be liable to
pay the reasonable legal costs and attorneys' fees incurred by the Indemnitee
in establishing its claim for indemnity.
SECTION 17.
CONFIDENTIALITY
17.1 (a) Disclosure or delivery of confidential and proprietary
information or material by any PARTY to the other PARTY may be made in
writing, or orally. Such confidential information or material provided by one
PARTY to the other PARTY will be safeguarded by the recipient and will not be
disclosed to third parties and will be made available only to the receiving
PARTY's or its AFFILIATES employees or agents (including attorneys) who need
to know such information or have such material for purposes permitted under
this Agreement and who have obligations of confidentiality and non-use
similar to those of this Agreement. Each PARTY shall hold as confidential
such confidential information and material in the same manner and with the
same protection as such party maintains for its own confidential information
and materials and agrees to use such confidential information and materials
only for the purpose of this Agreement and as permitted by this Agreement. A
PARTY may disclose Confidential Information of another to a third party for
the purposes contemplated by
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this Agreement, provided that the third party agrees to maintain the
confidentiality thereof in a manner consistent with the confidentiality
provisions of this Agreement.
(b) The mutual obligations of confidentiality under this
Section will not apply to any information to the extent that such information:
(i) is or hereafter becomes part of the public domain through
no action of the recipient of the information which constitutes a
default under this Agreement;
(ii) was already known to the recipient as evidenced by prior
written documents in its possession which were not furnished by the
other party;
(iii) is disclosed to the recipient by a third party who is
not in default of any confidentiality obligation to the disclosing
PARTY hereunder;
(iv) is disclosed to obtain a regulatory approval for
DEVELOPMENT PRODUCT in the TERRITORY, provided that the disclosing
PARTY takes all reasonable steps to restrict and maintain the
confidentiality of the disclosure;
(v) is required by law or bona fide legal process to be
disclosed, provided that the disclosing PARTY takes all reasonable
steps to restrict and maintain confidentiality of such disclosure and
provides reasonable notice to the non-disclosing PARTY; or
(vi) is approved for release by the PARTYS.
17.2 BTI and NOVARTIS each agrees not to disclose any terms or
conditions of this Agreement to any third party without the prior consent of
the other PARTY, except as required by applicable law, rule or regulation; or
in connection with a financing or offering statement or memorandum, or to a
potential sublicensee, assignee or transferee
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of the business of a party to which this Agreement relates; or to a licensor
of a PARTY for the purpose of granting a sublicense to the other PARTY. In
the event of a disclosure required under this Section, the disclosing PARTY
shall nonetheless provide the non-disclosing PARTY with notice of such
disclosure prior to disclosure, and will, to the extent reasonably possible,
provide the non-disclosing PARTY with an opportunity to correct same. A PARTY
shall not be required to provide the other PARTY with a disclosure which has
been previously provided to a PARTY.
NOVARTIS and BTI shall have the right to advise third parties as to
whether or not this Agreement covers any contemplated work or collaboration
with such third party.
17.3 To the extent that NOVARTIS COLLABORATION TECHNOLOGY or BTI
TECHNOLOGY is subject to an obligation of confidentiality to a third party,
NOVARTIS and BTI, as the case may be, shall use reasonable best efforts to
obtain the right to disclose same to the other PARTY under an obligation of
confidentiality in furtherance of and for the purposes of this Agreement.
17.4 NOVARTIS agrees that, with respect to any miniswine which are
provided to NOVARTIS for research or development under this Agreement by or
on behalf of BTI as well as all progeny, modifications thereto, genetic
variants thereof and transgenic swine produced therefrom by or on behalf of
NOVARTIS and/or AFFILIATES of NOVARTIS and or any of their sublicensees shall
be owned by BTI, and NOVARTIS shall not transfer same to a third party
without the consent of BTI and then only if such third party enters into a
separate agreement with BTI acknowledging BTI's rights therein,
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unless otherwise agreed to by BTI. NOVARTIS further acknowledges and
understands that all such swine are subject to the terms, conditions and
obligations of BTI to Charles River Laboratories under the Supply Agreement
with Charles River Laboratories.
SECTION 18.
FORCE MAJEURE
18.1 Neither party shall be held liable or responsible to the other
party nor be deemed to have defaulted under or breached this Agreement for
failure or delay in fulfilling or performing any term of this Agreement
(other than a payment provision) when such failure or delay is caused by or
results from causes beyond the reasonable control of the affected party
including but not limited to fire, floods, embargoes, war, acts of war
(whether war be declared or not), insurrections, riots, civil commotions,
strikes, lockouts or other labor disturbances, acts of God or acts, omissions
or delays in acting by any governmental authority or the other party.
SECTION 19.
ASSIGNMENT AND NOVARTIS AFFILIATES
19.1 This Agreement may not be assigned or otherwise transferred by
either PARTY without the consent of the other PARTY;provided, however, that
either PARTY may, without such consent, assign this Agreement and its rights
and obligations hereunder to its AFFILIATES or in connection with the
transfer or sale of all or substantially all of its business to which this
Agreement relates, or in the event of its
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merger or consolidation or change in control or similar transaction. Any
purported assignment in violation of the preceding sentences shall be void.
Any permitted assignee shall assume all obligations of its assignor under
this Agreement.
19.2 NOVARTIS warrants that its AFFILIATES, including, but not
limited to, its United States AFFILIATE will comply with the terms,
obligations and conditions imposed on NOVARTIS under this Agreement as if
they were signatories to this Agreement.
19.3 BTI warrants that its AFFILIATES will comply with the terms,
obligations and conditions imposed on BTI under this Agreement as if they
were signatories to this Agreement.
SECTION 20.
GENERAL PROVISIONS
20.1 The relationship between BTI and NOVARTIS is that of
independent contractors. BTI and NOVARTIS are not joint venturers, partners,
principal and agent, master and servant, employer or employee, and have no
relationship other than as independent contracting parties. BTI shall have no
power to bind or obligate NOVARTIS in any manner.
20.2 This Agreement, including the Appendices, and any CO-PROMOTION
AGREEMENT and the Amended and Restated Collaboration Agreement between the
PARTIES effective as of September 7, 1995 set forth the entire agreement and
understanding between the PARTIES with respect to the subject matter thereof
and
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supersedes all prior agreements in this respect. There shall be no amendments
or modifications to this Agreement, except by a written document which is
signed by both parties.
20.3 This Agreement shall be construed and enforced in accordance
with the laws of New York without reference to its choice of law principles.
20.4 The headings in this Agreement have been inserted for the
convenience of reference only and are not intended to limit or expand on the
meaning of the language contained in the particular article or section.
20.5 Any delay in enforcing a party's rights under this Agreement or
any waiver as to a particular default or other matter shall not constitute a
waiver of a party's right to the future enforcement of its rights under this
Agreement, excepting only as to an expressed written and signed waiver as to
a particular matter for a particular period of time.
20.6 Notices. Any notices given pursuant to this Agreement shall be
in writing and shall be deemed received upon the earlier of (i) when received
at the address set forth below (including telefax or personal delivery), or
(ii) three (3) business days after mailed by certified or registered mail in
the United States or Swiss mails, postage prepaid and properly addressed,
with return receipt requested. Notices shall be delivered to the respective
parties as indicated:
To BTI: Bio Transplant, Inc.
3rd Avenue, Bldg. 75
Charlestown Navy Yard
Charlestown, MA 02129
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To NOVARTIS: Novartis Pharma Ag.
Lichtstrasse 35
Ch-4002
Basel, Switzerland
Attn: Legal Department
Telecopy No. 41-61-324-7399
20.7 If any provision(s) of this Agreement are or become invalid,
are ruled illegal by any court of competent jurisdiction or are deemed
unenforceable under then current applicable law from time to time in effect
during the term hereof, it is the intention of the parties that the remainder
of this Agreement shall not be affected thereby provided that a party's
rights under this Agreement are not materially affected. It is further the
intention of the parties that in lieu of each such provision which is
invalid, illegal, or unenforceable, there be substituted or added as part of
this Agreement a provision which shall be as similar as possible in economic
and business objectives as intended by the parties to such invalid, illegal
or unenforceable provision, but shall be valid, legal and enforceable. In the
event a party's rights are materially affected as a result of a change in
this Agreement under this Section, such party may terminate this Agreement.
20.8 The parties agree throughout the duration of this Agreement to
notify each other immediately of any information concerning any serious or
unexpected side effect, injury, toxicity or sensitivity reaction or any
unexpected incidence and the severity thereof associated with the uses,
studies, field trials, investigations, tests and marketing of XENOGRAFT
PRODUCT. The parties further agree to immediately notify each other of any
information received regarding any threatened or pending action which may
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affect the safety or efficacy claims of XENOGRAFT PRODUCT or the continued
marketing of XENOGRAFT PRODUCT.
20.9 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.
SECTION 21. - WARRANTIES
21.1 The PARTYS warrant and represent to each other that each has
the full right and authority to enter into this Agreement, that each is not
aware of any impediment which would inhibit its ability to perform the terms
and conditions imposed on it by this Agreement, and that there are no and
will be no outstanding agreements, licenses, assignments or encumbrances
inconsistent with the provisions of and the rights and licenses granted under
this Agreement, or which are inconsistent with or would prevent a PARTY from
performing all of its obligations under this Agreement.
SECTION 22. - EXCEPTION FROM COLLABORATION
22.1 The PARTYS agree that notwithstanding anything else to the
contrary in the Agreement, either party shall have the right to enter into a
non-exclusive agreement or non-exclusive relationship with a third party by
which that party provides to a third party for use in the FIELD: bone (not
including cartilage or bone marrow). Any net income received therefrom shall
be divided equally by the PARTYS and shall be payable within sixty (60) days
after the end of a calendar quarter.
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IN WITNESS WHEREOF, the parties intending to be bound have set their
hands and seals, effective as of the date first written above.
BIO TRANSPLANT INCORPORATED NOVARTIS PHARMA AG
By: /s/ Elliot Lebowitz By: /s/ Clive Morris
------------------------- --------------------
TITLE: President Title: Authorized Signatory
---------------------- --------------------
Date: October 6, 1997 Date: 9/30/97
---------------------- --------------------
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Confidential Materials omitted and filed separately with
the Securities and Exchange Commission. Asterisks denote omissions.
APPENDIX A
LICENSE AGREEMENT-MAIN TERMS
1. License to NOVARTIS to be exclusive, worldwide and with the right to
grant sub-licenses to affiliates and third-parties with NOVARTIS
remaining responsible for the royalty and other obligations to BTI
under the Agreement in the event of such sub-licensing.
2. License to be subject to reasonable efforts with regard to development,
regulatory approval and marketing with termination rights on a
country-by-country basis in the event of lack of reasonable diligence
in major countries.
3. In the case where the licenses product is a pharmaceutical (therapeutic
or prophylactic), a royalty of ***** on net sales shall be in countries
where the pharmaceutical is covered by the licensed patent rights for
the term of the patents. In other countries, there shall be a reduced
royalty as negotiated by the parties payable on net sales for a period
of ten years from the date of first sale in each such country taking
into account all relevant factors.
4. In the case where the licensed product is a pharmaceutical, NOVARTIS
shall also make the following benchmark payments to BTI:
on the first filing of PLA, NDA or equivalent in a major country:
**********
on first sale of licensed product in a major country:
**********
5. In the case of licensed technology other than a pharmaceutical, the
parties will negotiate in good faith the royalty benchmark payments and
other terms of the license but in no case shall the royalty rate and
benchmark payments (if any) exceed those specified above in paragraphs
3 and 4.
6. In lieu of a royalty in a country in North America, BTI shall have the
right to copromote, receiving ********** of net proceeds and performing
********** of the selling effort (with BTI also being reimbursed for
its selling expenses).
7. Upon expiration of the obligation to pay royalties under the license
agreement the licenses granted shall become fully paid-up,
non-terminable, non-exclusive licenses.
8. All other terms to be negotiated in good faith taking into account all
relevant factors.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
APPENDIX B
CO-PROMOTION CONCEPT
At the time that BTI elects to co-promote a CO-PROMOTION PRODUCT in the
CO-PROMOTION TERRITORY, the PARTYS will agree on a joint marketing model for
such CO-PROMOTION PRODUCT which will be driven by the premises that
a. BTI shall receive the CO-PROMOTION PERCENTAGE of the
CO-PROMOTION PROFIT so long as the CO-PROMOTION AGREEMENT is
in effect;
b. the CO-PROMOTION PRODUCT will be sold under the trademark of
NOVARTIS who will also distribute and book sales;
c. BTI will perform the CO-PROMOTION PERCENTAGE of the
co-promotion selling effort and NOVARTIS shall perform the
remainder, each at its expense;
d. exposure will apply to both PARTYS during the course of the
marketing effort corresponding to the share of co-promotion
effort.
2. A PARTY's share of "CO-PROMOTION PROFIT" shall be ********************
********** in any year where such PARTY's actual co-promotion effort in
such year is not equal to at least ***** of its budgeted co-promotion
effort for the year. Such ********** will be in direct proportion to
the ********** in such PARTY's efforts as compared to its budgeted
co-promotion effort.
3. After PLA submission BTI will pay **********of the CO-PROMOTION
PERCENTAGE of the sum of PREMARKETING EXPENSES and DEVELOPMENT COSTS on
an ongoing basis, and NOVARTIS shall pay the remainder.
4. The marketing of CO-PROMOTION PRODUCT in the CO-PROMOTION TERRITORY
will be managed by NOVARTIS and reviewed by a marketing committee
similar in make-up to and voting in the same manner as the CLINICAL
STEERING COMMITTEE.
5. The Agreement shall include appropriate diligence efforts for both
parties.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
6. NOVARTIS shall pay all royalties to third parties on CO-PROMOTION
PRODUCT which BTI co-promotes.
7. BTI shall not be required to pay any MARKETING EXPENSES except those
which NOVARTIS shall reimburse.
8. EACH PARTY shall be responsible for its own SELLING EXPENSES even in
the event that that PARTY'S share of the CO-PROMOTION PROFIT is less
than its SELLING EXPENSES.
9. In the event that CO-PROMOTION PROFIT is negative,********************
************************************************************.
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APPENDIX C
FUNDED RESEARCH PLAN
Intentionally omitted
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APPENDIX D
ARBITRATION PROVISION
In the event the Parties are unable to reach agreement with respect
to any matter which is to be subject to arbitration in accordance with the
Collaboration Agreement, as applicable, such will be determined through
binding arbitration in Boston, Massachusetts in accordance with the
Commercial Rules of Arbitration of the American Arbitration Association.
The arbitration panel shall be comprised of three (3) arbitrators.
Each Party shall be entitled to appoint one arbitrator. The Parties shall
appoint their respective arbitrators within thirty (30) days after submission
for arbitration. If either Party shall fail to make timely appointment of its
arbitrator, the arbitration shall be heard and decided by the sole arbitrator
duly appointed by the other Party. Where both Parties have timely appointed
their respective arbitrators, the two arbitrators so appointed shall agree on
the appointment of the third arbitrator from the list of arbitrators
maintained by the American Arbitration Association. If the Parties' appointed
arbitrators shall fail to agree. within thirty (30) days from the date both
Parties' arbitrators have been appointed, on the identity of the third
arbitrator, then such arbitrator shall be appointed by the appropriate
administrative body of the American Arbitration Association.
Within ten (10) days of appointment of the full arbitration panel,
the Parties shall exchange their final proposed positions with respect to the
matters to be arbitrated, which shall approximate as closely as possible the
closest positions of the parties
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previously taken in the negotiations. Within thirty (30) days of appointment
of the arbitration Panel, each Party shall submit to the arbitrators a copy
of the proposed position which it previously delivered to the other Party,
together with a brief or other written memorandum supporting the merits of
its proposed position. The arbitration panel shall promptly convene a
hearing, at which time each Party shall have one (1) hour to argue in support
of its proposed position. The Parties will not call any witnesses in support
of their arguments.
The arbitration panel shall select either of the Party's proposed
position on the issue as the binding final decision to be embodied as an
agreement between the Parties. In making their selection, the arbitrators
shall not modify the terms or conditions of either Party's proposed position;
nor will the arbitrators combine provisions from both proposed position. In
making their selection, the arbitrators shall consider the terms and
conditions of this Agreement, the relative merits of the proposed position
and the written and oral arguments of the Parties. In the event the
arbitrators seek the guidance of the law of any jurisdiction, the law of the
State of New York shall govern.
The arbitrators shall make their decision known to the Parties as
quickly as possible by delivering written notice of their decision to both
Parties. Such written notice need not justify their decision. The Parties
will execute any and all papers necessary to obligate the parties to the
position selected by the arbitration Panel within five (5) days of receipt of
notice of such selection. The decision of the arbitrators shall be final and
binding on the Parties, and specific performance may be ordered by any court
of competent jurisdiction.
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<PAGE>
The Parties will bear their own costs in preparing for the
arbitration. The costs of the arbitrators will be equally divided between the
Parties.
Notwithstanding anything to the contrary, prior to initiating
arbitration, the issues shall be submitted to the Chief Executive Officer of
each of the Parties in an attempt to resolve the issues by good faith,
mediation or negotiations by such Chief Executive Officers. If the issues
have not been resolved within sixty (60) days after submission to the Chief
Executive Officers, then either party may initiate arbitration as set forth
herein.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
APPENDIX E
RESEARCH MILESTONES
********** Achieve *************************************
******************************************************* and demonstrate ******
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***********.
********** Eliminate *******************************
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***********.
********** Achieve *********************************
***********************************************************************.
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APPENDIX F
THIRD PARTY AGREEMENTS.
Title and Date of Agreement
1. Research and License Agreement between BTI and The General Hospital
Corporation, dated January 1, 1991.
2. Agreement between BTI and Catholic University of Louvain Experimental
Immunology Unit dated January 1, 1993.
3. Agreement between BTI and Alberta Research Council, dated December 23,
1992.
4. Supply Agreement between the Company and Alberta Research Council dated
December 24, 1992.
5. Development and Supply Agreement between BTI and Activated Cell
Therapy, dated August 22, 1996.
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<PAGE>
Exhibit 10.2
PROMISSORY NOTE
$500,000.00 Boston, Massachusetts
September 5, 1997
FOR VALUE RECEIVED, the undersigned BioTransplant Incorporated, a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of FLEET
NATIONAL BANK (the "Bank") the principal amount of Five Hundred Thousand and
00/100 ($500,000.00) Dollars or such portion thereof as may be advanced by the
Bank pursuant to Section 1.2 of that certain letter agreement of even date
herewith between the Bank and the Borrower (the "Letter Agreement") and remains
outstanding from time to time hereunder ("Principal"), with interest, at the
rate hereinafter set forth, on the daily balance of all unpaid Principal, from
the date hereof until payment in full of all Principal and interest hereunder.
Interest on all unpaid Principal shall be due and payable monthly in
arrears, on the first day of each month, commencing on the first such date after
the advance of any Principal and continuing on the first day of each month
thereafter and on the date of payment of this note in full, at a fluctuating
rate per annum (computed on the basis of a year of three hundred sixty (360)
days for the actual number of days elapsed) which shall at all times be equal to
the Prime Rate, as in effect from time to time (but in no event in excess of the
maximum rate permitted by then applicable law), with a change in the aforesaid
rate of interest to become effective on the same day on which any change in the
Prime Rate is effective; provided, however, that (A) if a Eurodollar Interest
Rate (as defined in the Letter Agreement) shall have become applicable to all or
any portion of the outstanding Principal for any Interest Period (as defined in
the Letter Agreement), then interest on such Principal or portion thereof shall
accrue at said applicable Eurodollar Interest Rate for such Interest Period and
shall be payable on the Interest Payment Date (as defined in the Letter
Agreement) applicable to such Interest Period, and (B) if a COF Interest Rate
(as defined in the Letter Agreement) shall have become applicable to the
outstanding Principal, then interest on the outstanding Principal shall accrue
at said COF Interest Rate and shall be paid on the first day of each month.
Overdue Principal and, to the extent permitted by law, overdue interest shall
bear interest at a fluctuating rate per annum which at all times shall be equal
to the sum of (i) two (2%) percent per annum plus (ii) the per annum rate
otherwise payable under this note with respect to the Principal which is overdue
(or as to which such interest is overdue) (but in no event in excess of the
maximum rate permitted by then applicable law), compounded monthly and payable
on demand. As used herein, "Prime Rate" means that rate of interest per annum
announced by the Bank from time to time as its prime rate, it being understood
that such rate is merely a reference rate, not necessarily the lowest, which
serves as the basis upon which effective rates of interest are calculated for
obligations making reference thereto. If the entire amount of any required
Principal and/or interest is not paid within ten (10) days after the same is
due, the Borrower shall pay to the Bank a late fee equal to five percent (5%) of
the required payment.
All outstanding Principal shall be repaid by the Borrower to the Bank
in 36 equal consecutive monthly installments (each in an amount equal to 1/36th
of the total Principal outstanding at the close of business on March 31, 1998),
such installments to commence April 1,
<PAGE>
1998 and to continue thereafter on the first Business Day (as defined in the
Letter Agreement) of each month through and including March 1, 2001, on which
date all then remaining Principal and all interest accrued but unpaid thereon
will be due and payable in full.
The Borrower may at any time and from time to time prepay all or any
portion of any Term Loan (as defined in the Letter Agreement), but, as to
Fixed Rate Loans (as defined in the Letter Agreement), only at the times and
in the manner, and (under certain circumstances) with the additional
payments, provided for in the Letter Agreement. Any prepayment of Principal,
in whole or in part, will be without premium or penalty (but, in the case of
Fixed Rate Loans, may require payment of additional amounts, as provided for
in the Letter Agreement). Each Principal prepayment shall be accompanied by
payment of all interest on the prepaid amount accrued but unpaid to the date
of payment. Any partial prepayment of Principal will be applied against
Principal installments in inverse order of normal maturity.
Payments of both Principal and interest shall be made, in immediately
available funds, at the office of the Bank located at 75 State Street, Boston,
Massachusetts 02109, or at such other address as the Bank may from time to time
designate.
The undersigned Borrower irrevocably authorizes the Bank to make or cause
to be made, on a schedule attached to this note or on the books of the Bank, at
or following the time of making any Term Loan and of receiving any payment of
Principal, an appropriate notation reflecting such transaction (including date,
amount and maturity) and the then aggregate unpaid balance of Principal.
Failure of the Bank to make any such notation shall not, however, affect any
obligation of the Borrower hereunder or under the Letter Agreement. The unpaid
Principal amount of this note, as recorded by the Bank from time to time on such
schedule or on such books, shall constitute presumptive evidence of the
aggregate unpaid principal amount of the Term Loans.
The Borrower hereby (a) waives notice of and consents to any and all
advances, settlements, compromises, favors and indulgences (including, without
limitation, any extension or postponement of the time for payment), any and all
receipts, substitutions, additions, exchanges and releases of collateral, and
any and all additions, substitutions and releases of any person primarily or
secondarily liable, (b) waives presentment, demand, notice, protest and all
other demands and notices generally in connection with the delivery, acceptance,
performance, default or enforcement of or under this note, and (c) agrees to
pay, to the extent permitted by law, all reasonable costs and expenses,
including, without limitation, reasonable attorneys' fees, incurred or paid by
the Bank in enforcing this note and any collateral or security therefor, all
whether or not litigation is commenced.
This note is the Term Note referred to in the Letter Agreement and is
entitled to the benefits of the Security Agreement (as defined in the Letter
Agreement). This note is subject to prepayment as set forth in the Letter
Agreement (which, in the case of Fixed Rate Loans, may require the making of
certain additional payments, as provided for in the Letter Agreement). The
maturity of this note may be accelerated upon the occurrence of an Event of
Default, as provided in the Letter Agreement.
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<PAGE>
Executed, as an instrument under seal, as of the day and year first above
written.
CORPORATE SEAL BIOTRANSPLANT INCORPORATED
ATTEST:
/s/Steven D. Singer By: /s/Richard V. Capasso
- ------------------------- ----------------------------
Secretary Name: Richard V. Capasso
Title: Vice President, Finance and Treasurer
3
<PAGE>
SECURITY AGREEMENT (EQUIPMENT)
SECURITY AGREEMENT (EQUIPMENT) dated as of September 5, 1997 by and between
BioTransplant Incorporated, a Delaware corporation (the "Debtor") and Fleet
National Bank (the "Secured Party").
WHEREAS, the Debtor and the Secured Party are parties to that certain
letter agreement of even date herewith (the "Letter Agreement") pursuant to
which the Secured Party may from time to time advance to the Debtor certain term
loans (the "Term Loans") for the purpose of acquisition of certain items of
equipment; and
WHEREAS, the Term Loans are evidenced by the Debtor's $500,000 face
principal amount promissory note of even date herewith (the "Term Note") payable
to the order of the Secured Party; and
WHEREAS, as a condition to the making of any Term Loan, the Secured Party
requires that the Debtor grant to the Secured Party a security interest in the
Collateral (as defined in Section 1);
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby act and agree
as follows:
1. Definitions. As used in this Security Agreement, the following terms
have the following meanings:
"Collateral" - All of the Equipment and all of the following:
(a) all warranties, licenses, contract rights and other rights and
interests (other than any such warranties, licenses, contract rights or
other rights or interests which are by their terms non-assignable)
pertaining to any of the Equipment and/or the use thereof, all whether now
or hereafter existing or owned by the Debtor or in which the Debtor shall
now or hereafter have any interest; and
(b) all liens, guaranties, securities, rights, remedies and privileges
pertaining to, and all proceeds (including, without limitation, insurance
proceeds) of and all accessions to, any of the foregoing items of
Collateral, all whether now or hereafter existing or owned by the Debtor or
in which the Debtor shall now or hereafter have any interest.
"Equipment" - All of the items listed on Exhibit A hereto, as same may be
from time to time supplemented, and all accessions, additions, substitutions or
replacements to or for any of such items and all attachments, components,
accessories, parts and supplies relating thereto; all whether affixed or
moveable and wherever located, and whether now existing and owned by the Debtor
or herewith arising or acquired.
<PAGE>
"Event of Default" - The occurrence of any one or more of the following:
(i) any "Event of Default" as defined in any Loan Document; or (ii) any
representation or warranty by the Debtor contained in this Security Agreement
shall prove to have been inaccurate or incomplete in any material respect on the
date when made; or (iii) the failure or default by the Debtor under any of
Subsections 4(a), 4(d), 4(e) or 4(g); or (iv) any failure by the Debtor to
perform or observe any of its other obligations or agreements under this
Security Agreement, which failure remains uncured for thirty (30) days after
notice thereof has been given to the Debtor.
"Lien" - Any lien, charge, encumbrance or security interest, whether
voluntary or involuntary.
"Loan Documents" - This Security Agreement, the Letter Agreement, the Term
Note and any other instruments, documents or other agreements made by the Debtor
with or in favor of the Secured Party in connection with any Term Loan, all
whether now existing or hereafter entered into or delivered.
"Obligations" - Each Term Loan, the Term Note and any and all other
indebtedness, liabilities or obligations of the Debtor, joint or several, direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, to or for the benefit of the Secured Party, which arise out
of or relate to any Term Loan.
"Person" - As defined in the Letter Agreement.
"Premises" - All locations (whether owned, leased, operated or otherwise
used by the Debtor) in which any of the Equipment is or will be located, all of
which are listed on Exhibit B hereto together with the record owner of each such
location.
"Security Agreement" - This Security Agreement (Equipment), as same may be
from time to time amended.
"UCC" - The Uniform Commercial Code as in effect from time to time in
Massachusetts, except that with respect to Collateral located or deemed located
in any other jurisdiction, such term shall refer to the Uniform Commercial Code
as in effect in each such other jurisdiction.
Any defined term used in the plural preceded by the definite article shall
be taken to encompass all members of the relevant class. Any defined term used
in the singular preceded by "any" shall be taken to indicate any number of the
members of the relevant class.
2. Grant of Security Interest. As security for the full and timely
satisfaction of the Obligations, the Debtor hereby grants to the Secured Party a
continuing security interest in the Collateral, and in each item thereof, all to
the maximum extent that the Debtor has an interest therein or at any time in the
future obtains such an interest.
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<PAGE>
3. Representations and Warranties. The Debtor represents and warrants to
the Secured Party that:
(a) The execution, delivery and performance by the Debtor of this Security
Agreement, including the security interests herein granted or intended to be
granted, has been duly authorized by all necessary corporate and other action
and does not and will not:
(i) require any waiver, consent or approval of its shareholders, any
governmental authority or any other Person;
(ii) contravene its charter or by-laws;
(iii) violate any provision of, or require any filing (other than the
filing of financing statements under the UCC with respect to the security
interests herein granted), registration, consent or approval under, any
law, rule, regulation (including, without limitation, Regulation U), order,
writ, judgment, injunction, decree, determination or award presently in
effect having applicability to the Debtor;
(iv) result in a breach of or constitute a default or require any
waiver or consent under any indenture or loan or credit agreement or any
other material agreement, lease or instrument to which the Debtor is party
or by which it or any of its properties may be bound; or
(v) result in, or require, the creation or imposition of any Lien
(other than as created hereunder) upon or with respect to any of the
properties now owned or hereafter acquired by the Debtor.
(b) This Security Agreement has been duly executed and delivered on behalf
of the Debtor and is a legal, valid and binding obligation of the Debtor.
(c) No Obligation has been or will hereafter be incurred on account of
personal, family or household purposes.
(d) The principal place of business and chief executive offices of the
Debtor are located at Third Avenue, Building 75, Charlestown Navy Yard,
Charlestown, Massachusetts 02129 and all of the books and records of the Debtor
are kept at that location. Except as described on Exhibit B hereto, none of the
Collateral is kept at any other location. The Debtor is a tenant in its
Premises and the record owner of each location constituting the Premises is as
set forth on Exhibit B hereto.
(e) The Debtor does not conduct business under any trade name or style
other than its corporate name.
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<PAGE>
(f) The Debtor owns the Collateral free and clear of all Liens except
(i) Liens in favor of the Secured Party, and (ii) the Lien of taxes not yet due
and payable or contested in good faith by the Debtor by appropriate proceedings
which serve to stay the enforcement thereof and as to which the Debtor has
established and is maintaining adequate reserves.
(g) This Agreement, coupled with the filing of appropriate UCC financing
statements with appropriate public offices, creates in favor of the Secured
Party a valid and perfected first priority security interest in all of the
Collateral.
(h) The Equipment has been accepted by the Debtor and is in good repair,
working order and condition, and the Debtor has not asserted (and the Debtor
knows of no basis for) any material warranty or other claim against any seller
or manufacturer thereof.
4. Covenants. (a) Payment and Performance. The Debtor shall
unconditionally pay when due or within any applicable grace period (or on
demand, if so payable) each Obligation and shall duly and punctually perform
each Obligation.
(b) Further Assurances. The Debtor will from time to time at its expense,
upon the Secured Party's request, promptly execute and deliver all such further
instruments and documents, and take all such further action, as the Secured
Party may reasonably request in order to perfect and/or protect the security
interests granted or intended to be granted hereby or to enable the Secured
Party to enforce its rights and remedies hereunder with respect to any
Collateral. Without limitation of the foregoing, as a precondition to the
making of each Term Loan, the Debtor will execute and deliver to the Secured
Party (i) an agreement in form and substance satisfactory to the Secured Party
amending Exhibit A hereto by adding to same (without deleting any items of
Equipment previously shown thereon) a list of the additional items of equipment
to be purchased with the proceeds of such Term Loan and all such additional
items will thereupon be deemed included in the Equipment described in this
Security Agreement, (ii) UCC financing statements which will be sufficient (when
filed) to give the Secured Party a fully perfected first security interest in
all of such additional items, and (iii) a certificate of the Debtor confirming
that the representation and warranties contained in Section 3 above remain true
and correct as of the date of such Term Loan and taking into account such
additional items of equipment.
(c) Information. The Debtor shall maintain complete and accurate records
of all of its Collateral and its dealings with respect thereto in accordance
with generally accepted accounting principles applied on a consistent basis.
Upon reasonable notice from time to time at reasonable times during normal
business hours (and at any time and without notice after the occurrence and
during the continuance of an Event of Default), the Debtor shall permit the
Secured Party and its employees, representatives and agents access to the
Premises and the Secured Party shall have the right to inspect the Collateral
and make copies of such books and records. The Debtor shall from time to time
furnish to the Secured Party such information concerning the Collateral as the
Secured Party may reasonably request, and will promptly notify the Secured Party
if any
4
<PAGE>
representation or warranty of the Debtor in Section 3 hereof becomes
inaccurate, incomplete or misleading in any material respect.
(d) Insurance. The Debtor shall at its expense maintain fire and extended
coverage insurance policies insuring the Equipment, with responsible and
reputable insurance companies or associations, in amounts sufficient to provide
for full replacement cost coverage (with agreed amount endorsement), and in any
event not less than the amount necessary to avoid co-insurance. All such
insurance shall name the Secured Party as secured party and first loss payee.
All policies of such insurance shall contain a provision forbidding cancellation
of such insurance either by the carrier or by the insured without at least 15
days' prior written notice to the Secured Party. The Debtor shall upon the
Secured Party's request deliver to the Secured Party duplicate policies of such
insurance and/or binders, certificates or other evidence thereof (with evidence
of premiums having been paid) from the insurer or a reputable insurance broker.
In case of any casualty, loss or damage to which the following sentence is not
applicable, the Debtor shall, in its sole discretion, either (a) make the
necessary repairs or replacements and shall be entitled to be reimbursed
therefor from and to the extent of the proceeds of such insurance or (b) have
all such insurance proceeds paid to the Secured Party for application in the
order provided in Subsection 8(c) below (provided that the option set forth in
this clause (b) cannot be elected unless such insurance proceeds are sufficient,
or the Debtor makes other payments, so that the Term Loan (or portion thereof)
which relates to the damaged or destroyed items of Equipment is paid in full).
Upon the occurrence and during the continuance of any Event of Default, all
insurance payments in respect of Equipment shall be paid and applied as
specified in Subsection 8(c) below.
(e) Title; Sale or Removal of Collateral. The Debtor shall not create or
suffer to exist any Lien in or on any of the Collateral, except (i) the Lien of
the Secured Party and (ii) the Lien of taxes not yet due and payable or
contested in good faith by the Debtor by appropriate proceedings which serve to
stay the enforcement thereof and as to which the Debtor has established and is
maintaining adequate reserves. The Debtor shall not, without the Secured
Party's prior written approval, sell, transfer or remove any item of Collateral
from the Premises or otherwise dispose of any of the Collateral; provided that
the Debtor may move the Collateral to any other location if the Debtor gives the
Secured Party not less than thirty (30) days' prior written notice of such move
and provides all such financing statements, landlord's waivers and other
documentation as may be necessary to protect, perfect and/or confirm the first
priority security interests granted or intended to be granted in this Security
Agreement. The Debtor (i) shall maintain books and records relating to
Collateral only as described in Subsection 3(d) above, (ii) will not move its
chief executive office or principal place of business from the location
described in Subsection 3(d) above, (iii) will not change its name or identity
(or use any trade name or style except as described in Subsection 3(e) above),
and (iv) will not make or suffer to be made any change in its corporate
structure until, in each case, after receipt of a certificate from the Secured
Party, signed by an officer thereof, stating that the Secured Party has, to its
satisfaction, obtained all documentation that it has reasonably requested in
order to obtain, maintain, perfect and/or confirm the first priority security
interests granted or intended to be granted herein.
5
<PAGE>
(f) Maintenance and Use of Equipment. The Debtor will maintain all
Equipment in good order and condition, making all necessary repairs thereto.
The Debtor will not suffer any waste or destruction of any Equipment, nor use
any Equipment in violation of any applicable law or any insurance thereon. The
Debtor will promptly restore or replace any Equipment damaged or destroyed by
fire or other casualty, or, at its option, may have all insurance proceeds
relating to such damaged or destroyed items of Equipment paid to the Secured
Party for application in the order provided in Subsection 8(c) below (provided
that such option not to restore and replace Equipment cannot be elected unless
such insurance proceeds are sufficient, or the Debtor makes other payments, so
that the Term Loan (or portion thereof) which relates to the damaged or
destroyed items of Equipment is paid in full). The Debtor shall promptly
furnish to the Secured Party a statement as to any casualty, loss or damage in
excess of $10,000 to any Equipment.
(g) Taxes. The Debtor promptly shall pay, as they become due and payable,
all taxes, unemployment contributions and all other charges of any kind or
nature levied, assessed or claimed against the Debtor or the Collateral by any
Person whose claim could result in a Lien upon any of the Collateral, except to
the extent such taxes, contributions or other charges are being contested in
good faith and by appropriate proceedings which operate as a matter of law to
stay the enforcement of any such Lien and adequate reserves have been
established and are maintained by the Debtor.
5. Secured Party Appointed Attorney-in-Fact. (a) The Debtor hereby
irrevocably appoints the Secured Party as the Debtor's attorney-in-fact, but
effective only after the occurrence and during the continuance of any Event of
Default, with full authority in the name, place and stead of the Debtor, from
time to time in the Secured Party's discretion, to take any action and to
execute any instrument which the Secured Party may deem necessary or advisable
to accomplish the purposes of this Security Agreement, including, without
limitation, to obtain and adjust any insurance required pursuant to this
Security Agreement and/or the Letter Agreement.
(b) The power of attorney granted pursuant to this Section 5 is a power
coupled with an interest and shall be irrevocable until the Obligations are paid
indefeasibly in full.
6. Secured Party May Perform. If the Debtor fails to perform any
agreement contained herein, the Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of the Secured Party incurred
in connection therewith shall be payable by the Debtor as provided under Section
9 hereof, with interest as provided in the Letter Agreement.
7. Secured Party's Duties. The powers conferred on the Secured Party
hereunder are solely to protect its interests in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe
custody of any Collateral actually in its possession and the accounting for
monies actually received by it hereunder, the Secured Party shall have no duty
as to any Collateral. The Secured Party shall not be liable for any acts,
omissions, errors of judgment or mistakes of fact or law including, without
limitation, acts, omissions, errors or mistakes with respect to the Collateral,
except for those arising out of or in connection with the
6
<PAGE>
Secured Party's negligence, gross negligence or willful misconduct. The
Secured Party shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that which the
Secured Party accords its own like property, it being understood that the
Secured Party shall be under no obligation to take any necessary steps to
collect any Collateral or preserve rights against prior parties or any other
rights pertaining to any Collateral, but may do so at its option, and all
reasonable expenses incurred in connection therewith shall be for the sole
account of the Debtor and shall be added to the Obligations.
8. Remedies. If any Event of Default shall have occurred and be
continuing:
(a) The Secured Party may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party under the UCC and also may
without limitation:
(i) require the Debtor to, and the Debtor hereby agrees that it will,
at its expense and the upon reasonable request of the Secured Party,
forthwith, assemble all or any part of the Collateral as directed by the
Secured Party and make it available to the Secured Party at a place or
places to be designated by the Secured Party which is or are reasonably
convenient to the respective parties;
(ii) itself or through agents, without notice to any Person and
without judicial process of any kind, enter the Debtor's Premises (or any
other premises or location where any Collateral may be) and take physical
possession of any Collateral or disassemble, render unusable and/or
repossess any of the same, and the Debtor shall peacefully and quietly
yield up and surrender the same; and
(iii) without notice except as specified below, sell, lease, assign,
grant an option or options to purchase or otherwise dispose of the
Collateral or any part thereof in one or more parcels at public or private
sale, at any exchange, broker's board or at the Secured Party's offices or
elsewhere, for cash, on credit or for future delivery, and upon such other
terms as are commercially reasonable.
(b) The Secured Party may maintain possession of Collateral at the
Premises or remove the same or any part thereof to such places as the Secured
Party may elect. The Debtor agrees that, to the extent notice of sale shall be
required by law, 10 days' prior written notice to the Debtor shall constitute
reasonable notification. Notice of any public or private sale shall be
sufficient if it describes the Collateral to be sold in general terms, stating
the items or amounts thereof and the location and nature thereof, and (as to a
notice of public sale only) is published at least once in any newspaper selected
by the Secured Party and of general circulation in the locale of such sale, not
less than 10 days prior to the sale. The Secured Party shall not be obligated
to make any sale of Collateral regardless of notice of sale having been given
and may be the purchaser at any such sale, if public, to the extent permitted by
applicable law, free from any right of redemption. The Debtor shall be fully
liable for any deficiency. The Secured Party may
7
<PAGE>
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.
(c) Any cash or other proceeds received by the Secured Party in respect of
any sale of, collection from, or other realization upon all or any part of the
Collateral, shall be applied by the Secured Party in the following order of
priorities:
First, to the payment of the reasonable costs and expenses of any sale or
other reasonable expenses (including, without limitation, reasonable legal fees
and expenses), liabilities and advances made or incurred by the Secured Party in
connection therewith or referred to in Section 9 or provided for by the Letter
Agreement;
Next, to payment of interest on and principal of the Term Note and other
charges relating thereto (in such order as may be provided for in the Letter
Agreement or as otherwise determined by the Secured Party);
Next, to the payment of any other Obligations; and
Finally, after payment in full of all Obligations, to the payment to the
Debtor or its successors or assigns, or to whomsoever may be lawfully entitled
to receive the same or as a court of competent jurisdiction may direct, of any
surplus then remaining of such cash.
9. Expenses and Indemnification. The Debtor agrees to reimburse the
Secured Party for and to indemnify and hold harmless the Secured Party from and
against any and all liability, loss, damage, and all costs or expenses
(including, without limitation, reasonable fees and disbursements of counsel,
experts and agents) imposed on, incurred by or asserted against the Secured
Party arising out of or in connection with: preparation of this Security
Agreement, the documents relating hereto, or amendments, modifications or
waivers hereof; taxes (excluding any corporate excise or income taxes payable by
the Secured Party by reason hereof or otherwise) and other governmental charges
in connection with this Security Agreement and the Collateral; exercise of the
Secured Party's rights with respect to this Security Agreement and the
Collateral; any enforcement, collection or other proceedings resulting therefrom
or any negotiations or other measures to preserve the Secured Party's rights
hereunder; the custody or preservation of, or the sale of or other realization
upon, any of the Collateral; any failure by the Debtor to perform or observe any
of the provisions of this Security Agreement; any investigative, administrative
or judicial proceeding (whether or not the Secured Party is designated a party
thereto) relating to or arising out of this Security Agreement; or any
bankruptcy, insolvency or other similar proceeding relating to the Debtor,
unless the Secured Party was at fault with respect to such liability, loss,
damage, cost or expense or acted in bad faith with respect thereto. The
Debtor's obligations under the preceding sentence shall constitute Obligations
and shall survive the termination of this Security Agreement.
8
<PAGE>
10. Termination. This Security Agreement shall remain in full force and
effect so long as any Obligation remains outstanding. Upon the satisfaction in
full of all of the monetary Obligations, the Secured Party shall, at the
Debtor's expense, promptly execute and deliver to the Debtor all instruments of
assignment or otherwise as may be necessary to establish full title of the
Debtor to any of the Collateral, subject to any prior sale or other disposition
thereof pursuant to Section 8. Until then, this Security Agreement shall itself
constitute conclusive evidence of the validity, effectiveness and continuing
force hereof, and any Person may rely hereon.
11. Waiver; Rights Cumulative. No failure to exercise and no delay in
exercising, on the part of the Secured Party, any right or remedy hereunder or
otherwise shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right or remedy. Waiver by the Secured Party of any right or
remedy on any one occasion shall not be construed as a bar to or waiver thereof
or of any other right or remedy on any future occasion. The Secured Party's
rights and remedies hereunder and under the Loan Documents shall be cumulative,
may be exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.
The provisions of this Security Agreement are not in derogation or
limitation of any obligations, liabilities or duties of the Debtor under any of
the other Loan Documents or any other agreement with or for the benefit of the
Secured Party. No inconsistency in default provisions between this Security
Agreement and any of the other Loan Documents or any such other agreement will
be deemed to create any additional grace period or otherwise derogate from the
express terms of each such default provision. No covenant, agreement or
obligation of the Debtor contained herein, nor any right or remedy of the
Secured Party contained herein, shall in any respect be limited by or be deemed
in limitation of any inconsistent or additional provisions contained in any of
the other Loan Documents or any such other agreement.
12. Severability. In the event that any provision of this Security
Agreement or the application thereof to any Person, property or circumstance
shall be held to any extent to be invalid or unenforceable, the remainder of
this Security Agreement and the application of such provision to Persons,
properties and circumstances other than those as to which it has been held
invalid or unenforceable shall not be affected thereby, and each provision of
this Security Agreement shall be valid and enforceable to the fullest extent
permitted by law.
13. Binding Effect; Assignment. This Security Agreement shall be binding
upon the Debtor and its successors and assigns and shall inure to the benefit of
the Debtor and the Secured Party and their respective successors and assigns.
14. Notices. All notices and other communications under or relating to
this Security Agreement shall be given in the manner and to the addresses of the
parties provided for in Section 6.3 of the Letter Agreement.
9
<PAGE>
15. Headings. Section headings in this Security Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Security Agreement for any other purpose.
16. Governing Law. This Security Agreement shall be governed by, and
construed and enforced in accordance with, the laws of The Commonwealth of
Massachusetts, except that the creation, perfection and enforcement of security
interests in any Collateral located in jurisdictions other than Massachusetts
will be governed by the laws of the respective jurisdictions in which such
Collateral is located.
IN WITNESS WHEREOF, the Debtor and the Secured Party have caused this
Security Agreement to be executed, as an instrument under seal, by their
respective officers thereunto duly authorized, as of the date first above
written.
BIOTRANSPLANT INCORPORATED
By /s/Richard V. Capasso
------------------------------------
Name: Richard V. Capasso
Title: Vice President, Finance and Treasurer
FLEET NATIONAL BANK
By /s/Kimberly Martone
-----------------------------------
Name: Kimberly Martone
Title: Vice President
10
<PAGE>
EXHIBIT A - Equipment list
EXHIBIT B - Locations in which Equipment is located, including owners of
real estate
<PAGE>
EXHIBIT A
EQUIPMENT LIST
[To be provided with each Term Loan.]
<PAGE>
EXHIBIT B
COLLATERAL LOCATIONS
Location Record Owner
Third Avenue, Building 75 The Boson Redevelopment
Charlestown Navy Yard Authority (ground lessee: BioLease, Inc.)
Charlestown, MA 02129
<PAGE>
EXHIBIT 11.1
BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
(A Development Stage Company)
COMPUTATION OF NET LOSS PER COMMON SHARE (1)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
<S> <C> <C> <C> <C>
1996 1997 1996 1997
---------- ---------- ---------- ----------
Net Loss: $(2,323,714) $(2,056,992) $(3,470,099) $(4,054,362)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Shares Used in Computing Net Loss Per Common Share:
Weighted Average Common Stock Outstanding During the
Period................................................. 8,548,756 8,570,916 6,683,869 8,567,136
Dilutive Effect of Common Equivalent Shares Issued
Subsequent to March 1, 1995 (2)....................... -- -- 315,818 --
----------- ----------- ----------- -----------
8,548,756 8,570,916 6,999,687 8,567,136
----------- ----------- ----------- -----------
Net Loss Per Common Share................................ $ (0.27) $ (0.24) $ (0.50) $ (0.47)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
- ------------------------
(1) Historical net loss per common share has not been separately presented as
the amounts would not be meaningful
(2) Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No.
83, common stock, preferred stock, stock options and warrants issued at
prices below the initial public offering price per share ("cheap stock")
during the twelve month period immediately preceding the filing date of the
Company's Registration Statement for its initial public offering have been
included as outstanding for all periods presented until the effective date
of the Company's initial public offering. The dilutive effect of the common
and common stock equivalents was computed in accordance with the treasury
stock method.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheet of September 30, 1997 and the condensed
consolidated statement of operations for the nine months ended September 30,
1997 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 5,118,707
<SECURITIES> 13,038,769
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,082,498
<PP&E> 4,008,352
<DEPRECIATION> 2,918,603
<TOTAL-ASSETS> 31,284,616
<CURRENT-LIABILITIES> 6,026,472
<BONDS> 0
0
0
<COMMON> 85,709
<OTHER-SE> 65,322,899
<TOTAL-LIABILITY-AND-EQUITY> 31,284,616
<SALES> 0
<TOTAL-REVENUES> 9,050,105
<CGS> 0
<TOTAL-COSTS> 13,104,467
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49,740
<INCOME-PRETAX> (4,054,362)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,054,362)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,054,362)
<EPS-PRIMARY> (.47)
<EPS-DILUTED> (.47)
</TABLE>
