<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO
SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JANUARY 14, 2000
--------------------
CYTOTHERAPEUTICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
Delaware 0-19871 94-3078125
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification Number)
</TABLE>
525 DEL REY AVENUE, SUITE C
SUNNYVALE, CA 94086
(ADDRESS, OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(408) 731-8670
(REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE)
--------------------
================================================================================
Page 1 of 4
<PAGE>
Item 2. Acquisition or Disposition of Assets.
CytoTherapeutics, Inc. (the "Company") announced that on December 30,
1999 it sold its Encapsulated Cell Technology ("ECT") to Neurotech S.A., a
privately held French company engaged in the pre-clinical and clinical
development of cell-based therapies in the central nervous system and the eye,
and will remain concentrated on its core business of stem cell technology. The
Company will receive an initial payment of $3 million, royalties on future
product sales, and a portion of certain Neurotech revenues from third parties in
return for the assignment to Neurotech of intellectual property assets relating
to ECT. In addition, the Company retained certain non-exclusive rights to use
ECT in combination with its proprietary stem cell technology and in the field of
vaccines for prevention and treatment of infectious diseases. The consideration
received by the Company reflected consideration by the Company of the various
alternatives for realizing value from its ECT technology and its negotiations
with Neurotech.
The sale of ECT is another step in the Company's previously announced
plan for restructuring its operations to focus on the development of its stem
cell technologies. The Company has relocated its headquarters from Rhode Island,
where the ECT activity was previously based, to the Sunnyvale, California
location of its wholly owned subsidiary, StemCells, Inc. The Company plans to
dispose of its pilot manufacturing plant and its former corporate headquarters
and ECT research facility in Rhode Island as part of the restructuring.
The Company also announced that the Company and the Advanced
Technology Program of the National Institute of Standards and Technology have
agreed to terminate by mutual consent two grants previously awarded to the
Company for ECT and stem cell related research. The ECT grant has been
obviated by the sale of the technology. The Company intends to resubmit a
proposal consistent with the new directions the Company is taking in its stem
cell programs.
Statements in this current report other than statements of
historical facts constitute forward-looking statements regarding, among other
things, the Company's future business operations. The Company's actual
results may vary materially from those contemplated in the forward looking
statements due to risks and uncertainties to which the Company is subject
including without limitation uncertainties regarding the future development
of ECT by Neurotech and the resulting uncertainty regarding the receipt of
future revenues from Neurotech, the uncertainty of future grant awards, the
Company's ability to successfully dispose of its pilot manufacturing plant in
Rhode Island and to sublease its former corporate headquarters and ECT
research facility in Rhode Island, and others that are described in
-2-
<PAGE>
Exhibit 99 to this current report entitled "Cautionary Factors Relevant to
Forward Looking Statements."
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
<TABLE>
<CAPTION>
Exhibit Number Title
-------------- -----
<S> <C>
2.1 Asset Purchase and License Agreement dated
as of December 29, 1999 ("Asset Purchase
Agreement") between CytoTherapeutics, Inc.
as Seller and Neurotech S.A. as Buyer, with
certain confidential portions redacted. The
Registrant will furnish supplementally a
copy of any omitted schedule or exhibit to
the Asset Purchase Agreement to the
Securities and Exchange Commission upon
request.
99 Cautionary Factors Relevant to
Forward-Looking Statements
</TABLE>
-3-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
CYTOTHERAPEUTICS, INC.
By /s/ Richard M. Rose
----------------------------------
Title: Chief Executive Officer
Date: January 14, 2000
-4-
<PAGE>
EXHIBIT 2.1
EXECUTION
ASSET PURCHASE AND LICENSE AGREEMENT
DATED AS OF DECEMBER 29, 1999
BETWEEN
CYTOTHERAPEUTICS, INC.
AS SELLER
AND
NEUROTECH S.A.
AS BUYER
<PAGE>
EXECUTION
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
1. DEFINITIONS..................................................................................................1
2. PURCHASE AND SALE OF THE PURCHASED ASSETS....................................................................6
2.1. Assets Being Assigned to Buyer..........................................................................6
2.2. Excluded Assets.........................................................................................7
2.3. Assumed Obligations.....................................................................................7
2.4. Purchase Price..........................................................................................7
2.5. Further Assurances......................................................................................7
3. CLOSING......................................................................................................8
4. LICENSE GRANT TO SELLER......................................................................................8
4.1. Non-Exclusive License Under the ECT Technology for Stem Cell Combination
Products in the Stem Cell Field.........................................................................8
4.2. Non-Exclusive License Under the ECT Technology in the Vaccine Field.....................................8
4.3. No Other Licenses.......................................................................................9
5. FUTURE PAYMENTS AND SHARE OF MILESTONE AND OTHER PAYMENTS....................................................9
5.1. Future Payments.........................................................................................9
5.2. Share of ECT Revenues...................................................................................9
5.3. Records.................................................................................................9
5.4. Reports and Payments...................................................................................10
5.5. Form of Payment........................................................................................10
5.6. Taxes..................................................................................................11
5.7. Interest...............................................................................................11
6. PROTECTION OF INTELLECTUAL PROPERTY RIGHTS..................................................................11
6.1. PATENT PROSECUTION/PATENT COSTS.............................................................................11
6.2. Confidential Information...............................................................................12
6.3. Enforcement of Intellectual Property Rights............................................................12
7. COVENANTS OF BUYER..........................................................................................13
7.1. Due Diligence..........................................................................................13
7.1.1. General Obligation...........................................................................13
7.1.2. Specific Due Diligence Obligations...........................................................13
7.1.3. Failure to Meet Due Diligence Obligations....................................................14
7.1.4. Reports......................................................................................14
7.1.5. Effect of Reversion of ECT Technology........................................................14
7.1.6. Force Majeure................................................................................14
7.1.7. Payments By Seller...........................................................................15
7.2. Compliance with Law....................................................................................15
7.3. Marking................................................................................................15
7.4. Publicity..............................................................................................15
7.5. Modification of Modex Cross License Agreement..........................................................15
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
7.6. Escrow Agreement.......................................................................................15
8. COVENANTS OF SELLER..........................................................................................16
9. REPRESENTATIONS AND WARRANTIES OF SELLER.....................................................................16
9.1. Due Organization, Authorization and Good Standing......................................................16
9.2. No Conflict............................................................................................16
9.3. Title to ECT Equipment.................................................................................17
9.4. ECT Technology.........................................................................................17
9.5. [* ]...................................................................18
9.6. Consents...............................................................................................19
9.7. Proprietary Information of Third Parties...............................................................19
9.8. Litigation.............................................................................................19
9.9. Taxes..................................................................................................20
9.10. Disclaimer of Warranties; Federal Patent Policy........................................................20
9.11. Full Disclosure........................................................................................20
10. REPRESENTATIONS AND WARRANTIES OF BUYER......................................................................20
10.1. Due Organization, Authorization and Good Standing......................................................21
10.2. No Conflict............................................................................................21
10.3. Disclaimer of Warranties...............................................................................21
11. TERM.........................................................................................................22
12. INDEMNIFICATION..............................................................................................22
12.1. Survival of Representations and Warranties.............................................................22
12.2. Indemnification by Seller..............................................................................22
12.3. Indemnification by Buyer...............................................................................23
13. INSURANCE....................................................................................................24
13.1. Insurance Obligations of Buyer.........................................................................24
13.2. Insurance Obligations of Seller........................................................................25
14. LIMITATION OF LIABILITY......................................................................................25
15. EXPENSES OF TRANSACTION......................................................................................25
16. CONDUCT OF PARTIES...........................................................................................25
17. NOTICES......................................................................................................26
18. ENTIRE AGREEMENT; MODIFICATIONS AND AMENDMENTS...............................................................27
19. ASSIGNMENT...................................................................................................27
20. GOVERNING LAW, VENUE.........................................................................................27
21. DISPUTE RESOLUTION...........................................................................................28
</TABLE>
* This confidential portion has been omitted and filed separately with the
Commission.
ii
<PAGE>
<TABLE>
<S> <C>
22. INDEPENDENT CONTRACTORS.....................................................................................28
23. SEVERABILITY................................................................................................28
24. NO WAIVER...................................................................................................28
25. COUNTERPARTS................................................................................................29
26. HEADINGS....................................................................................................29
</TABLE>
iii
<PAGE>
EXECUTION
ASSET PURCHASE AND LICENSE AGREEMENT
THIS AGREEMENT is made as of December 29, 1999 (the "Effective Date")
between CytoTherapeutics, Inc., a Delaware corporation ("Seller") and Neurotech
S.A., a French societe anonyme ("Buyer").
WHEREAS, Buyer desires to purchase Seller's encapsulated cell
technology from Seller, and Seller wishes to sell Seller's encapsulated cell
technology to Buyer, on the terms and subject to the conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of these premises, the respective
covenants of Buyer and Seller set forth below and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. DEFINITIONS. The following capitalized terms shall have the meanings given
below:
1.1. "Affiliate" shall mean, with respect to a party ("First Person")
any other Person which is controlled by or controls the First Person or,
together with the First Person, is under the common control of a third Person,
but only for so long as such control relationship continues to exist. Control
shall mean, (i) in the case of stock-issuing, for-profit corporate entities,
direct or indirect ownership of at least 50% of the stock or shares having the
right to vote for the election of directors; (ii) in the case of other
for-profit entities, ownership of at least 50% of the equity interest in such
entity with the power to elect the governing body of such entity or the power to
elect at least 50% of the members of the governing body of such entity; and
(iii) in the case of any not-for-profit entity, the direct or indirect power to
manage, direct or cause the direction of the management and policies of the
entity or the power to elect at least 50% of the members of the governing body
of such entity.
1.2. "Assigned Agreements" shall have the meaning set forth in
Section 2.1.2.
1.3. "Assumed Obligations" shall have the meaning set forth in
Section 2.3.
1.4. "Buyer Indemnitees" shall have the meaning set forth in
Section 12.2.1.
1.5. "Closing" shall have the meaning set forth in Section 2.1.
1.6. "Closing Date" shall have the meaning set forth in Section 3.1.
1.7. "Confidential Information" shall mean any and all information
furnished by one party (the "Disclosing Party") to the other party (the
"Receiving Party") that is (a) marked "confidential" or bears a similar legend,
if such information is disclosed in a document or other tangible medium, or (b)
accompanied by a contemporaneous oral notification to the effect that such
information is considered confidential and followed within 30 days by a written
notification that the information is confidential, if such information is
disclosed orally or visually. Information that may be identified as confidential
may include information relating to any technology, product, process or
intellectual property of the Disclosing Party (including, but not
1
<PAGE>
limited to, owned or licensed intellectual property rights, data, know-how,
samples, technical and non-technical materials and specifications) as well as
any business plan, financial or other confidential commercial information of or
about the Disclosing Party.
Notwithstanding the foregoing, information of or about the Disclosing
Party shall not be considered Confidential Information with respect to the
Disclosing Party to the extent that the Receiving Party can demonstrate by
written records or other suitable physical evidence that:
(i) such information was lawfully in the Receiving
Party's possession or control prior to the time such
information was disclosed to the Receiving Party by
the Disclosing Party;
(ii) such information was developed by the Receiving Party
or on its behalf independently of and without
reference to the Confidential Information;
(iii) such information was lawfully obtained by the
Receiving Party from a Third Party under no apparent
obligation of confidentiality to the Disclosing
Party; or
(iv) such information was, at the time it was disclosed or
obtained by the Receiving Party, or thereafter
became, publicly known otherwise than through a
breach by the Receiving Party of such party's
obligation to the Disclosing Party.
1.8. "Current ECT Technology" shall have the meaning set forth in
Section 7.1.3.
1.9. "Development Period" shall have the meaning set forth in
Section 7.1.2.
1.10. "ECT Arrangement" shall mean an agreement between Buyer or an
Affiliate of Buyer and a Third Party which is executed on or before
[* ] and which includes a grant of rights under the ECT Technology
or any portion thereof.
1.11. "ECT Equipment" shall have the meaning set forth in
Section 2.1.3.
1.12. "ECT Know-how" shall mean all technology, inventions,
technical information, biological materials and the like related to the cells
(other than cells within the Stem Cell Technology) used in Seller's
encapsulation programs, the use of encapsulated cells, devices for
encapsulating cells, methods of making such devices, membrane jackets for
such devices, matrix cores for such devices and methods of delivery of
molecules from such devices, in which Seller has an interest on the Effective
Date, whether patentable or not, and which: (i) (a) is related to any patent
application or patent included in the ECT Patents or (b) is necessary or
useful in connection with the manufacture, use or sale of any product
described in any such patent application or patent, or the practice of any
invention or technology described in any such patent application or patent,
and (ii) until the Effective Date constitutes the confidential information of
Seller.
1.13. "ECT Patents" shall mean those patents and patent applications
listed in Schedule 1.13, and any divisional, continuation, continuation-in-part,
reissue, renewal or
* This confidential portion has been omitted and filed separately with the
Commission.
2
<PAGE>
extension thereof or substitute therefor, or any patent issuing therefrom and
any foreign patent applications and patents corresponding thereto.
1.14. "ECT Product" shall mean:
(i) any product, the manufacture, use, sale or
importation of which would, absent the rights
transferred (or sublicensed, in the case where
Section 2.5 applies) by Seller to Buyer hereunder,
infringe any Valid Claim; or
(ii) any product developed in whole or in part through use
of a process which is covered by a Valid Claim.
1.15. "ECT Revenues" shall mean amounts payable to Buyer or an
Affiliate of Buyer from a Third Party pursuant to an ECT Arrangement, including
without limitation up-front license fees, milestone payments, payments in
consideration for the issuance of equity or debt securities of Buyer, and other
non-royalty cash payments; PROVIDED, HOWEVER, that ECT Revenues shall not
include (i) bona fide research and development support payments, (ii) royalty
payments and revenues realized from the sale of ECT Products and (iii) payments
received to reimburse Buyer for patent expenses incurred by Buyer or an
Affiliate of Buyer after execution of the ECT Arrangement.
1.16. "ECT Technology" shall mean the Owned ECT Technology and the
In-Licensed ECT Technology.
1.17. "Federal Patent Policy" shall mean 35 U.S.C. Section 200 et seq.
and all regulations promulgated thereunder, as amended, and any similar or
successor statutes or regulations.
1.18. "Indemnification Floor" shall have the meaning set forth in
Section 12.2.5.
1.19. "Infringement" shall have the meaning set forth in Section 6.3.2.
1.20. "Infringer" shall have the meaning set forth in Section 6.3.1.
1.21. "In-Licensed ECT Know-how" shall mean Seller's interest in all
ECT Know-how which is obtained pursuant to the Assigned Agreements.
1.22. "In-Licensed ECT Patents" shall mean Seller's interest in all ECT
Patents which is obtained pursuant to the Assigned Agreements.
1.23. "In-Licensed ECT Technology" shall mean the In-Licensed ECT
Know-How and the In-Licensed ECT Patents.
1.24. "Knowledge" and like phrases shall mean and include (i) actual
knowledge and (ii) that knowledge, data and other information which a party
(including the directors, officers and key employees of Seller) should have
known by virtue of being an officer, director or key employee of the Seller.
3
<PAGE>
1.25. "Lien" shall mean any mortgage, pledge, security interest,
attachment, license, right to use, encumbrance, lien or charge of any kind
(including any agreement to give any of the foregoing).
1.26. "Modex Agreement" shall mean the cross-license agreement between
Seller and Modex Therapeutiques, S.A. originally dated as of July 10, 1996 and
amended and restated as of October 28, 1997.
1.27. "Modex Field" shall have the meaning set forth in Section 1.16 of
the Modex Agreement as it exists on the Closing Date, together with the
additional field categories proposed by Modex in the correspondence referenced
in the Schedule of Exceptions, to the extent (if any) that such field categories
are actually included as additional field categories pursuant to Section 1.16.5
of the Modex Agreement.
1.28. "Net Royalties" with respect to an ECT Product shall mean
royalties on the Net Sales (or per unit sales or other similar basis for the
payment of royalties) of an ECT Product payable to Buyer by a Sublicensee with
respect to such ECT Product, less royalties on the Net Sales (or per unit sales
or other similar basis for the payment of royalties) of the same ECT Product
payable by Buyer to any Third Party.
1.29. "Net Sales" shall mean
(i) in any case where any ECT Product is sold or commercially
disposed of for value in an arm's length sale to an
independent Third Party, the gross invoice price for such
ECT Product, less the following permitted deductions to the
extent that such items are reflected in the price charged
and do not exceed reasonable and customary amounts in the
country in which the transaction occurs: (a) trade and
quantity discounts or rebates actually taken or allowed, (b)
credits or allowances given or made for rejections or return
of any previously sold ECT Product actually taken or
allowed, (c) any tax or government charge (including any tax
such as a value added or similar tax or government charge,
but not including any tax levied with respect to income)
levied on the sale, transportation or delivery of the ECT
Product and borne by the seller thereof, and (d) any charges
for freight or insurance billed to the final customer.
(ii) in any case, other than for a use in research or development
or for use in clinical trials, where any ECT Product is not
sold or commercially disposed of for value in an arm's
length sale to an independent Third Party (including,
without limitation, disposition in connection with the
delivery of other products or services), the greatest of:
(a) the Net Sales amount for such transaction determined as
provided in (i) above or (b) if there has been any arm's
length sale of a similar ECT Product to an independent Third
Party, the Net Sales amount, determined as provided in (i)
above, for the most contemporaneous such sale or (c), if
there has been no such arm's length sale, the gross sales
asking price for the ECT Product.
4
<PAGE>
1.30. "Owned ECT Know-how" shall mean all ECT Know-how other than the
In-Licensed ECT Know-how.
1.31. "Owned ECT Patents" shall mean all ECT Patents other than the
In-Licensed ECT Patents.
1.32. "Owned ECT Technology" shall mean the Owned ECT Patents and the
Owned ECT Know-how.
1.33. "Person" shall mean any natural person or legal entity.
1.34. "Pilot Plant" shall have the meaning set forth in Schedule 2.1.3.
1.35. "Purchased Assets" shall have the meaning set forth in
Section 2.1.
1.36. "Reversion Event" shall have the meaning set forth in
Section 7.1.3(i).
1.37. "SAF Facility" shall have the meaning set forth in
Schedule 2.1.3.
1.38. "Seller Indemnitees" shall have the meaning set forth in
Section 12.3.1.
1.39. "Stem Cell Combination Product" means a product comprising a
combination of the ECT Technology with the Stem Cell Technology (i) where
Seller's proprietary stem cells are not encapsulated through use of the ECT
Technology, and (ii) where the primary therapeutic or diagnostic effect of such
combination product, as reasonably demonstrated through statistically
significant pre-clinical tests in a relevant animal model, is provided by the
Stem Cell Technology, and (iii) where the ECT Technology and/or the cells within
the ECT Technology do not, by themselves, have a significant therapeutic effect
as compared with the combination product, as reasonably demonstrated through
statistically significant pre-clinical tests in a relevant animal model. For
purposes of the immediately preceding sentence of this Section 1.39, the term
"significant" means greater than twenty percent (20%).
1.40. "Stem Cell Field" shall mean the use of a Stem Cell Combination
Product in any field of use other than the Modex Field.
1.41. "Stem Cell Technology" shall mean the current and future
proprietary technology of Seller and its Affiliates based on the use of Seller's
proprietary stem cells or proprietary progenitor cells and the cells derived
from such stem cells or progenitor cells, for tissue regeneration or tissue
replacement, or for diagnostic purposes.
1.42. "Sublicensee" shall mean any Third Party which is a direct or
indirect licensee, sublicensee or assignee of the ECT Technology from Buyer.
1.43. "Third Party" shall mean any Person other than Buyer and its
Affiliates or Seller and its Affiliates.
1.44. "Transaction Documents" shall have the meaning set forth in
Section 9.1.
5
<PAGE>
1.45. "Vaccine" shall mean an agent which achieves a prophylactic or
therapeutic effect by inducing an antigen-specific humoral and/or cellular
immune system response.
1.46. "Vaccine Field" shall mean the use of a Vaccine Product for the
prevention or treatment of infectious diseases, but excluding any use of a
Vaccine Product in the Modex Field.
1.47. "Vaccine Product" shall mean an ECT Product that is a Vaccine.
1.48. "Valid Claim" shall mean (i) any pending claim of a patent
application included in the ECT Patents that has not been abandoned or finally
rejected without the possibility of appeal or refiling or (ii) any claim of an
issued or granted and unexpired patent included in the ECT Patents which has not
been held permanently revoked, unenforceable, unpatentable or invalid by a
decision of a court or other governmental body of competent jurisdiction that is
unappealable or unappealed within the time allowed for appeal, which has not
been rendered unenforceable through disclaimer or otherwise, which has neither
been abandoned nor lost through an interference proceeding.
2. PURCHASE AND SALE OF THE PURCHASED ASSETS.
2.1. ASSETS BEING ASSIGNED TO BUYER. At the closing of the transaction
as described in Section 3 (the "Closing"), Seller shall sell and assign to
Buyer, and Buyer shall purchase and assume, the assets identified in Sections
2.1.1 through 2.1.6 below (collectively, the "Purchased Assets") as the same
exist on the Closing Date (as hereinafter defined):
2.1.1. Seller's entire right, title and interest in the Owned
ECT Technology.
2.1.2. All of Seller's rights under the agreements listed on
Schedule 2.1.2 attached hereto (collectively, the "Assigned
Agreements").
2.1.3. Seller's entire right, title and interest in the
equipment (the "ECT Equipment") identified on Schedule 2.1.3 attached
hereto.
2.1.4. With respect to the ECT Patents, all of Seller's right,
title and interest in the prosecution files for all patent applications
and patents comprising the ECT Patents (including, without limitation,
all drafts, notes, drawings or figures, official correspondence with
patent offices, other correspondence and copies of cited references,
copies of which Seller may retain), and in all intellectual property
rights in such patents and applications, including without limitation
the right to claim the priority benefit thereof and to prosecute and to
enforce any patents arising therefrom.
2.1.5. With respect to the ECT Technology, all of Seller's
right, title and interest in originals or copies of all laboratory
notebooks and other primary data, research results, records and
documentation, research plans, proposals, conclusions, know-how,
specifications and information, to the extent any of the foregoing are
recorded in any tangible form (including, without limitation, gels,
photographs, print-outs, electronic files and paper documents), which
are owned by or licensed to and in the possession of Seller and which
relate to the discovery of or are necessary or materially useful for
the practice
6
<PAGE>
of the ECT Technology, and all intellectual and tangible
property rights in the foregoing, including the right to file
additional patent applications based thereon.
2.1.6. With respect to the ECT Technology, all of Seller's
right, title and interest in all regulatory approvals of, or clinical
trials or other studies conducted on, and all filings made with
regulatory agencies, in connection with the ECT Technology.
Seller shall transfer the Purchased Assets to Buyer pursuant
to a Bill of Sale in substantially the form of EXHIBIT A attached hereto (the
"Bill of Sale"), an Assignment of Patents substantially in the form of EXHIBIT B
attached hereto (the "Patent Assignment"), and an Assignment and Assumption
Agreement substantially in the form of EXHIBIT C attached hereto (the
"Assignment and Assumption Agreement").
2.2. EXCLUDED ASSETS. Buyer shall not acquire any assets other than
those assets specifically included in the Purchased Assets. Without limiting the
foregoing, Buyer shall not acquire any of Seller's other technology, other
intellectual property, cash or cash equivalents, accounts receivable, software,
deposits or open purchase orders or back orders.
2.3. ASSUMED OBLIGATIONS. Buyer shall assume and perform all
obligations of the Seller under the Assigned Agreements arising after the
Closing and based on events or circumstances arising after the Closing (the
"Assumed Obligations"), including, without limitation, any and all royalty
payments, product development milestones, diligence, patent prosecution or other
obligations arising thereunder after the Closing. Except as otherwise explicitly
set forth herein, Buyer shall not assume any obligations of Seller other than
the Assumed Obligations, and Buyer shall not assume any liabilities of the
Seller.
2.4. PURCHASE PRICE. In addition to the payments provided for in
Section 5 and assumption of the Assumed Obligations, Buyer shall pay to Seller a
total of $3,000,000.00 pursuant to Sections 3.1.3 and 7.6 hereof. Each of Buyer
and Seller, respectively, shall pay any sales, use and other transfer taxes
imposed on such party by operation of law in connection with the purchase and/or
transfer of the Purchased Assets hereunder.
2.5. FURTHER ASSURANCES. Each of the parties hereto, before, at and
after the Closing, promptly upon the request from time to time of any other
party hereto and without further consideration, will do each and every
reasonable act and thing as may be necessary or reasonably desirable to
consummate the transactions contemplated hereby and to effect an orderly
transfer to Buyer of the Purchased Assets, and to put the Buyer in actual
possession and operating control thereof, and to confirm the Buyer's title to
all of the Owned ECT Technology and Buyer's rights under the Assigned
Agreements, and to carry out the purpose and intent of this Agreement, including
without limitation: (i) granting Buyer a license or other interest in such
Purchased Assets to the extent that the Seller is unable to assign such asset
without the consent or approval of one or more Third Parties; (ii) assigning to
Buyer additional agreements between the Seller and Third Parties, such as, for
example, material transfer agreements; (iii) executing, acknowledging and
delivering assurances, assignments, powers of attorney and other documents and
instruments; (iv) furnishing information and copies of documents, scientific
notebooks, books and records; (v) filing reports, returns, applications, filings
and other documents and instruments with governmental authorities; and (vi)
cooperating with the other party hereto in
7
<PAGE>
EXECUTION
exercising any right or pursuing any claim, whether by litigation or otherwise,
other than rights and claims running against the party from which such
cooperation is requested.
3. CLOSING.
3.1. The Closing shall be held at the offices of Ropes & Gray, One
International Place, Boston, Massachusetts, at 5:00 p.m. Eastern Standard Time
on December 29, 1999 or at such other location and on such other date as Buyer
and Seller may agree upon in writing (the "Closing Date"). At the Closing:
3.1.1 Seller shall deliver or cause to be delivered to Buyer
the following:
(i) The Bill of Sale;
(ii) The Patent Assignment; and
(iii) The Assignment and Assumption Agreement.
3.1.2. Buyer shall deliver or cause to be delivered to Seller
the Assignment and Assumption Agreement.
3.1.3. Buyer shall pay to Seller, by wire transfer of
immediately available funds, in accordance with written instructions
furnished by Seller at least one business day prior to the Closing,
$[**].
3.2. Seller shall deliver at the Closing or shall make available within
thirty (30) days after the Closing all of the books, data, documents,
instruments and other records and materials to the extent required by Section
2.1, and any other documents or materials containing or embodying ECT Know-how.
For the purpose of effecting the transfer of all ECT Technology to Buyer, and to
facilitate Buyer's understanding of the ECT Technology, Seller will, from time
to time upon reasonable notice during the term of this Agreement, make Seller
personnel reasonably available to Buyer to answer Buyer's questions related to
the ECT Technology, including any past agreements between Buyer and Third
Parties related thereto, provided that Buyer shall reimburse Seller for any
out-of-pocket expenses incurred by Seller in connection therewith.
4. LICENSE GRANT TO SELLER.
4.1. NON-EXCLUSIVE LICENSE UNDER THE ECT TECHNOLOGY FOR STEM CELL
COMBINATION PRODUCTS IN THE STEM CELL FIELD. Subject to the terms and conditions
of this Agreement, Buyer hereby grants to Seller an irrevocable, non-exclusive,
royalty-free, worldwide license under the ECT Technology, including the right to
grant sublicenses, to use the ECT Technology solely in combination with Seller's
Stem Cell Technology to use, make, have made, offer to sell, sell and import
Stem Cell Combination Products for use in the Stem Cell Field.
4.2. NON-EXCLUSIVE LICENSE UNDER THE ECT TECHNOLOGY IN THE VACCINE
FIELD. Subject to the terms and conditions of this Agreement, Buyer hereby
grants to Seller an irrevocable, non-exclusive, royalty-free, worldwide license,
including the right to grant sublicenses, under the
* This confidential portion has been omitted and filed separately with the
Commission.
8
<PAGE>
ECT Technology to use, make, have made, offer to sell, sell and import Vaccine
Products in the Vaccine Field.
4.3. NO OTHER LICENSES. Except as set forth in Sections 4.1 and 4.2
above, no other rights or licenses under the ECT Technology are granted to
Seller hereunder. Without limiting the generality of the foregoing sentence, no
provision of this Agreement shall be construed to grant Seller rights under the
ECT Technology to make, have made, use have used, sell, have sold, or import
products other than Vaccine Products or Stem Cell Combination Products.
5. FUTURE PAYMENTS AND SHARE OF MILESTONE AND OTHER PAYMENTS.
5.1. FUTURE PAYMENTS.
5.1.1. Buyer shall pay or cause to be paid to Seller an amount
equal to [****] percent [**] of the Net Sales of ECT Products sold by
Buyer or its Affiliates.
5.1.2. With respect to the Net Sales of ECT Products by
Sublicensees of Buyer, Buyer shall pay or cause to be paid to Seller an
amount equal to the greater of: (A) [****] percent [**] of such Net
Sales, or (B) [****] [**] of Net Royalties realized by Buyer or any
Affiliate of Buyer with respect to such Net Sales.
5.1.3. [* ]
5.1.4 No multiple amounts shall be payable by Buyer under this
Article 5 because the manufacture, use, sale or import of any ECT
Product is covered by more than one Valid Claim of an ECT Patent or
uses or incorporates more than one aspect of the ECT Technology.
5.1.5 With respect to each ECT Product, the obligations of
Buyer under this Article 5 shall expire, on a country-by-country basis,
upon the expiration of the last to expire Valid Claim within the ECT
Patents covering such ECT Product in such country.
5.2. SHARE OF ECT REVENUES.
5.2.1 Buyer shall pay or cause to be paid to Seller, upon
receipt, ten percent (10%) of any ECT Revenues with respect to any ECT
Arrangement with a Third Party identified in Schedule 5.2.
5.2.2. Buyer shall pay to Seller, upon receipt by Buyer,
[****] percent [**] of any ECT Revenues payable by [* ]
with respect to any ECT Arrangement with any Third Party other than a
Third Party identified in Schedule 5.2.
5.3. RECORDS. Buyer shall keep, and shall require its Sublicensees and
Affiliates to keep and make available to Buyer for review by accountants
selected by Seller as provided
* This confidential portion has been omitted and filed separately with the
Commission.
9
<PAGE>
herein, complete and accurate records of thelatest three (3) years relating to
the Net Sales of ECT Products on which amounts are payable hereunder. For the
sole purpose of verifying the amounts payable to Seller under Section 5.1,
Seller shall have the right, no more often than once each calendar year, at
Seller's expense to retain an independent, certified public accountant selected
by Seller and reasonably acceptable to Buyer, to review such records of Buyer in
the location where such records are maintained by Buyer upon reasonable notice
and during regular business hours and under obligations of strict confidence.
The independent certified public accountant shall disclose to Seller only
whether the reports required under Section 5.4 are correct or incorrect, and the
specific details concerning any discrepancies. No other information shall be
provided to Seller. If such independent certified public accountant concludes
that additional amounts were owed during such period, then Buyer shall pay such
additional amounts to Seller within thirty (30) days after the date Seller
delivers to Buyer such accounting firm's written report so concluding. If such
independent certified public accountant concludes that Buyer overpaid amounts
due during such period, Buyer shall receive a credit against payment of future
amounts due for such overpayment. Should the results of such review result in an
increase of more than 5% in any payment due Seller hereunder, Buyer shall be
obligated to pay any out-of-pocket expenses incurred by Seller with respect to
such review. Seller shall treat all financial information subject to review
under this Section 5.3 as the Confidential Information of Buyer in accordance
with the provisions of Section 6.2, and shall cause its independent public
accountant or accounting firm to enter into confidentiality agreements having
provisions at least as strict as the provisions in Section 6.2 hereof.
5.4. REPORTS AND PAYMENTS. Within ninety (90) days after the end of
each calendar quarter, Buyer shall (i) deliver or cause to be delivered to
Seller a true and accurate report, giving such particulars of the business
conducted by Buyer, Buyer's Affiliates and any Sublicensees during such quarter
under this Agreement as are pertinent to an accounting for any payments
hereunder, and (ii) pay or cause to be paid any payment amounts determined on
the basis of such accounting. If no payments are due, it shall be so reported.
For the purposes of determining when the sale of an ECT Product occurs for the
purposes of calculating Net Sales, such sale shall be deemed to occur on the
date of invoice to the purchaser of the ECT Product. To the extent appropriate
for the calculation of any amounts payable under this Agreement, any such report
shall include a statement showing the calculation of the amount owed on a
country-by-country basis, the total Net Sales on a country-by-country basis for
the period covered, the exchange rate used to convert any amounts payable into
United States Dollars and the total Net Sales for the period covered in all
countries.
5.5. FORM OF PAYMENT. All amounts payable to Seller hereunder shall be
payable in United States dollars to the address specified in Section 17, or at
such other place as Seller may reasonably designate; PROVIDED, HOWEVER, that if
the law of any foreign country prevents any payment payable to Seller hereunder
to be made as so provided, or prevents any such payment to be made in United
States dollars, Seller agrees to accept such payment in such form and place as
is permitted, including deposits by Buyer in the applicable foreign currency in
a local bank or banks in such country designated by Seller. If any currency
conversion is required in connection with any payment to Seller hereunder, such
conversion shall be made at the buying rate for the transfer of such other
currency as quoted by The Wall Street Journal on the last business day of the
applicable accounting period, in the case of any payment payable with respect to
a specified
10
<PAGE>
accounting period, or, in the case of any other payment, the last
business day prior to the date of such payment.
5.6. TAXES. Seller and Buyer shall use all reasonable and legal efforts
to reduce tax withholding on payments made to Seller hereunder. If Buyer
concludes that, notwithstanding such efforts, tax withholding under the laws of
any country is required with respect to any payment to be made to Seller under
this agreement, Buyer shall withhold or cause its Affiliate or Sublicensee to
withhold the required amount and to pay such amount to the appropriate
governmental authority. In such a case, Buyer will promptly provide Seller with,
or promptly cause Seller to be provided with, original receipts or other
evidence sufficient to allow Seller to obtain the benefits of any such tax
withholding.
5.7. INTEREST. In the event that any payment due hereunder is not made
when due, the payment shall accrue interest beginning on the first day following
the calendar quarter to which such payment relates calculated at the annual rate
of the sum of (a) [****] percent [**] plus (b) [***********]; PROVIDED, THAT, in
no event shall said annual rate exceed the maximum interest rate permitted by
law in regard to such payments. Such payment when made shall be accompanied by
all interest so accrued. Said interest and the payment and acceptance thereof
shall not negate or waive the right of Seller to any other remedy, legal or
equitable, to which it may be entitled because of the delinquency of the
payment.
6. PROTECTION OF INTELLECTUAL PROPERTY RIGHTS.
6.1. PATENT PROSECUTION/PATENT COSTS. Buyer shall be responsible for
prosecuting and maintaining all ECT Patents. Buyer shall reimburse Seller for
all reasonable out-of-pocket costs incurred by Seller (if any) after the
Effective Date in connection with the preparation, filing, prosecution and
maintenance of any ECT Patent. Seller shall cooperate with Buyer in regard to
such maintenance and prosecution which cooperation shall include: (i) provision
of written or other information reasonably requested by the Buyer, (ii) allowing
the Buyer reasonable access to employees of the Seller and (iii) commercially
reasonable efforts to have the officers, employees, consultants, agents,
accountants and attorneys of the Seller cooperate fully with the Buyer,
including, without limitation, by providing written or oral testimony pertaining
to the ECT Technology and/or the discovery thereof as reasonably requested by
the Buyer, signing all lawful documents reasonably requested by the Buyer, and
executing all divisional, continuing, reissue and foreign applications
reasonably requested by the Buyer. The Buyer shall reimburse Seller for
reasonable out-of-pocket costs incurred in providing such cooperation. Should
Buyer determine to abandon prosecution of, or to cease to maintain, any ECT
Patent in any jurisdiction, Buyer shall so notify Seller and shall permit
Seller, should Seller choose to do so, at Seller's expense, to continue to
prosecute and maintain such ECT Patent in such jurisdiction, and Buyer shall
cooperate with Seller in regard thereto. In such event, and upon Seller's
written request and agreement to indemnification and insurance provisions
acceptable to Buyer's insurance carrier, Buyer shall irrevocably assign Buyer's
interests in such ECT Patent in such jurisdiction to Seller to the extent Buyer
is permitted to do so pursuant to Buyer's contractual obligations to a Third
Party or obligations to the U.S. government; PROVIDED, THAT any such assignment
shall be subject to the grant of an irrevocable, royalty-free, transferable
license under such ECT Patent to the Buyer in the applicable jurisdiction.
* This confidential portion has been omitted and filed separately with the
Commission.
11
<PAGE>
6.2. CONFIDENTIAL INFORMATION. Each party shall maintain the
Confidential Information of the other party in strict confidence, and shall not
disclose, divulge or otherwise communicate such Confidential Information to
others, or use it for any purpose, except pursuant to, and in order to carry
out, the terms and objectives of this Agreement or with the express written
consent of the Disclosing Party. Each party also hereby agrees to take
reasonable steps to prevent and restrain the unauthorized disclosure of such
Confidential Information by any of its directors, officers, employees,
consultants, sub-contractors, sub-licensees or agents. For purposes of this
Agreement, the ECT Technology and the Assigned Agreements shall become the
Confidential Information of Buyer upon the Closing; PROVIDED, HOWEVER, that upon
the occurrence of a Reversion Event, the Current ECT Technology and the Assigned
Agreements shall become the Confidential Information of Seller. The provisions
of this paragraph shall not apply to any Confidential Information of the
Disclosing Party which is required to be disclosed by the Receiving Party to
comply with any applicable laws or regulations, but only to the extent required
by such law or regulation; and FURTHER, PROVIDED, that the Receiving Party
making a disclosure pursuant to the provisions of this sentence shall provide
prior notice of such disclosure to the Disclosing Party sufficiently in advance
of such disclosure to allow the Disclosing Party to respond and to take
reasonable and lawful action to avoid and/or minimize the degree of such
disclosure.
6.3. ENFORCEMENT OF INTELLECTUAL PROPERTY RIGHTS.
6.3.1. If Buyer becomes aware of any infringement of any ECT
Patent or any violation of any other intellectual property right
contained (i) in the ECT Technology by a Third Party (an "Infringer")
during the Development Period, or (ii) in the Vaccine Field or related
to a Stem Cell Combination Product by an Infringer during term of this
Agreement, Buyer shall so notify Seller. Similarly, if Seller becomes
aware of the infringement of any ECT Patent during the term of this
Agreement or any other intellectual property right contained in the ECT
Technology during the term of this Agreement, Seller shall so notify
Buyer.
6.3.2. Buyer shall have the right to protect against any
infringement of any ECT Patent or any violation of any other
intellectual property right contained in the ECT Technology (any such
infringement or violation being referred to herein as an
"Infringement") by any Infringer during the term of this Agreement
when, in Buyer's sole judgment, such action may be reasonably
necessary, proper and justified. If (i) at any time during the
Development Period with respect to the ECT Technology, or (ii) at any
time during the term of this Agreement with respect to the Vaccine
Field or relating to a Stem Cell Combination Product, Seller shall have
provided Buyer with written evidence demonstrating prima facie evidence
of an Infringement and Seller shall have requested Buyer in writing to
take steps to protect against such Infringement, and Buyer has not,
within 90 days of the receipt of such evidence and request, either (i)
caused such Infringement to terminate, (ii) initiated legal proceedings
against the Infringer, or (iii) entered into discussions with such
alleged Infringer regarding a license under the applicable ECT Patent,
then Seller may, upon notice to Buyer, initiate legal proceedings
against the Infringer at Seller's expense and in Buyer's name if so
required by law.
12
<PAGE>
6.3.3. In the event that either party shall initiate or carry
on legal proceedings against any Infringer as contemplated by Section
6.3.2 above, the other party shall fully cooperate with and supply all
assistance reasonably required by the party initiating or carrying on
such proceedings. The party which initiates any such proceedings shall
have sole control of such proceedings and shall bear the reasonable
expenses (excluding all legal fees) incurred by the other party in
providing such assistance and cooperation as is requested pursuant to
this Section 6.3.3. The party initiating or carrying out such
proceedings shall keep the other party informed of the progress of such
proceedings and such other party shall be entitled to counsel in such
proceedings but at its own expense.
6.3.4. Any award paid by any Third Party as a result of such
proceedings (whether by way of settlement or otherwise) shall be first
applied to reimbursement of the unreimbursed legal fees and expenses
incurred by the party initiating the proceedings, then to the
reimbursement of the unreimbursed legal fees and expenses incurred by
the other party, and then the remainder shall be divided by the parties
as follows:
6.3.4.1. If the remaining amount awarded is with
respect to lost profits, the applicable party shall receive an
amount equal to the damages the court determines such party
has suffered as a result of the Infringement, less any amounts
(if any) that would have been due to the other party under
this Agreement had such party made the sale of products or
realized payments from Affiliates or sublicensees that would
have resulted in such profits; and the other party shall
receive an amount equal to such deducted amounts.
6.3.4.2. Any remaining amounts shall be retained by
the party initiating such proceedings.
7. COVENANTS OF BUYER.
7.1. DUE DILIGENCE.
7.1.1. GENERAL OBLIGATION. Buyer shall use commercially
reasonable efforts to diligently commercialize the ECT Technology,
which efforts shall not be less than the efforts expended by Buyer in
connection with its other development projects having similar market
potential.
7.1.2. SPECIFIC DUE DILIGENCE OBLIGATIONS. Buyer, itself or
through its Affiliates or Sublicensees, agrees to accomplish one of the
following commercialization objectives with respect to the ECT
Technology during the three (3) year period commencing on the first day
of Buyer's first fiscal quarter following the Closing Date (the
"Development Period"):
(i) expend, in the aggregate among Buyer, its Affiliates
or Sublicensees, at least $[**] on the research and
development of the ECT Technology; or
(ii) file an IND for an ECT Product.
* This confidential portion has been omitted and filed separately with the
Commission.
13
<PAGE>
7.1.3. FAILURE TO MEET DUE DILIGENCE OBLIGATIONS. If Buyer,
itself or through its Affiliates or Sublicensees, fails to accomplish
at least one of the commercialization objectives set forth in Section
7.1.2 above (a "Reversion Event"), then the ECT Technology as it exists
on the Effective Date (the "Current ECT Technology"), and the ECT
Equipment owned by Buyer at the end of the Development Period shall
automatically be reassigned to Seller; provided, that, if, Buyer
granted licenses or sublicenses (as the case may be) under the ECT
Technology prior to the occurrence of a Reversion Event, such licenses
or sublicenses (as the case may be) shall be assigned to the Seller and
otherwise shall remain in full force and effect under the same terms
and conditions.
7.1.4. REPORTS. During the Development Period, Buyer shall
provide to Seller a semi-annual report of its activities and efforts
toward commercialization of the ECT Technology in sufficient detail to
allow Seller to monitor Buyer's compliance with the due diligence
obligations set forth in Section 7.1.2 above. Any such reports shall be
the Confidential Information of Buyer and shall be held in strict
confidence by Seller in accordance with the provisions of Section 6.2
hereof.
7.1.5. EFFECT OF REVERSION OF ECT TECHNOLOGY. Upon the
occurrence of a Reversion Event, Buyer shall transfer and assign to
Seller all of Buyer's right, title and interest in the Current ECT
Technology, including, without limitation, the Assigned Agreements.
Buyer shall permit Seller to utilize and otherwise have the benefit of
all regulatory approvals of, or clinical trials or other studies
conducted on, and all filings made with regulatory agencies in
connection with, the Current ECT Technology in order to assist Seller
or its licensees in developing the ECT Technology and obtaining any
approvals required to make, have made, use, offer to sell or sell ECT
Products. If Buyer shall have granted licenses or sublicenses (as the
case may be) under the ECT Technology prior to the occurrence of a
Reversion Event, such licenses and/or sublicenses (as the case may be)
shall be assigned to the Seller and otherwise shall remain in full
force and effect under the same terms and conditions. Buyer shall take
any and all action Seller may reasonably request, at the expense of
Seller, to effect the assignments to Seller set forth in this
Section 7.1.5.
7.1.6. FORCE MAJEURE. Buyer shall not be deemed to be in
breach of its obligations under this Agreement, including without
limitation its obligations under Section 7.1.5 above, if such failure
or delay is due to natural disasters or any causes beyond its
reasonable control, including without limitation delays caused by
regulatory agencies or other governmental bodies; PROVIDED, HOWEVER,
that in such event, Buyer shall promptly notify Seller in writing of
such occurrence, use commercially reasonable best efforts to meet its
obligations under this Agreement, notify Seller in writing of the
expected duration of such inability to perform and of any developments
(or changes therein) that appear likely to affect Buyer's ability to
perform any of its obligations hereunder in whole or in part; and
provided, further, any time for performance by Buyer hereunder shall be
extended by the actual time of delay caused by such occurrence or
event.
14
<PAGE>
7.1.7. PAYMENTS BY SELLER. In consideration for the transfer
and assignment back to Seller of Buyer's rights in the ECT Technology
as provided in Section 7.1.5 above, Seller shall pay Buyer [****]
percent [**] of all license fees, equity payments, royalties, revenues
or any other payments received by Seller after a Reversion Event in
connection with the transfer or other grant of rights under the ECT
Technology until such time as Buyer has recovered its entire investment
in the acquisition, research and development and protection of the ECT
Technology, including without limitation the $3,000,000 acquisition fee
paid to Seller pursuant to this Agreement.
7.2. COMPLIANCE WITH LAW. Buyer shall comply with, and shall insure
that Buyer's Affiliates and Sublicensees comply with, all government statutes
and regulations that relate to ECT Products, including, but not limited to, FDA
statutes and regulations and the Export Administration Act of 1979 (50 App.
U.S.C. ss.2401 et. seq.), as amended, and the regulations promulgated
thereunder, and any applicable similar laws and regulations of any other
country. Without limiting the generality of the foregoing, Buyer agrees that all
ECT Products used or sold in the United States shall be manufactured
substantially in the United States to the extent required by and in compliance
with the Federal Patent Policy.
7.3. MARKING. Buyer shall cause all ECT Products sold in the United
States to be marked with all applicable U.S. Patent Numbers, to the full extent
required by United States law. Buyer shall similarly cause all ECT Products
shipped to or sold in any other country to be marked in such a manner as to
conform with the patent laws and practice of such country.
7.4. PUBLICITY. Except as required by law, neither party shall use the
name of the other party or the other party's Affiliates, nor that of any staff
member or employee of the other party or the other party's Affiliates, or any
adaptation thereof, in any advertising, promotional or sales literature,
offering materials, business plans or any other form of publicity without prior
written consent obtained from such other party and from the individual staff
member or employee if such individual's name is so used.
7.5. [* ]
7.6. ESCROW AGREEMENT. After the Closing, Buyer shall deposit $[**]
into an escrow account with an independent Third Party pursuant to an escrow
agreement having commercially reasonable terms and conditions mutually agreed to
by the Buyer, the Seller and such independent Third Party (the "Escrow
Agreement"), and Buyer shall use commercially reasonable efforts to negotiate
and execute such Escrow Agreement within ten (10) days of the Closing Date, such
Escrow Agreement to provide for an escrow period of one year from the
* This confidential portion has been omitted and filed separately with the
Commission.
15
<PAGE>
Closing Date. As between Buyer and Seller, the Escrow Agreement will provide (A)
for the escrowed funds to be released to Seller upon written notice from Buyer
to the escrow agent that Buyer has received from Seller evidence reasonably
satisfactory to Buyer (i)[**********], and (ii)[*******************************
********], and (B) Buyer to promptly so notify the escrow agent upon receipt of
such evidence. If Seller has not provided such evidence to Buyer within one year
of the Closing Date, the escrowed funds shall be released to Buyer. All expenses
of the escrow arrangement shall be shared equally by Buyer and Seller. Buyer
shall satisfy its obligations under the Escrow Agreement.
8. COVENANTS OF SELLER.
Seller shall satisfy its obligations under the Escrow Agreement
referenced in Section 7.6 above.
9. REPRESENTATIONS AND WARRANTIES OF SELLER.
Except as set forth in the schedule of exceptions, Seller represents
and warrants to Buyer as follows:
9.1. DUE ORGANIZATION, AUTHORIZATION AND GOOD STANDING. Seller is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and is authorized to transact business as a
foreign corporation in each jurisdiction in which the failure to so qualify
would have a material adverse impact on Seller's ability to sell the Purchased
Assets, including the States of California and Rhode Island. Seller has the
requisite corporate power and authority to enter into, execute, deliver and
perform this Agreement and any other instruments of transfer and conveyance
executed in connection herewith (collectively, with this Agreement, the
"Transaction Documents"), and to consummate all transactions contemplated hereby
and thereby and has or will have taken all corporate action required by law and
its articles of incorporation and by-laws to authorize such execution, delivery
and performance. This Agreement is, and each of the other Transaction Documents
will, upon execution by duly authorized officers of Seller at the Closing, be
the valid and legally binding obligation of Seller, enforceable against it in
accordance with its terms, except to the extent such enforcement may be limited
by bankruptcy, insolvency, moratorium, reorganization and similar laws of
general applicability affecting the rights and remedies of creditors and by
general principles of equity, regardless of whether enforcement is sought in
proceedings in equity or at law.
9.2. NO CONFLICT. The execution, delivery and performance of the
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby will not (i) result in a breach or violation of or be in
conflict with Seller's articles of incorporation or by-laws, (ii) violate or
result in a breach of any mortgage, indenture, note, license, agreement or any
other instrument or obligation related to Seller or to Seller's ability to
execute this Agreement or the Transaction Documents or to consummate the
transactions contemplated hereby or thereby, except for such defaults (or rights
of termination, cancellation or acceleration) as to which requisite waivers or
consents have been obtained in writing, (iii) violate any judgment, order,
* This confidential portion has been omitted and filed separately with the
Commission.
16
<PAGE>
writ, injunction, decree, statute, rule or regulation applicable to Seller, or
(iv) result in the creation of any Lien upon the Purchased Assets. Seller is in
good standing and is not in breach or default of any obligation under any of the
Assigned Agreements.
9.3. TITLE TO ECT EQUIPMENT. Seller has good and defensible title to
all the ECT Equipment, free and clear of all Liens.
9.4. ECT TECHNOLOGY. Seller owns all of the patents and patent
applications comprising the Owned ECT Technology and Seller owns all of the
Owned ECT Know-how, in each case free and clear of all Liens and free and
clear of all claims or actions arising out of or resulting from any action or
failure to act of the Seller, or arising out of or resulting from any action
or failure to act of any inventors of such Owned ECT Technology or any other
agent, employee or consultant of Seller. Seller has the right to assign to
Buyer all of its rights under the Assigned Agreements and any ECT Technology
subject to such Agreements, and to the Knowledge of Seller, all ECT
Technology within the Assigned Agreements is free and clear of all Liens and
free and clear of all claims or actions arising out of or resulting from any
action or failure to act of the Seller, or arising out of or resulting from
any action or failure to act of any inventors of such ECT Technology or any
other agent, employee or consultant of Seller. Seller is not in default of
any of the Assigned Agreements, nor has Seller received notice of any default
under any agreement under which Seller has in-licensed any portion of the ECT
Technology. To Seller's Knowledge, no party from which Seller has in-licensed
the In-Licensed ECT Technology is in default or breach of any of the Assigned
Agreements, and Seller has not asserted any claims of default against any
party to the Assigned Agreements. The parties expressly acknowledge and agree
that Seller's technology known as "Con-G", as embodied in United States
Patent Number 5,844,077 (CTI-47), USE OF CONATOKINS FOR ANALGESIA, is not
part of the ECT Technology and is not included in the technology purchased by
Buyer hereunder. The patents and patent applications identified on Schedule
1.13 constitute all of the patents and patent applications related to the ECT
Technology in which Seller has an interest. All of the ECT Patents have been
filed and prosecuted in good faith as required by law and are in good
standing. The inventors of such patent applications and patents are as set
forth in the respective patent documents and all such inventors have assigned
their rights in the ECT Technology to Seller or to the party that licensed
any In-Licensed ECT Technology to Seller. To the Knowledge of Seller, no
Third Party has any claim of infringement against Seller of any patents or
other intellectual property rights of others in connection with the ECT
Technology or the use thereof. No interference or opposition proceeding is
pending or, to the Knowledge of the Seller threatened, relating to the ECT
Technology. Except as reflected in this Agreement and the disclosure
schedules, Seller has not granted any Third Party any right to use the ECT
Technology for any purpose. Except for the Assigned Agreements, and other
than the agreements between the Seller and [* ],
any agreements entered into between Seller and any Third Party prior to the
Closing Date (including without limitation agreements with Akzo Faser AG,
Akzo Nobel Fazer AG, and Astra AB) and which included a grant of the right to
such Third Party to access or use the ECT Technology, or the grant of rights
under Seller's intellectual property rights in the ECT Technology
(collectively "Third Party ECT Rights") have expired or have been terminated
under conditions where: (i) all of such Third Party ECT Rights have been
terminated so that as of the Closing Date and thereafter, such Third Party
does not have and will not have any rights in or any rights of access to or
use of: (x) the ECT Technology and any intellectual property rights therein,
(y) any
* This confidential portion has been omitted and filed separately with the
Commission.
17
<PAGE>
inventions or discoveries (including any intellectual property rights therein)
made through such party's use of the ECT Technology, or (z) any products
developed or made through the use of the ECT Technology; and (ii) such Third
Party has returned to Seller or destroyed all confidential information relating
to the ECT Technology and any tangible embodiments of the ECT Technology. No
right or license under intellectual property (other than the ECT Technology)
owned or controlled by, or licensed to, the Seller is needed by Buyer in order
to practice the ECT Technology.
9.5. [**********]
9.5.1. [**********]
9.5.2. [**********]
9.5.3. [**********]
9.5.4. [**********]
9.5.5. [**********]
* This confidential portion has been omitted and filed separately with the
Commission.
18
<PAGE>
9.5.6. [**********]
9.5.7. [**********]
9.5.8. [**********]
9.6. CONSENTS. No filing with or notice to and no permit,
authorization, consent or approval of any Person or regulatory or governmental
authority is necessary for the execution, delivery and performance of this
Agreement and the Transaction Documents and the transactions contemplated hereby
and thereby.
9.7. PROPRIETARY INFORMATION OF THIRD PARTIES. To the Knowledge of
Seller, no Third Party has claimed or has reason to claim that any person
employed by or affiliated with Seller has, in any way related to the ECT
Technology, (i) violated or may be violating any of the terms or conditions of
such person's employment, non-competition or non-disclosure agreement with such
Third Party, or (ii) disclosed or may be disclosing, or utilized or may be
utilizing any trade secret or proprietary information or documentation of such
Third Party. No Third Party has requested information from Seller which suggests
that such a claim might be contemplated. To the Knowledge of Seller, no person
employed by or affiliated with Seller has employed or proposes to employ in
connection with the ECT Technology any trade secret or any information or
documentation proprietary to any former employer or other Third Party and no
person employed by or affiliated with Seller has violated any confidential
relationship which such person may have had with any Third Party in connection
with the ECT Technology
9.8. LITIGATION. There is no action, suit, claim, proceeding or
investigation pending, or, to the Knowledge of Seller, threatened against
Seller, affecting the Purchased Assets, (i) at law or in equity, or before any
federal, state, municipal or other governmental commission, board, bureau,
agency or instrumentality, domestic or foreign, or (ii) before any arbitration
panel. To the Knowledge of Seller, there are no outstanding writs, judgments,
injunctions or decrees of any court, governmental agency or arbitration tribunal
against, involving or affecting the Purchased Assets. There is no action or suit
by Seller pending or threatened against others involving the Purchased Assets.
* This confidential portion has been omitted and filed separately with the
Commission.
19
<PAGE>
9.9. TAXES. Seller has not taken or, to the Knowledge of Seller, failed
to take any action which could create any tax lien on the Purchased Assets.
9.10. DISCLAIMER OF WARRANTIES; FEDERAL PATENT POLICY.
9.10.1. EXCEPT AS EXPRESSLY SET FORTH HEREIN, SELLER MAKES NO
EXPRESS OR IMPLIED WARRANTY INCLUDING, WITHOUT LIMITATION, ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR ANY IMPLIED WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE WITH RESPECT TO ANY OF THE PURCHASED ASSETS
INCLUDING WITHOUT LIMITATION THE ECT TECHNOLOGY OR ANY ECT PRODUCT AND
HEREBY DISCLAIMS THE SAME.
9.10.2. SELLER MAKES NO EXPRESS OR IMPLIED WARRANTY THAT THE
MANUFACTURE, USE, SALE OR DISPOSAL OF ANY ECT PRODUCT WILL NOT INFRINGE
ANY PATENT OR OTHER RIGHT OF ANY THIRD PARTY AND HEREBY DISCLAIMS THE
SAME.
9.10.3. Nothing in this Agreement shall be construed as:
(i) a warranty or representation by Seller as to the
validity or scope of the ECT Patents;
(ii) an obligation on Seller to bring or prosecute
actions or suits against Third Parties for patent
infringement;
(iii) conferring by implication, estoppel or otherwise
any license or rights under any patents of Seller other than
the ECT Patents as defined in this Agreement, regardless of
whether those patents are dominant or subordinate to the ECT
Patents;
(iv) an obligation on Seller to furnish any know-how not
related to the ECT Technology; or
(v) an obligation on Seller to improve, modify or update
the ECT Technology.
9.10.4. The rights transferred by Seller to Buyer hereunder
may be subject to a royalty-free non-exclusive license granted to the
United States Government pursuant to 35 USC under Section 202(c)(4)
with respect to any ECT Patent claiming an invention subject to the
Federal Patent Policy.
9.11. FULL DISCLOSURE. No representation or warranty of the Seller
contained in this Agreement, the schedules and exhibits attached hereto or in
the Transaction Documents contains an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements made, in the context in which made, not false or misleading.
10. REPRESENTATIONS AND WARRANTIES OF BUYER.
20
<PAGE>
Buyer represents and warrants to Seller as follows:
10.1. DUE ORGANIZATION, AUTHORIZATION AND GOOD STANDING. Buyer is a
societe anonyme duly incorporated, validly existing and duly registered with the
"Registre de Commerce et des Societes de Evry" under the number RCS Evry B-400
530 655, and has all requisite power and authority to execute, deliver and
perform this Agreement and the other Transaction Documents and the transactions
contemplated hereby and thereby and has taken all action required by law and its
Statuts to authorize such execution, delivery and performance. This Agreement
is, and each of the other Transaction Documents will, upon execution thereof by
a duly authorized officer of Buyer at the Closing, be the valid and legally
binding obligation of Buyer, enforceable in accordance with its terms, except to
the extent such enforcement may be limited by bankruptcy, insolvency,
moratorium, reorganization and similar laws of general applicability affecting
the rights and remedies of creditors and to general principles of equity,
regardless of whether enforcement is sought in proceedings in equity or at law.
10.2. NO CONFLICT. The execution, delivery and performance of this
Agreement and the other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby will not (i) result in a breach or
violation of Buyer's Statuts, (ii) violate or result in a breach of any
mortgage, indenture, note, license, agreement or other instrument or obligation
related to Buyer or to Buyer's ability to consummate the transactions
contemplated hereby or thereby, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite waivers or
consents have been obtained in writing, or (iii) violate any judgment, order,
writ, injunction, decree, statute, rule or regulation application to Buyer.
10.3. DISCLAIMER OF WARRANTIES.
10.3.1. BUYER MAKES NO EXPRESS OR IMPLIED WARRANTY INCLUDING,
WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR ANY
IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO
THE ECT TECHNOLOGY OR ANY VACCINE PRODUCT AND HEREBY DISCLAIMS THE
SAME.
10.3.2. BUYER MAKES NO EXPRESS OR IMPLIED WARRANTY THAT THE
MANUFACTURE, USE OR SALE OF ANY VACCINE PRODUCT OR STEM CELL
COMBINATION PRODUCT WILL NOT INFRINGE ANY PATENT OR OTHER RIGHT OF ANY
PARTY AND HEREBY DISCLAIMS THE SAME.
10.3.3. Nothing in this Agreement shall be construed as:
(i) a warranty or representation by Buyer as to the
validity or scope of the ECT Patents;
(ii) an obligation on Buyer to bring or prosecute
actions or suits against Third Parties for patent
infringement;
(iii) conferring by implication, estoppel or otherwise
any license or rights under any patents of Buyer other than
the ECT Patents as defined in this Agreement, regardless of
whether those patents are dominant or subordinate to the ECT
Patents; or
21
<PAGE>
(iv) an obligation on Buyer to improve, modify or update
the ECT Technology.
11. TERM.
11.1. This Agreement shall commence on the Effective Date, and unless
terminated earlier by mutual written agreement of the parties, this Agreement
will expire upon the expiration of the last of the ECT Patents to expire in any
country.
11.2. Upon the termination of this Agreement for any reason, nothing
herein shall be construed to release either party from any obligation that
matured prior to the effective date of termination.
11.3. The provisions of the following Articles and Sections shall
survive the expiration or termination of this Agreement: 6.2, 9, 10, 11.2, 11.3,
12, 13, 14, 20, 21.
12. INDEMNIFICATION.
12.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Seller and Buyer shall survive the Closing and shall continue
in full force and effect for twelve (12) months following the Closing, except
that the Seller's representations contained in Section 9.5 shall survive the
Closing and shall continue in full force and effect forever.
12.2. INDEMNIFICATION BY SELLER.
12.2.1. Seller agrees to defend and indemnify Buyer, its
Affiliates, their respective officers, directors, employees and agents
and their respective successors, heirs and assigns (the "Buyer
Indemnitees") from all sums, including, without limitation, reasonable
attorneys' fees, with respect to:
(i) any and all liabilities, losses, damages and
expenses due and owing and arising prior to the Closing or
arising from an act, omission or conduct of Seller prior to
the Closing, and relating to the Purchased Assets, of any
nature, whether accrued, absolute, contingent or otherwise
existing;
(ii) any breach of the representations, warranties or
covenants by Seller contained herein or in the Transaction
Documents; and
(iii) any and all liabilities, losses, damages and
expenses incurred by or imposed upon the Buyer Indemnitees in
connection with any claims, suits, actions, demands or
judgments arising out of or resulting from the making or
distribution of, the use by or administration to any Person of
any Vaccine Product or Stem Cell Combination Product made,
used or sold pursuant to any right or license granted to
Seller under this Agreement (including, but not limited to,
actions in the form of tort, warranty or strict liability).
22
<PAGE>
12.2.2. Seller's indemnification under Section 12.2.1 shall
not apply to any liability, damage, loss or expense to the extent that
it is directly attributable to the reckless misconduct or intentional
misconduct of the Buyer Indemnitees.
12.2.3. Seller agrees, at its own expense, to provide
attorneys reasonably acceptable to Buyer to defend against any actions
brought or filed against any party indemnified hereunder with respect
to the subject of indemnity contained herein, whether or not such
actions are rightfully brought.
12.2.4. Any Buyer Indemnitee seeking indemnification hereunder
shall promptly notify Seller of any claim for which indemnification is
sought (PROVIDED, HOWEVER, that no delay on the part of any Buyer
Indemnitee in so notifying Seller shall relieve Seller of any liability
hereunder unless, and solely to the extent that, Seller is prejudiced
thereby), shall cooperate with Seller in the defense of any such claim,
and shall not settle or compromise, or consent to the entry of a
judgment with respect to any such claim, without the prior written
consent of Seller, which shall not be unreasonably withheld.
12.2.5. Seller shall have no liability under Sections
12.2.1(i), 12.2.1(ii) or 12.2.1(iii) above until the aggregate of all
sums due hereunder exceeds $50,000 (the "Indemnification Floor"), in
which case Seller shall be liable for the amount of such sums in excess
of $50,000.
12.3. INDEMNIFICATION BY BUYER.
12.3.1. Buyer agrees to defend and indemnify Seller, its
Affiliates, their respective officers, directors, employees and agents
and their respective successors, heirs and assigns (the "Seller
Indemnitees") from all sums, including, without limitation, reasonable
attorneys' fees, with respect to:
(i) except as provided in Section 12.2.1(i), any and all
liabilities, losses, damages and expenses due and owing and
arising subsequent to the Closing, or arising from an act,
omission or conduct of Buyer after the Closing and relating to
the Purchased Assets of any nature, whether accrued, absolute,
contingent or otherwise existing, including, without
limitation, any federal, state or local tax liability;
(ii) any breach of the representations, warranties or
covenants by Buyer contained herein or in the Transaction
Documents, including, without limitation, under the Assumed
Obligations; and
(iii) any and all liabilities, losses, damages and
expenses incurred by or imposed upon the Seller Indemnitees in
connection with any claims, suits, actions, demands or
judgments arising out of or resulting from the making or
distribution of, the use by or administration to any Person of
any ECT Product made, used or sold pursuant to any right or
license granted to Buyer under this Agreement (including, but
not limited to, actions in the form of tort, warranty or
strict liability).
23
<PAGE>
12.3.2. Buyer's indemnification under Section 12.3.1 shall not
apply to any liability, damage, loss or expense to the extent that it
is directly attributable to the reckless misconduct or intentional
misconduct of the Seller Indemnitees.
12.3.3. Buyer agrees, at its own expense, to provide attorneys
reasonably acceptable to Seller to defend against any actions brought
or filed against any party indemnified hereunder with respect to the
subject of indemnity contained herein, whether or not such actions are
rightfully brought.
12.3.4. Any Seller Indemnitee seeking indemnification
hereunder shall promptly notify Buyer of any claim for which
indemnification is sought (PROVIDED, HOWEVER, that no delay on the part
of any Seller Indemnitee in so notifying Buyer shall relieve Buyer of
any liability hereunder unless, and solely to the extent that, Buyer is
prejudiced thereby), shall cooperate with Buyer in the defense of any
such claim, and shall not settle or compromise, or consent to the entry
of a judgment with respect to any such claim, without the prior written
consent of Buyer, which shall not be unreasonably withheld.
12.3.5. Buyer shall have no liability under Sections
12.3.1(i), 12.3.1(ii) or 12.3.1(iii) above until the aggregate of all
sums due hereunder exceeds the Indemnification Floor, in which case
Buyer shall be liable for the amount of such sums in excess of $50,000.
13. INSURANCE.
13.1. INSURANCE OBLIGATIONS OF BUYER.
13.1.1 Beginning at the time as any ECT Product is being
commercially distributed or sold (other than for the purpose of
obtaining regulatory approvals) by Buyer, an Affiliate of Buyer or by a
sublicensee of Buyer, Buyer shall, at its sole cost and expense,
procure and maintain commercial general liability insurance in amounts
not less than $2,000,000 per incident and $2,000,000 annual aggregate
and naming the Seller Indemnitees as additional insureds. Such
commercial general liability insurance shall provide (a) product
liability coverage and (b) contractual liability coverage for Buyer's
indemnification under Section 12 of this Agreement. If Buyer elects to
self-insure all or part of the limits described above (including
deductibles or retentions which are in excess of $250,000 annual
aggregate) such self-insurance program must be acceptable to Seller.
The minimum amount of insurance coverage required under this Section
13.1 shall not be construed to create a limit of Buyer liability with
respect to its indemnification under Section 12 of this Agreement.
13.1.2. Buyer shall provide Seller with written evidence of
such insurance upon request of Seller. Buyer shall provide Seller with
written notice at least fifteen (15) days prior to the cancellation,
non-renewal or material change in such insurance; if Buyer does not
obtain replacement insurance providing comparable coverage within such
fifteen (15) day period, Seller shall have the right to terminate this
Agreement effective at the end of such fifteen (15) day period without
notice of any additional waiting periods.
13.1.3. Buyer shall maintain such commercial general liability
insurance during (a) the period that any such product, process or
service is being commercially distributed or sold
24
<PAGE>
(other than for the purpose of obtaining regulatory approvals) by Buyer
or by a Sublicensee and (b) a reasonable period after the period
referred to in (iii)(a) above which in no event shall be less than
three (3) years.
13.2. INSURANCE OBLIGATIONS OF SELLER.
13.2.1 Beginning at the time as any Vaccine Product or Stem
Cell Combination Product is being commercially distributed or sold
(other than for the purpose of obtaining regulatory approvals) by
Seller, an Affiliate of Seller or by a Sublicensee of Seller, Seller
shall, at its sole cost and expense, procure and maintain commercial
general liability insurance in amounts not less than $2,000,000 per
incident and $2,000,000 annual aggregate and naming the Buyer
Indemnitees as additional insureds. Such commercial general liability
insurance shall provide (a) product liability coverage and (b)
contractual liability coverage for Seller's indemnification under
Section 12 of this Agreement. If Seller elects to self-insure all or
part of the limits described above (including deductibles or retentions
which are in excess of $250,000 annual aggregate) such self-insurance
program must be acceptable to Buyer. The minimum amount of insurance
coverage required under this Section 13.2 shall not be construed to
create a limit of Buyer liability with respect to its indemnification
under Section 12 of this Agreement.
13.2.2. Seller shall provide buyer with written evidence of
such insurance upon request of Buyer. Seller shall provide Buyer with
written notice at least fifteen (15) days prior to the cancellation,
non-renewal or material change in such insurance; if Seller does not
obtain replacement insurance providing comparable coverage within such
fifteen (15) day period, Buyer shall have the right to terminate this
Agreement effective at the end of such fifteen (15) day period without
notice of any additional waiting periods.
13.2.3. Seller shall maintain such commercial general
liability insurance during (a) the period that any such product,
process or service is being commercially distributed or sold (other
than for the purpose of obtaining regulatory approvals) by Seller or by
a Sublicensee and (b) a reasonable period after the period referred to
in (iii)(a) above which in no event shall be less than three (3) years.
14. LIMITATION OF LIABILITY.
Neither party shall be liable to the other party for indirect,
incidental or consequential damages arising out of the terms or conditions of
this Agreement, the ECT Technology or any ECT Product or with respect to its
performance or lack thereof.
15. EXPENSES OF TRANSACTION.
Except as otherwise provided in Section 7.1.7, whether or not the
transactions provided for herein are consummated, each of the parties hereto
will assume and bear all expenses, costs and fees incurred by such party in
connection with the preparation, negotiation and execution of this Agreement and
the other Transaction Documents and the consummation of the transactions
contemplated hereby and thereby.
16. CONDUCT OF PARTIES.
25
<PAGE>
Each party agrees to conduct itself in good faith in all relations with
the other party contemplated by this Agreement. Each party agrees not to
intentionally take, delay or omit to take any action to avoid compliance with
this Agreement; provided, that, this provision shall not be interpreted in any
way to require either party to alter its customary method of reaching business
decisions or to make business decisions other than (i) in a commercially
reasonable manner using prudent business judgement, (ii) in compliance with all
applicable laws and regulations and (iii) in accordance with such party's
fiduciary and other obligations to its employees and stockholders.
17. NOTICES.
All notices and other communications required or permitted hereunder
shall be in writing and shall be sent by facsimile (with hard copy to follow),
courier service or certified mail, return receipt requested, postage prepaid,
addressed as follows or to such other address or addresses of which the
respective party shall have notified the other party.
If to Seller, to it at
CytoTherapeutics, Inc.
525 Del Rey Avenue, Suite C
Sunnyvale, CA 94086
Facsimile: 408-731-8461
Attn: President
Copy to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
Facsimile: 617-951-7050
Attn: Geoffrey B. Davis, Esq.
If to Buyer, to it at
Neurotech S.A.
Batiment Genepole Industries
4 rue Pierre-Fontaine
91000 Evry
FRANCE
Facsimile: 011-33-1-60-87-8950
Attn: President
26
<PAGE>
Copy to:
Mintz Levin Cohn Ferris Glovsky and Popeo PC
One Financial Center
Boston, MA 02111
Facsimile: 617-542-2241
Attn: Carolyn B. Sullivan, Esq.
18. ENTIRE AGREEMENT; MODIFICATIONS AND AMENDMENTS.
The agreement of the parties that is comprised of this Agreement and
the Schedules hereto, the other Transaction Documents and the other documents
referred to herein sets forth the entire agreement and understanding between the
parties and supersedes any prior written agreement or understanding and any
prior or contemporaneous oral agreement or understanding relating to the subject
matter of this Agreement. The terms and provisions of this Agreement may be
modified only by a written agreement executed by both parties hereto.
19. ASSIGNMENT.
This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the successors and permissible assigns of Seller and Buyer. This
Agreement and any rights hereunder shall not be assigned, hypothecated or
otherwise transferred by any party hereto without the prior written consent of
the other party hereto, which consent shall not be unreasonably withheld, except
that either party may assign its rights hereunder to a purchaser or successor in
connection with a sale of such party's business (whether by merger, sale of
stock or sale of all or substantially all of such party's assets); PROVIDED,
HOWEVER, that no assignment by either party shall relieve such party of its
obligations hereunder, including without limitation its obligations under
Section 12 above.
20. GOVERNING LAW, VENUE.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware. Each of the parties hereto hereby irrevocably
and unconditionally consents to submit to the exclusive jurisdiction of the
courts of the State of Delaware and of the United States of America located in
the State of Delaware for any actions, suits or proceedings arising out of or
relating to this Agreement and the transactions contemplated hereby, and each of
the parties hereto agrees not to commence any action, suit or proceeding
relating hereto or thereto except in such courts. Each of the parties hereto
hereby irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby or thereby, in the courts of the State of
Delaware or the United States of America located in the State of Delaware, and
hereby further irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such action, suit or proceeding brought in any
such court has been brought in an inconvenient forum.
27
<PAGE>
21. DISPUTE RESOLUTION.
Any controversy, dispute or claim arising out of or in connection with
this Agreement, or the breach, termination or validity hereof, shall be settled
by final and binding arbitration to be conducted by an arbitration tribunal in
Wilmington, Delaware pursuant to the Commercial Arbitration Rules of the
American Arbitration Association then in effect. The arbitration tribunal shall
consist of three arbitrators. The party initiating arbitration shall nominate
one arbitrator in the request for arbitration and the other party shall nominate
a second in the answer thereto within thirty (30) days of receipt of the
request. The two arbitrators so named will then jointly appoint the third
arbitrator. If the answering party fails to nominate its arbitrator within the
thirty (30) day period, or if the arbitrators named by the parties fail to agree
on the third arbitrator within sixty (60) days, the office of the American
Arbitration Association in Wilmington, Delaware shall make the necessary
appointments of such arbitrator(s). Each party shall pay the costs of its
respective arbitrator, and the parties shall share equally the costs of the
third arbitrator. The decision or award of the arbitration tribunal (by a
majority determination, or if there is no majority, then by the determination of
the third arbitrator, if any) shall be final, and judgment upon such decision or
award may be entered in any competent court or application may be made to any
competent court for judicial acceptance of such decision or award and an order
of enforcement. In the event of any procedural matter not covered by the
aforesaid rules, the procedural law of The State of Delaware shall govern.
22. INDEPENDENT CONTRACTORS.
For the purposes of this Agreement and all services to be provided
hereunder, each shall be, and shall be deemed to be, an independent contractor
and not an agent, partner, joint venturer or employee of the other party.
Neither party shall have authority to make any statements, representations or
commitments of any kind, or to take any action which shall be binding on the
other party, except as may be explicitly provided for herein or authorized in
writing.
23. SEVERABILITY.
If any provision of this Agreement shall be found by a court of
competent jurisdiction to be void, invalid or unenforceable in any respect in
the jurisdiction or jurisdictions in which it is to be performed, the same shall
either be reformed to comply with applicable law or stricken if not so
conformable, so as not to affect the validity or enforceability of this
Agreement; and no party shall be deemed to be in breach of this Agreement for
its failure to perform any obligation which is unenforceable, void or invalid.
24. NO WAIVER.
No failure or delay by a party hereto in exercising any right, power or
remedy under this Agreement, and no course of dealing between the parties
hereto, shall operate as a waiver of any such right, power or remedy of the
party. No single or partial exercise of any right, power or remedy under this
Agreement by a party hereto, nor any abandonment or discontinuance of steps to
enforce any such right, power or remedy, shall preclude such party from any
other or further exercise thereof or the exercise of any other right, power or
remedy hereunder. The election of any remedy by a party hereto shall not
constitute a waiver of the right of such party to pursue
28
<PAGE>
other available remedies. The terms and provisions of this Agreement may be
waived, or consent for the departure therefrom granted, only by a written
document executed by the party entitled to the benefits of such terms or
provisions. No such waiver or consent shall be deemed to be or shall constitute
a waiver or consent with respect to any other terms or provisions of this
Agreement, whether or not similar. Each such waiver or consent shall be
effective only in the specific instance and for the purpose for which it was
given, and shall not constitute a continuing waiver or consent.
25. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original for all purposes and all of which together
shall constitute one and the same instrument.
26. HEADINGS.
The headings and captions contained in this Agreement are inserted only
as a matter of convenience and for reference and in no way define, limit, or
describe the scope or intent of this Agreement. The parties hereto acknowledge
and agree that: (i) each party and its counsel reviewed and negotiated the terms
and provisions of this Agreement and have contributed to its revision; (ii) the
rule of construction to the effect that any ambiguities are resolved against the
drafting party shall not be employed in the interpretation of this Agreement;
and (iii) the terms and provisions of this Agreement shall be construed fairly
as to all parties hereto and not in a favor of or against any party, regardless
of which party was generally responsible for the preparation of this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
29
<PAGE>
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be
executed under seal by their respective duly authorized officers as of the day
and year first written above.
CYTOTHERAPEUTICS, INC.
By:___________________________
Name:
Title:
NEUROTECH S.A.
By:___________________________
Name:
Title:
<PAGE>
EX-99
CAUTIONARY FACTORS
CAUTIONARY FACTORS RELEVANT TO FORWARD-LOOKING INFORMATION
CYTOTHERAPEUTICS, INC. (THE "COMPANY") WISHES TO CAUTION READERS THAT
THE FOLLOWING IMPORTANT FACTORS, AMONG OTHERS, IN SOME CASES HAVE AFFECTED AND
IN THE FUTURE COULD AFFECT THE COMPANY'S RESULTS AND COULD CAUSE ACTUAL RESULTS
AND THE NEEDS AND FINANCIAL CONDITION OF THE COMPANY TO VARY MATERIALLY FROM
FORWARD-LOOKING STATEMENTS MADE BY THE COMPANY ON THE BASIS OF MANAGEMENT'S
CURRENT EXPECTATIONS. THE BUSINESS IN WHICH THE COMPANY IS ENGAGED IS DEPENDENT
ON UNPROVEN TECHNOLOGY, RAPIDLY CHANGING, EXTREMELY COMPETITIVE AND INVOLVES A
HIGH DEGREE OF RISK, AND ACCURACY WITH RESPECT TO FORWARD-LOOKING STATEMENTS IS
DIFFICULT.
NO ASSURANCE OF FUTURE REVENUE FROM SALE OF ENCAPSULATED CELL
TECHNOLOGY. In December, 1999, the Company sold its encapsulated cell
therapy technology to Neurotech S.A. While the sale provides for the possibility
of the Company receiving royalty and other payments from Neurotech, there can be
no assurance that any such payments will be received and the Company does not
anticipate receiving any material payments from Neurotech in the near future, if
at all.
NEED TO OBTAIN CORPORATE PARTNER OR PARTNERS TO SUPPORT STEM CELL
DEVELOPMENT EFFORTS - The Company's ability to continue to fund the development
of its neural and other stem cell technologies will be dependent on the
Company's ability to reach appropriate partnering arrangements providing support
for the Company's discovery and development efforts. While the Company has
engaged, and expects to continue to engage, in discussions regarding such
arrangements, the Company has not reached any agreement regarding any such
arrangements and there can be no assurance that the Company will be able to
obtain any such agreement.
LACK OF LIQUIDITY AND CAPITAL RESOURCES - The Company has limited
liquidity and capital resources and must obtain significant additional capital
resources in order to sustain its product development efforts. The Company's
ability to obtain additional capital will be substantially dependent on the
Company's ability to obtain partnering support for its stem cell technology. The
Company's liquidity and capital resources will be adversely affected to the
extent that the Company is required to redeem common stock of the Company held
by Genentech, Inc. under the terms of the Company's partnering agreement with
Genentech regarding possible development of an encapsulated-cell product for the
treatment of Parkinson's disease, which was terminated by Genentech in May 1998.
In connection with the termination of the agreement, Genentech demanded that
the Company redeem, at a price of $10.01 per share, shares of the Company's
redeemable common stock held by Genentech in an amount equal to the amount of
funds invested by Genentech to acquire such stock less the amount expended by
the Company on the terminated program.
<PAGE>
In July 1999, the Rhode Island Partnership for Science and Technology
("RIPSAT") alleged that the Company is in default under a funding agreement
entered into with RIPSAT in 1989, and demanded payment of approximately $2.6
million. RIPSAT has since notified the Company demanding payment of the $2.6
million within thirty days (the notice period). While the Company has responded
to RIPSAT that the Company is not in default under this agreement and expects to
contest any attempt by RIPSAT to realize on its demand, it may be necessary or
desirable for the Company to resolve its dispute with RIPSAT in connection with
any possible transaction involving disposition of the Company's Rhode
Island-based assets, including, without limitation, the Company's pilot
manufacturing plant, which is financed by bonds insured by a Rhode Island state
agency, and the Company has therefore engaged in settlement discussions with
RIPSAT. There can be no assurance that this dispute will be resolved on a basis
satisfactory to the Company. Any settlement payment to RIPSAT could have a
material adverse effect on the Company's liquidity and capital resources.
The Company continues to have substantial outstanding obligations in
regard to its facilities in Rhode Island, including lease payments and operating
costs of approximately $950,000 per year associated with its Science and
Administration Facility (the "SAF") in Lincoln, Rhode Island, and debt service
payments and operating costs of approximately $1,000,000 per year with respect
to the Company's pilot manufacturing facility, also located in Lincoln, Rhode
Island. The Company is currently seeking to sublicense the SAF and sell its
pilot manufacturing facility, but there can be no assurance that the Company
will succeed in these efforts. Failure to succeed in these efforts within a
reasonable time period will have a material adverse effect on the Company's
liquidity and capital resources.
In order to sustain its product development efforts, substantial
additional funds will be required to support the Company's research and
development programs, for acquisition of technologies and intellectual
property rights, for preclinical and clinical testing of its anticipated
products, pursuit of regulatory approvals, acquisition of capital equipment,
laboratory and office facilities, establishment of production capabilities
and for general and administrative expenses. The Company's ability to obtain
additional capital will be substantially dependent on the Company's ability
to obtain partnering support for its stem cell technology and, in the near
term, the sale of the Company's excess fixed assets and the Company's pilot
manufacturing facility, as well as on the Company's ability to sublease the
SAF. There can be no assurance that the Company will succeed in any or all of
these <PAGE>
efforts, and failure to do so will have a material effect on the Company's
liquidity and capital resources. Until the Company's operations generate
significant revenues from product sales, the Company must rely on cash reserves
and proceeds from equity and debt offerings, proceeds from the transfer or sale
of its intellectual property rights, equipment or facilities, government grants
and funding from collaborative arrangements, if obtainable, to fund its
operations.
The Company intends to pursue opportunities to obtain additional
financing in the future through equity and debt financings, lease agreements
related to capital equipment, grants and collaborative research arrangements.
The source, timing and availability of any future financing will depend
principally upon market conditions, interest rates and, more specifically, on
the Company's progress in its exploratory, preclinical and clinical development
programs. Lack of necessary funds may require the Company to delay, reduce or
eliminate some or all of its research and product development programs or to
license its potential products or technologies to third parties. No assurance
can be given that funding will be available when needed, if at all, or on terms
acceptable to the Company.
The Company expects that its existing capital resources, income earned
on invested capital, and, if available, proceeds from the sale of assets,
out-licensing of technology and subleasing of facilities described above, will
be sufficient to fund its operations into the first quarter of 2000. The
Company's cash requirements may vary, however, depending on numerous factors.
Lack of necessary funds may require the Company to delay, scale back or
eliminate some or all of its research and product development programs and/or
its capital expenditures or to license its potential products or technologies to
third parties.
EARLY STAGE DEVELOPMENT; HISTORY OF OPERATING LOSSES -Substantially all
of the Company's revenues to date have been derived, and for the foreseeable
future substantially all of the Company's revenues will be derived, from
collaborative agreements, research grants and income earned on invested funds.
The Company will incur substantial operating losses in the future as the Company
conducts its research, development, clinical trial and manufacturing activities.
The Company's stem cell technology is at the pre-clinical stage and has not yet
led to the development of any proposed product. There can also be no assurance
that any products that may be generated in the future in the Company's stem cell
programs will: (i) survive and persist in the desired locations, (ii) provide
the therapeutic benefits intended, (iii) properly differentiate and integrate
into existing tissue in the desired manner, or (iv) not cause tumors or other
side effects. There can be no assurance that the Company will achieve revenues
from product sales or become profitable.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING - The
development of the Company's products will require the commitment of substantial
resources to conduct the time-consuming research, preclinical development and
clinical trials that are necessary for regulatory approvals and to establish
production and marketing capabilities, if such approvals are obtained. The
Company will need to raise
<PAGE>
substantial additional funds to continue its product development efforts and
intends to seek such additional funds through partnership, collaborative or
other arrangements with corporate sponsors, public or private equity or debt
financings, or from other sources. Future cash requirements may vary from
projections based on changes in the Company's research and development programs,
progress in preclinical and clinical testing, the Company's ability to enter
into, and perform successfully under, collaborative agreements, competitive and
technological advances, the need to obtain proprietary rights owned by third
parties, facilities requirements, changes in regulations and other factors. Lack
of necessary funds may require the Company to delay, reduce or eliminate some or
all of its research and product development programs or to license its potential
products or technologies to third parties. No assurance can be given that
funding will be available when needed, if at all, or on terms acceptable to the
Company.
REGULATORY CONCERNS REGARDING CELL THERAPY. There has been increasing
regulatory concern about the risks of cell transplantation. The FDA has
published a "Proposed Approach to Regulation of Cellular and Tissue-Based
Products" which relates to the use of human cells. The Company cannot presently
determine the effects of such actions or what other actions might be taken.
Restrictions on the testing or use of cells, as human therapeutics, could
adversely affect the Company's product development programs and the Company
itself and could prevent the Company from producing and/or selling products or
make the cost of production by the Company prohibitively high. See "Government
Regulation."
DEPENDENCE ON OUTSIDE PARTIES - The Company's strategy for the
research, development, commercialization and marketing of its products
contemplates that the Company will enter into various arrangements with
corporate sponsors, pharmaceutical companies, universities, research groups and
others. There is no assurance that the Company will be able to establish and
maintain such arrangements on terms acceptable to the Company, or successfully
perform its obligations under such arrangements. If any of the Company's
collaborators terminates its relationship with the Company or fails to perform
its obligations in a timely manner, the development or commercialization of the
Company's product candidate or research program under such collaborative
agreement may be adversely affected.
NEED FOR AND UNCERTAINTY OF OBTAINING PATENT PROTECTION - Patent
protection for products such as those the Company proposes to develop is highly
uncertain and involves complex factual and evolving legal questions. No
assurance can be given that any patents issued or licensed to the Company will
not be challenged, invalidated or circumvented, or that the rights granted under
such patents will provide competitive advantages to the Company. On the other
hand, it is important for the Company to obtain patent protection. This is
particularly true in the case of the Company's stem cell technology where the
first person or entity to discover and patent a particular stem or progenitor
cell may effectively block all others, meaning that it will be critically
important to the Company's stem cell development efforts for the Company or its
collaborators to be the first to discover any stem cell which the Company is
seeking to discover. Failure to be the first to make such a discovery would
likely force the Company
<PAGE>
to terminate or substantially modify its efforts directed toward the discovery
of the discovered stem cell, and would likely have a substantial adverse effect
on the Company.
EXISTENCE OF THIRD PARTY PATENTS AND PROPRIETARY RIGHTS; NEED TO OBTAIN
LICENSE - A number of pharmaceutical, biotechnology and other companies,
universities and research institutions have filed patent applications or have
been issued patents relating to cell therapy and other technologies potentially
relevant to or required by the Company's potential products. The Company cannot
predict which, if any, of such applications will issue as patents or the claims
that might be allowed. The Company is aware that a number of entities have filed
applications relating to stem and/or progenitor cells. The Company cannot
predict the effect of existing patent applications and patents on future
products. The Company may also be required to seek licenses from others in order
to commercialize its technology. There can be no assurance that the Company will
be able to obtain such licenses on acceptable terms, if at all, or that the
patents underlying any such licenses will be valid and enforceable. See
"Patents, Proprietary Rights and Licenses" in the Company's Annual Report on
Form 10-K.
GOVERNMENT REGULATION - The Company's research, preclinical development
and clinical trials, as well as the manufacturing and marketing of its potential
products, are subject to extensive regulation by governmental authorities in the
United States and other countries. The process of obtaining FDA and other
required regulatory approvals is lengthy, expensive and uncertain. There can be
no assurance that the Company or its collaborators will be able to obtain the
necessary approvals to commence or continue clinical testing or to manufacture
or market its potential products in anticipated time frames, if at all. In
addition, several legislative proposals have been made to reform the FDA. If
such proposals are enacted they may result in significant changes in the
regulatory environment the Company faces. These changes could result in
different, more costly or more time consuming approval requirements for the
Company's products, in the dilution of FDA resources available to review the
Company's products, or in other unpredictable consequences. See "Government
Regulation" in the Company's Annual Report on Form 10-K.
SOURCES OF CELLS AND OTHER MATERIALS - There can be no assurance that
the Company will successfully identify or develop sources of the cells required
for its potential products and obtain such cells in quantities sufficient to
satisfy the commercial requirements of its potential products.
MANUFACTURING UNCERTAINTIES - There can be no assurance that the
Company will be able to develop the capability of manufacturing any of its
potential products at a cost or in the quantities necessary to make a
commercially viable product, if at all.
COMPETITION - Competitors of the Company are numerous and include major
pharmaceutical and chemical companies, biotechnology companies, universities and
other research institutions. In addition, most of the Company's competitors have
substantially greater capital resources, experience in obtaining regulatory
approvals and,
<PAGE>
in the case of commercial entities, experience in manufacturing and marketing
pharmaceutical products, than the Company. There can be no assurance that the
Company's competitors will not succeed in developing technologies and products
that are more effective than those being developed by the Company or that would
render the Company's technology and products obsolete or non-competitive. See
"Competition" in the Company's Annual Report on Form 10-K.
DEPENDENCE ON KEY PERSONNEL - The Company is highly dependent on the
principal members of its management and scientific staff and certain of its
outside consultants. Loss of the services of any of these individuals could have
a material adverse effect on the Company's operations. In addition, the
Company's operations are dependent upon its ability to attract and retain
additional qualified scientific and management personnel. There can be no
assurance the Company will be able to attract and retain such personnel on
acceptable terms given the competition among pharmaceutical, biotechnology and
health care companies, universities and research institutions for experienced
personnel.
REIMBURSEMENT AND HEALTH CARE REFORM - In both domestic and foreign
markets, sales of the Company's potential products will depend in part upon the
availability and amounts of reimbursement from third-party health care payor
organizations, including government agencies, private health care insurers and
other health care payors such as health maintenance organizations and
self-insured employee plans. There is considerable pressure to reduce the cost
of therapeutic products. There can be no assurance that reimbursement will be
provided by such payors at all or without substantial delay, or, if such
reimbursement is provided, that the approved reimbursement amounts will provide
sufficient funds to enable the Company to sell its products on a profitable
basis. See "Reimbursement and Health Cost Control" in the Company's Annual
Report on Form 10-K.
