<PAGE> 1
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1996
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF 1934
For the transition period from to
----------------
Commission file number 0-27914
RIBOZYME PHARMACEUTICALS, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
----------------
Delaware 34-1697351
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(State of incorporation) (I.R.S. Employer Identification No.)
2950 Wilderness Place
Boulder, Colorado 80301
(Address of principal executive offices)
Registrant's telephone number: (303) 449-6500
----------------
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
---- ----
The number of shares of the registrant's common stock, par value $0.01 per
share, outstanding as of August 9, 1996 was 6,856,054.
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RIBOZYME PHARMACEUTICALS, INC.
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
PART 1 - FINANCIAL INFORMATION PAGE
----
<S> <C>
Item 1. Financial Statements
Condensed Balance Sheet - June 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Statements of Operations - Three and Six Months Ended
June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Statements of Cash Flows - Three and Six Months Ended
June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Condensed Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis or Plan of Operation . . . . . . . . . . . . . . . . . 8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
RIBOZYME PHARMACEUTICALS, INC.
CONDENSED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
June 30,
ASSETS 1996
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<S> <C>
Current assets
Cash and cash equivalents $ 21,088,945
Securities available-for-sale 4,541,659
Restricted cash 301,723
Accounts receivable 5,391
Notes receivable, employees 137,883
Prepaid expenses and other 287,993
------------
Total current assets 26,363,594
Equipment and leasehold improvements at cost, net of accumulated
depreciation and amortization 4,729,558
Restricted cash 143,802
Notes receivable, other 197,398
Deferred patents, net 1,756,884
Other assets, net 154,327
------------
Total assets $ 33,345,563
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable, trade $ 456,091
Accrued liabilities 1,826,188
Current portion of long-term debt and capital lease obligations 1,803,437
------------
Total current liabilities 4,085,716
Long-term debt and capital lease obligations 2,647,454
Deferred gain 16,115
Stockholders' equity
Common stock 68,295
Additional paid-in capital 66,981,616
Deferred compensation (163,989)
Accumulated deficit (40,289,644)
------------
Total stockholders' equity 26,596,278
------------
Total liabilities and stockholders' equity $ 33,345,563
============
</TABLE>
See notes to condensed financial statements
3
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RIBOZYME PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Collaborative agreements $ 200,000 $ 305,827 $ 759,122 $ 561,651
Grant and other income 34,968 3,380 68,859
Interest income 289,024 61,677 348,072 135,774
----------- ----------- ----------- -----------
Total revenues 491,604 402,472 1,110,574 766,284
----------- ----------- ----------- -----------
Expenses:
Research and development 4,636,894 2,806,022 7,665,998 6,220,987
General and administrative 680,879 292,371 1,151,477 669,770
Interest expense 227,502 109,263 449,196 196,993
----------- ----------- ----------- -----------
Total expenses 5,545,275 3,207,656 9,266,671 7,087,750
----------- ----------- ----------- -----------
Net loss $(5,053,671) $(2,805,184) $(8,156,097) $(6,321,466)
=========== =========== =========== ===========
Net loss per share $ (0.82) $ (0.99) $ (1.72) $ (2.26)
=========== =========== =========== ===========
Shares used in computing net loss
per share 6,189,011 2,838,475 4,730,750 2,797,608
=========== =========== =========== ===========
</TABLE>
See notes to condensed financial statements.
4
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RIBOZYME PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (8,156,097) $ (6,321,466)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 854,900 638,274
Compensation for forgiveness of notes
receivable-related parties 92,466 50,000
Compensation related to stock 188,100 0
Loss on sale of securities 13,140 0
Changes in assets and liabilities:
Accounts receivable 12,669 28,711
Prepaid expenses and other (130,159) (35,828)
Other assets (22,685) (19,741)
Accounts payable (92,946) 560,637
Accrued liabilities 1,739,798 (347,951)
Deferred contract revenue 0 (117,743)
Deferred gain (16,530) (18,618)
------------ ------------
Net cash used in operating activities (5,517,344) (5,583,725)
INVESTING ACTIVITIES
Additions to property, plant and equipment (1,044,510) (1,042,103)
Additions to patents and other intangible assets (284,315) (373,347)
Loans to officers and employees (155,417) 0
Transfer of restricted cash 764,405 0
Loan repayments from employees 0 6,000
Net purchases of securities available-for-sale (1,065,865) (1,931,955)
------------ ------------
Net cash used in investing activities (1,785,702) (3,341,405)
FINANCING ACTIVITIES
Net proceeds from sale of preferred and common stock 26,104,605 11,427,181
Proceeds from issuance of long-term debt 411,238 1,542,077
Principal payments on debt and capital lease obligations (1,036,861) (670,547)
------------ ------------
Net cash provided by financing activities 25,478,982 12,298,711
Net increase in cash and cash equivalents 18,175,936 3,373,581
Cash and cash equivalents at beginning of period 2,913,009 5,727,122
------------ ------------
Cash and cash equivalents at end of period $ 21,088,945 $ 9,100,703
============ ============
</TABLE>
See notes to condensed financial statements.
5
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RIBOZYME PHARMACEUTICALS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 1996
(Unaudited)
Note 1: Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and six-month
periods ending June 30, 1996 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1996. For further information,
refer to the financial statements and footnotes thereto for the year ended
December 31, 1995, included in the Company's registration statement on Form
SB-2, file no. 333-1908-D.
Note 2: Net loss per share
Pursuant to the Securities and Exchange Commission Staff Accounting Bulletins,
common and common equivalent shares issued during the 12-month period prior to
the Company's initial public offering in April 1996 at prices below the public
offering price have been included in the calculation as if they were
outstanding for all periods presented (using the treasury stock method and the
initial public offering price of $10.00 per share). Furthermore, pursuant to
Staff policy, common equivalent shares from convertible preferred shares that
converted upon completion of the Company's initial public offering are included
(using the if-converted method) even when antidilutive.
Had net loss per share been presented on the historical basis, average shares
outstanding would have equaled 5,796,578 and 3,418,554 for the three and six
months ended June 30, 1996, and net loss per share would have been $0.87 and
$2.38, respectively.
Note 3: Public Offering
In April 1996, the Company completed an initial public offering of 2,000,000
shares of its common stock to the public at a price of $10.00 per share. In
addition, the Company granted the Underwriters an option to purchase up to
300,000 additional shares of common stock, which the Underwriters exercised in
full. The proceeds to the Company from the sale of 2,300,000 shares, net of
Underwriters discount of $1,610,000, totaled $21,390,000. Concurrent with the
closing of this offering, Chiron Corporation ("Chiron") purchased from the
Company 377,202 shares of common stock for an aggregate purchase price of
$3,640,000, and paid the Company an additional $1,800,000 to complete the
purchase of a warrant for 444,444 shares of common stock.
6
<PAGE> 7
Note 4: Collaboration with Chiron Corporation regarding gene function
On May 13, 1996 the Company entered into a collaborative agreement with Chiron
regarding the use of ribozymes to determine gene function. The agreement gives
Chiron the right to develop and commercialize products that result from the
collaboration, and entitles RPI to receive product development milestone
payments and royalties on sales of any such commercial products. Chiron and RPI
will each pay a portion of the research and development expenses of the
collaboration, and the Company has agreed to pay Chiron $1.8 million in 1996 for
research funding related to the collaboration.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
OVERVIEW
RPI was incorporated in January 1992 and has devoted substantially all
of its resources since that time to develop ribozyme technology and products in
human therapeutics, agricultural, animal health and diagnostic applications.
The Company has incurred losses since inception and, as of June 30, 1996, had
an accumulated deficit of $40.3 million. The Company anticipates incurring
additional losses over at least the next several years as it expands its
research and development programs, including pre-clinical studies and clinical
trials. Such expansion will result in increases in research and development,
and general and administrative expenses.
The Company completed an initial public offering in April 1996
resulting in net proceeds of approximately $21.4 million. Concurrently with
the closing of the offering, Chiron purchased common stock at an aggregate
purchase price of $3.6 million and paid the Company an additional $1.8 million
to complete the purchase of a warrant issued to Chiron upon the closing.
RESULTS OF OPERATIONS
Three and Six Months Ended June 30, 1996 and 1995
Collaborative revenues decreased to $200,000 for the three month period
ended June 30, 1996, from $306,000 for the corresponding period in 1995.
However, these revenues increased 35% to $759,000 for the six months ended June
30, 1996, from $562,000 for the corresponding period in 1995, primarily due to a
one-time payment in the first quarter from Pharmacia Biotech in a collaboration
on the development of improved synthesis and purification methods for the
preparation of modified amidites and chimeric oligonucleotides. Collaborative
agreement and contract revenue fluctuations are generally the result of changes
in the number of funded research projects as well as the timing and completion
of contract milestones.
Grant and other income decreased to $2,600 and $3,400 for the three
and six months ended June 30, 1996, respectively, from $35,000 and $69,000 for
the corresponding periods in 1995. The decreases are primarily due to the
expiration of a certain grant funding.
Interest income increased to $289,000 and $348,000 for the three and
six months ended June 30, 1996, respectively, compared to $62,000 and $136,000
for the corresponding periods in 1995. The increases are due to higher average
balances in the Company's cash and cash equivalents and securities
available-for-sale as a result of the public offering in April.
Research and development expenses increased to $4.6 million and $7.7
million for the three and six months ended June 30, 1996, compared to $2.8
million and $6.3 million for the corresponding periods in 1995. The increase
is primarily due to the $1.8 million research funding expense related to the
Chiron gene function determination agreement which became effective in May. The
Company expects research and development expenses to continue to
8
<PAGE> 9
increase as it expands its research and development programs, including
pre-clinical studies and clinical trials.
General and administrative expenses increased to $681,000 and $1.2
million for the three and six months ended June 30, 1996, respectively, compared
to $292,000 and $670,000 for the corresponding periods in 1995. The increase in
general and administrative expenses is primarily due to one time cash and stock
bonus payments made to the Company's Chief Executive Officer in connection with
the public offering, as well as the hiring of additional management and
administrative personnel and the incurring of legal and other professional fees
in connection with the overall scale-up of the Company's operations and business
development efforts.
Interest expense increased to $228,000 and $449,000 for the three and
six months ended June 30, 1996, respectively, compared to $109,000 and $197,000
for the corresponding periods in 1995. The increase is attributable to
increased borrowings on long-term debt during the last half of 1995 which were
used in part to fund the Company's expansion into its current laboratory
facilities.
The Company reported a net loss of $5.1 million and $8.2 million, or
$0.82 and $1.72 per share, for the three and six months ended June 30, 1996,
respectively, compared to a net loss of $2.8 million and $6.3 million, or $0.99
and $2.26 per share, for the corresponding periods in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash, cash equivalents and securities available-for-sale
were $25.6 million at June 30, 1996, compared with $13.6 million at June 30,
1995. The $12 million increase in cash, cash equivalents and securities
available-for-sale is primarily the result of the following:
<TABLE>
<S> <C>
Net cash used in operating activities $(10,783,000)
Investment in equipment and leasehold improvement (3,345,000)
Additions to patents (527,000)
Transfer of restricted cash 764,000
Borrowings under loan facilities 2,210,000
Payments under loan facilities and capital lease obligations (825,000)
Net proceeds from sale of stock and warrants 27,020,000
Other, net (2,514,000)
------------
Total $ 12,000,000
============
</TABLE>
The Company invests its cash in interest-bearing high quality
investment grade securities.
Total additions for equipment and leasehold improvements for the six
months ended June 30, 1996, were $1,045,000, including $411,000 of additions
financed through the Company's
<PAGE> 10
existing equipment loan facilities. As of June 30, 1996, the Company had
approximately $1.6 million available for additional equipment under a loan
agreement with a commercial bank. The facility commitment terminates on June
30, 1997.
The Company estimates that its existing capital resources, the
aggregate net proceeds of the public offering completed in April and the
concurrent sale of common stock and warrant to Chiron and interest thereon,
together with facility and equipment financing and expected revenues from its
collaborative agreements, will be sufficient to fund its current and planned
operations at least through the end of 1997. There can be no assurance,
however, that changes in the Company's research and development plans or other
changes affecting the Company's operating expenses will not result in the
expenditure of such resources before such time and, in any event, the Company
will need to raise substantial additional capital to fund its operations in
future periods. Such additional capital may be raised through public or
private financing, as well as collaborative relationships, borrowing and other
available sources.
10
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3(i) Amended and Restated Certificate of Incorporation*
3(ii) Restated Bylaws*
10.1 Employment agreement, dated May 2, 1996, between
Registrant and Nassim Usman
10.2 Collaboration agreement, dated May 13, 1996, between
the Registrant and Chiron Corporation.
11 Statement re: computation of net loss per share.
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
quarter for which this report on Form 10-QSB is filed.
- ----------------
* Previously filed with the Company's Registration Statement on Form SB-2,
file no. 333-1908-D.
11
<PAGE> 12
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
RIBOZYME PHARMACEUTICALS, INC.
Dated: August 14, 1996 By: /s/ RALPH E. CHRISTOFFERSEN
--------------- ----------------------------
Ralph E. Christoffersen
President and Chief
Executive Officer
Dated: August 14, 1996 By: /s/ LAWRENCE E. BULLOCK
--------------- -----------------------
Lawrence E. Bullock
Vice President and Chief Financial
Officer (Principal Financial
Officer and Principal Accounting
Officer)
12
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Exhibit Index
<TABLE>
<CAPTION>
Exhibit Exhibit
No. Description
--- -----------
<S> <C>
3(i) Amended and Restated Certificate of Incorporation*
3(ii) Restated Bylaws*
10.1 Employment agreement, dated May 2, 1996, between Registrant and Nassim Usman
10.2 Collaboration agreement, dated May 13, 1996, between the Registrant and Chiron Corporation.
11 Statement re: computation of net loss per share.
27 Financial Data Schedule
</TABLE>
- -----------
* Previously filed with the Company's Registration Statement on Form SB-2, File
No. 333-1908-D.
<PAGE> 1
EXHIBIT 10.1
PERSONAL AND CONFIDENTIAL
Dr. Nassim Usman May 2, 1996
RPI
Dear Nassim,
As noted both in writing and in informal conversations, your accomplishments
and those of your group, as well as your growth as a manager, have been
impressive indeed. In addition, it is my belief that you have substantial
potential for further growth and accomplishment as a senior manager. It is
within that context that I am pleased to offer you a significant promotion
within RPI.
The specific promotion and associated terms are as follows:
Title: Vice President of Research
(and Corporate Officer)
Effective Date: May 10, 1996
Base Salary: $145,000
Bonus: Up to 15% of Vice President of Research 1996
base salary, payable at the end of 1996,
based on achievement of objectives (to be
mutually agreed within 30 days of acceptance
of this offer).
Stock Options: Award of 17,000 Incentive Stock Options, at
an exercise price equal to the closing price
of RPI Common Stock on May 10, 1996.
In the Incentive Stock Option award, 7, 000 options will vest upon achievement
of performance-based goals (to be mutually agreed within 30 days of acceptance
of this offer). For the 10,000 options vesting over 5 years, RPI will pay the
exercise price on vested options each year's anniversary of this appointment,
up to $15,000 per year for a total of 5 years, as long as you are employed at
RPI and satisfactory performance is maintained. In return, you agree not to
sell shares purchased by RPI until at least one year after the five year period
has ended.
Loan: If requested by you, RPI will provide an
interest-free loan of up to $75,000 in order
to allow you to purchase a house in the
Boulder area, repayable over 5 years at a
rate of $15,000/year on the first five
anniversary dates of the loan. Your house
will serve as collateral for the loan, and
the loan will be repayable in full if you
leave RPI before the loan is repaid or if you
sell the house.
<PAGE> 2
Severance: Six months severance pay if terminated
without cause, and if not otherwise employed.
During the period from your acceptance until a Vice President for Research and
Development is appointed, you will report to me, and together we will manage
RPI's R&D activities. Following the appointment of a Vice President for
Research and Development, you will report to that person.
I am very excited about the possibility of working with you to develop both
RPI's technology and products, and the significant opportunity it provides for
you personally. As the promotion implies, RPI is making a long term commitment
to you and your development, and your acceptance implies an equal acceptance on
your part for such a long term commitment to RPI.
If you accept the terms of this new appointment, please sign both copies of
this letter, and return one copy to me.
Sincerely,
Ralph E. Christoffersen
CEO and President
Accepted:
--------------------------
Nassim Usman
Date:
--------------------------
cc. L. Bullock
N. Usman Personnel File
<PAGE> 1
CONFIDENTIAL
EXHIBIT 10.2
THE CONFIDENTIAL PORTION OF THIS CONTRACT HAS BEEN OMITTED PURSUANT TO
REGULATION 240.25B-2(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AND HAS BEEN
FILED SEPARATELY WITH THE COMMISSION.
CHIRON CORP. - RIBOZYME PHARMACEUTICALS, INC. COLLABORATION
REGARDING USE OF RIBOZYMES TO DETERMINE GENE FUNCTION
This Collaboration Agreement ("Agreement") is entered into effective as of May
13, 1996 (the "Effective Date") by and between Chiron Corporation, a Delaware
corporation having a place of business at 4560 Horton Street, Emeryville,
California 94608 ("Chiron"), and Ribozyme Pharmaceuticals, Inc., a Delaware
corporation having a place of business at 2950 Wilderness Place, Boulder,
Colorado 80301 ("RPI").
WHEREAS:
RPI has developed or has licensed proprietary patented and trade secret
ribozyme technology; and
Chiron develops and commercializes products for human diagnostic, prophylactic
and therapeutic use; and
RPI and Chiron each have certain skills and experience related to the
identification, development and commercialization of products against specific
gene targets; and
RPI and Chiron wish to enter into a collaboration whereby they will evaluate
the use of ribozymes in the identification of gene function for a number of
targeted genetic sequences as set forth herein.
NOW THEREFORE, in consideration of the mutual promises contained herein, the
parties agree as follows:
1. Definitions.
1.1 "Affiliate" shall mean any entity which controls, is
controlled by, or is under common control with, a party hereto. An entity shall
be regarded as being in control of another entity if such party owns or
controls, directly or indirectly, 50 percent or more of the shares of the
subject entity entitled to vote in the election of directors (or, in the case
of an entity that is not a corporation, for the election of the corresponding
managing authority). Notwithstanding the foregoing, Affiliates of Chiron shall
not include Ciba-Geigy Limited ("Ciba") or any Affiliates of
<PAGE> 2
CONFIDENTIAL
Ciba unless and until Ciba exercises its rights to control the management and
affairs of Chiron pursuant to the Governance Agreement between Ciba and Chiron
dated as of November 20, 1994.
1.2 "Chiron Proprietary Product Data" shall mean all unpatented
data, results, and know how which are developed by Chiron in the course of
pursuing development of Ribozyme Products directed against the Targets pursuant
to this Agreement, other than the Screening Results.
1.3 "Chiron Proprietary Technology" shall mean patents, patent
applications and trade secrets owned or controlled by Chiron, which Chiron has
the right to license to RPI hereunder, with respect to the Genetic Sequence of
the Target or the use of ribozymes directed toward the Target, other than
Screening Results and Chiron Proprietary Product Data. Without limiting the
foregoing, Chiron Proprietary Technology does not include Chiron's assays or
assay methodologies; and does not include Chiron technology, information, data
or results with respect to aspects of the Target other than its Genetic
Sequence or with respect to therapeutic, diagnostic or prophylactic modalities
addressing such Target other than ribozymes.
1.4 "Collaboration" shall mean the collaboration between the
parties described in Sections 2 and 3 hereof for the purposes of identifying
gene function.
1.5 "Confidential Information" shall have the meaning set forth
in Section 15.1.
1.6 "Definitive Contribution Product" shall mean a product,
[ ]
1.7 "Endogenous" delivery of a ribozyme shall mean delivery of a
DNA or RNA vector encoding a ribozyme into a cell, whether in vivo or ex vivo,
for the purpose of expression thereof.
1.8 "Excluded Targets" shall mean [ ]
1.9 "Exogenous" delivery of a ribozyme shall mean delivery of a
chemically synthesized ribozyme.
1.10 "FDA" shall mean the U.S. Food and Drug Administration.
1.11 [ ]
1.12 "Genetic Sequence" shall mean a gene or partial sequence
thereof, or its transcription product or intermediates or portions thereof,
including either DNA or RNA.
-2-
<PAGE> 3
CONFIDENTIAL
1.13 "IND" shall mean an Investigational New Drug application
filed with the FDA, or a foreign equivalent thereof or the actual commencement
of clinical trials of a Product in a country in which no IND or equivalent
filing is required.
1.14 "Manufacturing Cost" shall mean, with respect to any
Product, [ ] generally accepted accounting principles and customary
usage in the U.S. pharmaceutical industry.
1.15 "NDA" shall mean a New Drug Application filed with the FDA
or a foreign equivalent thereof in the United Kingdom, Germany, France, Italy
or Japan.
1.16 "Net Sales" shall mean the gross sales price received by a
party or its Affiliates or sublicensees on sales of Products to non-Affiliate
customers, less (i) normal and customary rebates, cash and trade discounts,
(ii) credits for returns and allowances, (iii) insurance costs borne by the
seller, and transportation charges and (iv) sales or other excise taxes or
duties imposed upon and paid by such party or its Affiliates or sublicensees
with respect to such sales.
In the event that a Product is combined with another
biologically active product, or a part of a kit including calibrators, controls
or the like, or with a delivery system not developed under this Agreement then:
Net Sales from such sales, for purposes of calculating
royalties due or allocating profits under this Agreement, shall be calculated
by multiplying the Net Sales of that combination by the fraction A/(A+B), where
A is the gross selling price of the Product sold separately in the country of
sale and B is the gross selling price of the other product or delivery system
sold separately in the country of sale. In the event that no such separate
sales are made, Net Sales for purposes of determining royalty payments on such
combination products, shall be a reasonable apportionment of the gross amount
invoiced therefor based upon the relative contribution of the Product to the
price of the combination product. Such apportionment shall be negotiated in
good faith between the parties and such apportionment shall be established
prior to the time that a party hereto shall have the right to sell such
combination products.
As to diagnostic uses of a Product, "Net Sales" shall have
the foregoing meaning, unless the Product is increased in price by an amount
which reflects the acquisition or leasing cost of an instrument in connection
with the supply of an instrument system. In such event, the "Net Sales" of
such Product for diagnostic uses shall be calculated as follows: (i) the cost
of depreciation of such instrument in a given royalty payment period plus the
actual cost of servicing such instrument in such royalty period will be divided
by the Net Sales of all Products for use on such instrument which are sold to
end-users of such instrument in order to determine a "factor"; (ii) the Net
Sales of such Product will then be multiplied by such factor; and (iii) the
resulting amount will be subtracted from such Net Sales to arrive at the actual
Net Sales of such Product in such royalty payment period.
-3-
<PAGE> 4
CONFIDENTIAL
As to diagnostic laboratory services involving the use of
Products, "Net Sales" shall mean actual billings for such services, less: (i)
discounts allowed and taken in amounts customary in the market in which the
service occurred and (ii) any tax, charge or duty (other than an income tax)
levied or imposed on the service and (iii) that portion of the remainder
appropriately allocable to non-Product portions of such service (including
labor, etc.); provided, however that if the service is offered in combination
with another diagnostic service or services which are not licensed hereunder,
Net Sales for purposes of determining royalties on the service shall be
calculated by multiplying the Net Sales from the combination by the fraction
A/(A+B), where A is the invoice price of the service and B is the invoice price
of the other service or services in the combination if sold separately. If the
service is not sold separately, Net Sales for the purposes of determining
royalties on the service shall be reasonably estimated on the basis of the
price charged for similar services but which are sold separately.
1.17 [ ]
1.18 "Patent" shall mean U.S. patent applications and foreign
counterparts thereof, and all U.S. and foreign patents issuing therefrom,
including any additions, continuations and continuations-in-part, divisions,
reissues, renewals and extensions thereof.
1.19 [ ]
1.20 "Product" shall mean a Ribozyme Product, a [ ]
Product, or a [ ] Product.
1.21 [ ]
1.22 "Ribozyme Experiments" shall mean those studies conducted by
Chiron with ribozymes supplied by RPI pursuant to Article 3.
1.23 "Ribozyme Product" shall mean a ribozyme product directed
toward [ ] or directed toward a [ ], for therapeutic or
prophylactic or diagnostic use in humans or animals which is developed by a
party pursuant to this Agreement.
1.24 "RPI Technology" shall mean all Patents, inventions,
discoveries, improvements, data, materials, formulae, know how or other
technology owned, controlled or acquired by RPI, as of the Effective Date or
during the term of this Agreement, which RPI is free to license hereunder and
which is necessary or useful for the manufacture, use or sale of a Ribozyme
Product. RPI Technology shall include, without limitations, the issued patents
identified on Exhibit B, and foreign counterparts thereof as well as all U.S.
and foreign patents issuing therefrom, including any additions, continuations
or continuations-in-part, divisions, reissues, renewals and extensions thereof.
Notwithstanding the foregoing, RPI Technology shall not include any of RPI's
trade secret
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processes for the design and synthesis of ribozymes or manufacture of exogenous
ribozymes except to the extent license thereof is necessary to enable the
manufacturing of Ribozyme Products if RPI does not exercise its manufacturing
right under Section 8.1.
1.25 "Screening Results" shall mean the results of the cell
culture assays conducted by Chiron pursuant to Section 3.4, and the results of
such animal efficacy studies which Chiron elects to conduct using ribozymes
produced by RPI, pursuant to Section 3.4.
1.26 "Target" shall mean a Genetic Sequence identified by Chiron
pursuant to Section 3.2.
1.27 "Target Polypeptide" shall mean a polypeptide encoded by a
Target or Feasibility Study Target.
2. Feasibility Study
2.1 Purpose. The parties shall conduct a feasibility study to
evaluate the use of ribozymes for the determination of gene function.
2.2 [ ] Chiron shall notify RPI in writing of the first
[ ] within ten days following the Effective Date; and Chiron shall
notify RPI in writing of the remaining four [ ] not later than two
months following the Effective Date, all in accordance with Section 17.7. Once
RPI has received written notice of a [ ], RPI shall not pursue research
(including without limitation gene function identification studies) or
development of, or manufacture, ribozymes directed to such [ ], either
alone or in collaboration with a third party, unless and until RPI is
authorized to proceed with development of Ribozyme Products directed towards
such [ ] under Section 2.9 If, prior to the time at which RPI would
otherwise be authorized to pursue a [ ] under Section 2.9, RPI [
]
2.3 Supply of Ribozymes. RPI shall manufacture and supply to
Chiron approximately [ ] ribozymes, together with corresponding
controls, per [ ] Target, in approximate amounts of 0.5 mg of each
ribozyme and each control, including available delivery vehicles (owned or
controlled by RPI and available for license hereunder or provided by Chiron) as
appropriate for initial screening. RPI shall manufacture and supply additional
ribozymes and controls for verification of initial effects shown by ribozymes.
RPI shall provide Chiron with the nucleotide sequences and site of cleavage of
each ribozyme provided.
2.4 [ ]
2.5 Due Diligence. The parties will perform with due diligence
their duties to supply the ribozymes, and to complete the cell culture assays
in approximately six months, but no more than nine months, after delivery of
the ribozymes.
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2.6 [ ]
2.7 Development. Chiron, in its sole discretion, shall
determine whether to proceed with development of Products against [ ]
In connection with the development and commercialization of a Ribozyme Product
directed towards [ ] Target RPI shall be entitled to receive additional
compensation as provided in Section 6.4 hereof.
2.8 [ ]
2.9 [ ]
3. Screening Program.
3.1 Purpose. Following successful completion of the Feasibility
Study, as defined in Section 2.8, Chiron will conduct a screening program to
determine gene function of Targets selected pursuant to Section 3.2.
3.2 Targets. Chiron, in its sole discretion, shall select as
many as [ ] other [ ], as Targets. Chiron shall notify RPI in writing of the
Targets as they are selected, in accordance with Section 17.7. The number of
Genetic Sequences designated by Chiron as Targets may be increased by mutual
agreement of the parties; and may be reduced by reason of the Excluded Target
list as referenced in Section 3.8.
3.3 Supply of Ribozymes. RPI shall manufacture and supply to
Chiron approximately [ ] together with corresponding controls, per Target, in
approximate amounts of 0.5 mg of each ribozyme and each control, including
available delivery vehicles (owned or controlled by RPI and available for
license hereunder, or provided by Chiron) as appropriate for initial screening.
RPI shall manufacture and supply additional ribozymes and controls for
verification of initial effects shown by ribozymes.
3.4 [ ]
3.5 Term of Screening Program. The Targets will be selected by
Chiron from time to time during the Screening Program. Chiron may not select
for screening any Excluded Targets. Chiron shall notify RPI in writing of its
selection of Targets. Selection of Targets and synthesis of ribozymes against
the [ ] Targets is expected to be completed [ ] from initiation of the
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Screening Program. If necessary for the completion of Target selection and
ribozyme production, such period may be extended, upon written notice by Chiron
to RPI, for up to an [ ]. Until RPI receives written notice of
Chiron's selection of a Target for screening hereunder, RPI shall be free to
notify Chiron in writing in accordance with Section 17.7 of any Genetic
Sequence to be added to the list of Excluded Targets. [ ] provided that
the final decision as to whether such studies will be permitted shall be made
by Chiron in its sole discretion.
3.6 Due Diligence. RPI will supply the ribozymes directed
toward the Targets as requested by Chiron with commercially reasonable
diligence. Chiron will complete cell culture assays with commercially
reasonable diligence for each Target within approximately six months, but not
more than nine months from the time RPI delivers to Chiron the ribozymes
directed towards such Target .
3.7 Further Supplies. RPI shall use commercially reasonable due
diligence to manufacture and supply to Chiron such additional ribozymes
directed toward Targets as Chiron shall need and reasonably request for the
performance of animal efficacy studies or further development of Ribozyme
Products.
3.8 [ ]
3.9 Ribozyme Product Development.
(a) Following generation of cell culture data on the
function of a particular Target, Chiron shall [ ] from the conclusion of cell
culture assays (including cell culture assays conducted with the controls
supplied by RPI) related to a particular Target to notify RPI in writing of
Chiron's intent to pursue further research and development of a Ribozyme
Product directed toward such Target. If Chiron does not notify RPI within such
time period, Chiron shall be deemed to have abandoned research and development
of Ribozyme Products directed toward such Target for the purposes of Section
3.9(f). [ ]
(b) [ ]
(c) Once Chiron has elected to proceed with development of
a Ribozyme Product against a Target, Chiron shall not be deemed to have
abandoned such development so long as Chiron is actively conducting research or
development of a Ribozyme Product against such Target, in accordance with a
commercially reasonable research and development plan, which will include a
program involving expenditures of not less than the lesser [ ]
employees per year for preclinical research prior to formal toxicology; and
thereafter shall proceed with development of such product with commercially
reasonable expenditures appropriate to the applicable stage of development. It
is understood that the level of resources will change over the course of the
development program.
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(d) Chiron may, in its sole discretion, elect to abandon
research and development with respect to any Ribozyme Product at any time. In
the event that Chiron elects to abandon all Ribozyme Products with respect to a
Target, Chiron agrees to notify RPI in writing within thirty (30) days
following such abandonment.
(e) From the time RPI receives notice under Section 3.9(a)
of Chiron's intent to proceed with a Ribozyme Product, and while Chiron is
pursuing research, development or commercialization of Ribozyme Products
against a Target under this Agreement, RPI agrees that it will not pursue
research, development or commercialization, and it will not license any third
party to research, develop or commercialize any product containing ribozymes
against such Target [ ] all further subject to Section 4.5.
(f) In the event that Chiron abandons research, development
and commercialization of all Ribozyme Products with respect to a Target, except
as otherwise provided in Section 4.5, RPI shall be free, alone or with a third
party, at its sole discretion, to develop Ribozyme Products against such Target
and its Precluded Genetic Sequences, and RPI shall have the right to utilize
the Screening Results and Chiron Proprietary Product Data in connection with
such development and commercialization, all subject to the terms of this
Agreement, [ ] RPI shall further have the right to negotiate a royalty
bearing license under other Chiron Proprietary Technology for the development
and commercialization of ribozyme products against such Target, pursuant to
Sections 4.2 and 6.5(c).
4. Grants.
4.1 By RPI. Subject to the terms and conditions of this
Agreement, (and further subject to the terms and conditions required by third
party licensors in any sublicense as to which Chiron becomes a sublicensee) RPI
hereby grants Chiron an exclusive worldwide license under the RPI Technology,
to (i) [ ] (ii) conduct the Ribozyme Experiments with respect to the
Targets; (iii) develop, make and have made (subject to Section 8.1), use and
sell Ribozyme Products developed by Chiron and (iv) manufacture Ribozyme
Products developed by RPI for which Chiron has the right to manufacture
pursuant to Section 8.2. Chiron shall have the right to sublicense its rights
under (iii) to any third party in Chiron's discretion, and to sublicense its
rights under (iv) to an Affiliate of Chiron, or, with RPI's consent, which
shall not be unreasonably withheld, to a third party, provided that, in each
case, such sublicense is subject to the terms and conditions of this Agreement.
4.2 By Chiron. Subject to the terms and conditions of this
Agreement, Chiron hereby grants RPI an option to obtain a non-exclusive
worldwide royalty bearing license, with the right to sublicense, under Chiron
Proprietary Technology relating to a Target to develop, make and have made
(subject to Section 8.2), use and sell Ribozyme Products directed against such
Target which
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are developed or commercialized by RPI pursuant to Section 3.9. Such license
shall bear a commercially reasonable royalty and shall be subject to other
commercially reasonable terms to be negotiated by the parties in good faith.
4.3 Ownership of Technology. (a) Subject to the rights
expressly granted in this Agreement, as between the parties hereto, (i) Chiron
and its licensors retain all rights in the Screening Results, Chiron
Proprietary Technology and Chiron Proprietary Product Data and all other
technology of Chiron not specifically governed by this Section 4.3, and (ii)
RPI and its licensors retain all rights in the RPI Technology and all
technology of RPI not specifically governed by this Section 4.3.
(b) New inventions arising from activities under this
Agreement shall be owned as follows:
(i) Chiron shall own all right title and interest
in and to any inventions or discoveries made solely by employees or assignors
of Chiron, whether alone or with third parties;
(ii) RPI shall own all right, title and interest
in and to any inventions or discoveries made solely by employees or assignors
of RPI, whether alone or with third parties; and
(iii) Chiron and RPI shall jointly own all right,
title and interest in and to any inventions or discoveries made jointly by
employees or assignors of Chiron, on the one hand, and employees or assignors
of RPI, on the other hand.
(c) Chiron shall own all data arising from the Feasibility
Study, all Screening Results, and all data and information arising from the
research, development and commercialization of Products by Chiron.
(d) RPI shall own all data and information arising from
research, development and commercialization of Ribozyme Products by RPI.
4.4 No Other Rights. Except as expressly provided in this
Agreement neither party shall have any license or other right to use Technology
of the other party.
4.5 (a) [ ]
(b) "Precluded Genetic Sequence," with respect to a [ ] or a
Target, shall mean[ ]
(c) [ ]
5. Intellectual Property.
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5.1 Preparation, Filing and Prosecution of Patent Applications;
Maintenance of Issued Patents.
5.1.1 Preparation and Filing. When inventions which may
reasonably be considered to be patentable have been conceived by employees of a
party or others acting on behalf of a party in the performance of its
activities contemplated by this Agreement, the party owning such invention
shall have the right, in its sole discretion, to file United States and foreign
patent applications, consistent with its patent policy with respect to its
other patentable inventions, discoveries, improvements or other technology.
The party owning such invention shall control the preparation and filing of
such applications.
5.1.2 Prosecution and Maintenance. Subject to Section
5.1.3, RPI and Chiron each shall have the right, in its sole discretion, to
control the prosecution, grant and maintenance of patent applications and
patents covering its inventions, and to select all patent counsel or other
professionals to advise, represent or act for it in all matters relating to
such patent applications and patents. All costs incurred in connection
therewith shall be borne by the party taking action with respect to such patent
applications and patents. Each party shall inform the other party at
reasonable regular intervals, or at such other party's reasonable request,
about the status of any portions of such patent applications or patents which
are licensed to the other party hereunder and are applicable to such other
party's Products.
5.1.3 Abandonment of Patent Rights. In the event that a
party (the "Original Owning Party" for the purposes of this Section 5.1.3)
elects not to file a patent application in any country, or decides to abandon a
pending application or granted patent in any country, and the patent in
question has been, or the patent application in question would, under the terms
of the licenses granted herein, be exclusively licensed to the other party
hereunder and is applicable to the other party's Products, the Original Owning
Party shall provide at least 90 days prior written notice to the other party
and shall give such other party the opportunity, subject to the abandoning
party's existing contractual obligations to third parties, to file or maintain,
and control the prosecution of, such application or patent at such other
party's own expense, at the Owning Party's discretion either in the name of the
original owning Party or in such other party's own name; provided, that the
Original Owning Party shall receive a perpetual, irrevocable, fully paid-up,
royalty-free, nonexclusive, worldwide license, with the right to sublicense
(subject to the licenses granted, and the limitations set forth, in this
Agreement), to make and have made, use and sell or otherwise distribute
products incorporating, exploiting, or made using, such patents or renewals and
extensions thereof. For clarity of understanding, this Section 5.1.3 is not
applicable to Chiron Proprietary Technology.
5.2 Infringement Actions by Chiron or RPI Against Third Parties.
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(a) Each party (the "Notifying Party") shall notify the
other party in writing if it becomes aware of any material infringement by a
third party of such other party's intellectual property rights in such other
party's technology. The party that owns any such technology, (the "Owning
Party" for purposes of Section 5.2) shall have the right to abate such
infringement and to retain any recoveries as a result of abatement of such
third party infringement;
(b) Notwithstanding the foregoing, if Chiron is the
Notifying Party and if the sales of such infringing product in a country, on a
dollar-demonstrated basis, represent at least 15 percent of the combined sales
in such country of the infringing product and a Product sold by Chiron for the
same Target or Feasibility Study Target pursuant to this Agreement, then Chiron
may, at its own expense, undertake commercially reasonable efforts to abate
such infringement on behalf of RPI if RPI has not, within 180 days after RPI's
receipt of Chiron's written notice of infringement by a third party, caused
such infringement to cease, or reasonably demonstrated that there is in fact no
material infringement by the alleged third party infringer, or filed a lawsuit
against the alleged third party infringer. Any action by one party on behalf
of the other party pursuant to this Section 5.2 (b) shall be undertaken in a
commercially reasonable manner, shall not result in any transfer of ownership
rights in the infringed technology between Chiron and RPI, and shall not,
without such other party's written consent, involve any settlement or consent
to any adverse judgment that will diminish the rights of such other party. The
parties shall share any funds recovered as a result of legal action taken under
this Section 5.2(b) against a third party infringer as follows. In the event
of recovery from the action in question, each party shall be entitled to
reimbursement of its direct costs in bringing such action. The remainder of
the amount recovered shall be paid to Chiron, but shall be subject to royalty
payments to RPI in the same manner as if such remaining recovery constituted
Net Sales of a Product hereunder.
5.3 Infringements. If RPI or Chiron is sued by a third party
for patent infringement because of the manufacture, use or sale of Products,
the party which has been sued shall promptly notify the other party in writing
of the institution of such suit. The party sued shall defend the action at its
expense, and the other party shall cooperate in connection with such defense at
the expense of the sued party.
5.4 Notification of Issued Patents and Patent Term Extensions.
Each party shall notify the other promptly upon: (i) issuance of any patents
directed to such party's inventions licensed hereunder, or (ii) receipt of
notification of any extension of the term of any patent directed to such
party's inventions licensed hereunder, pursuant to the U.S. Drug Price
Competition and Patent Term Restoration Act of 1984, or any similar foreign
statute or regulation, where the Patent in question is applicable to Products.
5.5 Markings. On or in connection with each Product sold by
either party, such party shall legibly mark or provide an appropriate notice of
the other party's Patent rights in a reasonable
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form and substance approved in advance by the other party in writing and shall
provide at the other party's request proof of compliance with this requirement.
6. Payment of Royalties.
6.1 [ ]
6.2 [ ]
6.3 [ ]
Milestone payments: [ ] on IND filing
[ ] on NDA approval
Provided that [ ] of such milestone payments for a [ ]
such [ ] will be applied so [ ] for any period will not be reduced by
more than [ ]
Royalty: [ ] of Net Sales
6.4 Ribozyme Products.
(a) Chiron agrees to pay milestones to RPI on
Ribozyme Products arising from this Agreement as follows:
[ ] on IND filing
[ ] on commencement of Phase II Clinical Studies
[ ] on commencement of Phase III Clinical Studies
[ ] on NDA approval
Total per Product [ ]
(b) Subject to the adjustments set forth in
subsections 6.4 (c), (d), (e) and (f) below, Chiron agrees to pay royalties on
total Net Sales of Products containing ribozymes arising from this Agreement as
follows:
<TABLE>
<CAPTION>
Annual Net Sales Royalty
<S> <C>
up to $100,000,000 [ ] of Net Sales
$100-500,000,000 [ ] of Net Sales
over $500,000,000 [ ] of Net Sales
</TABLE>
(c) If the total cost of goods to Chiron, including
royalties to RPI under this Section 6.4, all costs of all other product
components, cost of finishing, filing and packaging, and
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all royalties and other obligations to third parties, and all other costs,
exceeds [ ] of Net Sales [ ]
Subject to the provisions of Section 8.1(a), RPI's royalties
shall be reduced as necessary [ ]
<TABLE>
<CAPTION>
Annual Net Sales Royalty
<S> <C>
up to $100,000,000 [ ] % of Net Sales
$100-500,000,000 [ ] of Net Sales
over $500,000,000 [ ] of Net Sales
</TABLE>
(d) In the event that the manufacture, use or sale of
a Ribozyme Product in any jurisdiction would not infringe a claim of an issued
Patent within the RPI Technology, the royalty otherwise payable under this
Section 6.4 shall be automatically reduced [ ] of Net Sales.
(e) The provisions of Sections 6.4(a), (b), (c) and
(d) above are applicable to Ribozyme Products for human therapeutic or
prophylactic use. The parties acknowledge that the pricing and margins in the
diagnostic and veterinary markets differ significantly from the human
therapeutic and prophylactic markets, and, as a result, different compensation
hereunder is appropriate for Ribozyme Products in the diagnostic or veterinary
markets.. Accordingly, if a Ribozyme Product has diagnostic or veterinary
uses, the parties shall negotiate in good faith commercially reasonable
reductions in the milestone payments and royalty rates set forth in Section
6.4, so as to render the compensation hereunder appropriate for the diagnostic
and veterinary markets..
(f) The compensation payable by Chiron to RPI under
this Article 6 includes all RPI obligations to third parties under the licenses
set forth in Exhibit B. Without limiting any other rights and remedies of
Chiron hereunder, in the event that any such third party license is terminated,
Chiron shall have the right to deduct from payments to RPI hereunder all costs
incurred by Chiron in obtaining licenses to such third party technology
directly from such third party.
6.5 Royalties on Products Developed by RPI. (a) If RPI
exercises its right to use the Screening Results, and, subject to Section
6.5(b), the Chiron Proprietary Product Data, RPI agrees to pay royalties to
Chiron with respect to total Net Sales of Products developed by RPI pursuant to
Section 3.9 as follows:
<TABLE>
<CAPTION>
Annual Net Sales Royalty
<S> <C> <C>
[ ] [ ] of Net Sales
</TABLE>
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<TABLE>
<S> <C>
$100-500,000,000 [ ] of Net Sales
over $500,000,000 [ ] of Net Sales
</TABLE>
(b) The provisions of Section 6.5(a) above are
applicable to Ribozyme Products for human therapeutic or prophylactic use. The
parties acknowledge that the pricing and margins in the diagnostic and
veterinary markets differ significantly from the human therapeutic and
prophylactic markets, and, as a result, different compensation hereunder is
appropriate for Ribozyme Products in the diagnostic or veterinary markets.
Accordingly, if a Ribozyme Product has diagnostic or veterinary uses, the
parties shall negotiate in good faith commercially reasonable reductions in the
royalty rates set forth in Section 6.5(a), so as to render the compensation
hereunder appropriate for the diagnostic and veterinary markets.
(c) If Chiron abandons a Ribozyme Product in accordance
with Section 3.9, RPI shall have the right to license Chiron Proprietary
Product Data related to such Ribozyme Product on the following terms: [
] until such time as all Precommercialization Costs and all other costs
(excluding general and administrative costs) incurred by Chiron and reasonably
attributable to the development of the licensed Chiron Proprietary Product Data
are recouped through such [ ]. Thereafter royalties shall revert to
those stated in Section 6.5(a).
(d) If, in connection with such Ribozyme Products, RPI
wishes to license other Chiron Proprietary Technology, including, without
limitation rights under patents or patent applications governing the Target,
the terms of such licenses will be separately negotiated by the parties in good
faith pursuant to Section 4.2, and will [ ]
7. Conduct of Collaboration and Product Development.
7.1 A party developing a Product pursuant to this Agreement
shall control all decisions with respect to such Product, in its discretion,
and shall bear its own expenses in connection with such development.
7.2 (a) RPI agrees to use commercially reasonable efforts
to supply to Chiron such quantities of ribozymes as are reasonably required by
Chiron for product development and clinical trials of Ribozyme Products, and,
if it has elected to manufacture the Ribozyme Product for Exogenous delivery
pursuant to Article 8, to conduct such process development and scale up as may
be reasonably required, all subject to reimbursement of its
Precommercialization Costs.
(b) If Chiron has elected to exercise its
manufacturing rights under Section 8.2 for a Ribozyme Product developed by RPI
for Endogenous delivery, Chiron agrees to use commercially reasonable efforts
to supply to RPI such quantities of such Ribozyme Product as are reasonably
required by RPI for product development and clinical trials, and to conduct
such process
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development and scale up as may be reasonably required, all subject to
reimbursement of its Precommercialization Costs.
7.3 Compliance With Applicable Laws and Regulations. Each party
shall fulfill its obligations under this Agreement in a manner which complies
with all applicable laws and regulations and applicable good laboratory,
clinical and manufacturing practices. Each party shall provide reasonably
sufficient time, equipment, facilities, personnel and other resources to
fulfill such obligations. Each party may subcontract third parties to assist
such party in fulfilling its obligations under this Agreement; provided, that:
(i) such party shall closely monitor the activities of its subcontractor to
ensure that each such subcontractor complies with all applicable laws and
regulations and applicable good laboratory, clinical and manufacturing
practices, and (ii) each such subcontractor shall sign a confidentiality
agreement at least as protective of the parties' proprietary information as
this Agreement.
7.4 Development Reports. During the Term of this Agreement,
each party shall provide the other party with annual progress reports, (i) of
such party's research and development activities, with respect to Products
arising hereunder and (ii) such party's progress in obtaining the regulatory
approvals that it is required to obtain with respect to such Products; provided
that such progress reports shall not be required to disclose confidential data
or results of either party or any third party licensees or collaborators of
such party.
7.5 [ ] If a resolution to the dispute is not reached
through the preceding process, the matter shall be submitted to binding
arbitration, to be held under similar confidentiality obligations to Chiron,
at which RPI shall be represented by the third party appointed as above, or a
replacement reasonably acceptable to Chiron.
8. Manufacturing of Products.
8.1 Products for Exogenous Delivery. Subject to the terms and
conditions of Section 8.3, RPI has the right to be the exclusive worldwide
manufacturer of any ribozyme based Product for Exogenous delivery developed by
Chiron. The transfer price to be paid by Chiron to RPI for such Products shall
be determined by the parties in good faith based on the principles set forth in
this Section 8.1. In the event that RPI is unable or unwilling to manufacture
any Product, in accordance with this Article 8, for timely delivery in
necessary quantities and in accordance with required quality standards, Chiron
shall have the right to have such Product manufactured by Chiron or a third
party, provided, however, that Chiron or such third party is able to
manufacture such Product for timely delivery in necessary quantities and in
accordance with required quality standards.
The principles governing the transfer price of Products manufactured
by RPI hereunder are as follows:
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(a) If total cost of goods to Chiron, including the transfer
price payable under this Section 8.1, all royalties payable to RPI under
Section 6.4, all costs of all other product components, the cost of finishing,
filling and packaging, all royalties and other obligations to third parties,
and all other costs, exceeds
(i) RPI agrees to reduce any manufacturing
compensation payable pursuant to this Section 8.1 as needed to bring
such total cost of goods to [ ] provided that Section 8.1(a)(iii)
will then apply.
(ii) If, following the reduction referenced in Section
8.1(a)(i) above, the total cost of goods still [ ]
(iii) Notwithstanding the above, in no case will RPI's
total profits (consisting of its manufacturing profits plus royalties
payable hereunder pursuant to Section 6.4(b) or 6.4(c) [ ]
(b) [ ]
8.2 Products for Endogenous Delivery.
(a) Chiron retains the right to manufacture Ribozyme Products
for Endogenous delivery developed by Chiron or its sublicensees.
(b) Subject to the terms and conditions of Section 8.3, Chiron
has the right to be the exclusive worldwide manufacturer of any ribozyme based
Product for Endogenous delivery developed by RPI pursuant to Section 2.9 or
Section 3.9. The transfer price to be paid by RPI to Chiron shall be determined
by the parties in good faith based on the principles set forth in this Section
8.2. In the event that Chiron is unable or unwilling to manufacture any
Product, in accordance with this Article 8, for timely delivery in necessary
quantities and in accordance with required quality standards, RPI shall have
the right to have such Product manufactured by RPI or a third party; provided,
however, that (i) RPI or such third party is able to manufacture such Product
for timely delivery in necessary quantities and in accordance with required
quality standards; and (ii) nothing in this Agreement shall be construed to
grant RPI any right or license under any Confidential Information or
intellectual property of Chiron, except for the Chiron Proprietary Technology
and the Chiron Proprietary Product Data as specifically set forth in this
Agreement. Without limiting the foregoing, nothing herein shall be construed
to grant to RPI any right or license under any Chiron technology related to any
gene transfer systems, delivery systems, or the manufacture or use thereof.
Any such licenses must be separately negotiated by the parties, and shall be
subject to separate compensation.
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CONFIDENTIAL
The principles governing the transfer price of Products manufactured by Chiron
hereunder are as follows:
(aa) The parties shall establish a maximum
for total cost of goods, expressed as a percentage of net
sales, after taking into account royalties payable to Chiron
under this agreement, as well as royalties payable under any
separately negotiated licenses of technology of Chiron,
known third party royalty obligations, and other known
factors influencing the cost of a particular Product. Based
on the royalties payable to Chiron both hereunder and under
any separately negotiated licenses to technology of Chiron,
the parties shall also establish a minimum total profit
amount for Chiron, expressed as a percentage of net sales,
and consisting of manufacturing profits plus all such
royalties payable to Chiron. If total cost of goods to RPI
exceeds the maximum amount for total cost of goods
referenced above, the manufacturing profit to Chiron shall
be reduced to bring the total cost of goods under such
maximum amount, provided that, in no event shall Chiron's
total profits be less than the agreed upon minimum total
profit amount referenced above. Unless separately
negotiated, no reduction in royalties payable to Chiron
shall arise in the event of cost of goods exceeding such
maximum amount.
(bb) Based on Section 8.2(b)(aa), the parties
shall determine the Transfer Price Reduction Point for such
Product. The transfer price structure adopted pursuant to
this Section 8.2(b) shall provide both (x) incentives which
operate to induce Chiron to continue to reduce its
Manufacturing Costs (and thereby increase its manufacturing
profit) at all levels of such Manufacturing Costs, and (y)
reasonable sharing between RPI and Chiron of the benefit of
Manufacturing Cost reductions at all levels of Manufacturing
Costs below the Transfer Price Reduction Point. Exhibit C,
if adjusted to reflect the maximum amount for total cost of
goods and the minimum total profit amount determined under
Section 8.2(b)(aa), would set forth an example of such a
transfer price structure. However, the parties acknowledge
that many factors which are unknown as of the Effective Date
may affect the profitability to Chiron of manufacturing a
Product, such as Product configuration, dosage, pricing,
sales volumes and the like. Such factors may require
adoption of a transfer price structure which is a variant of
that set forth in Exhibit C or different transfer price
structure. Based on the actual circumstances applicable to
a particular Product, the parties agree to negotiate in good
faith to determine a transfer price structure which meets
the requirements of subparts (x) and (y) of this Section
8.2(b)(bb), is consistent with the intent of the transfer
price structure described in Exhibit C, and is fair and
commercially reasonable to both parties.
8.3 Manufacturing Standards. As to any party determined to be
the manufacturer of a Product pursuant to Section 8.1 or Section 8.2, such
party shall manufacture such Product in accordance with all relevant statutory
and regulatory requirements, and specifications and quality standards approved
by the developing party.
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8.4 Other Manufacturing. Except as provided herein a party
developing a Product shall have the right, in its sole discretion, to have such
Product manufactured by third parties or to manufacture such Product itself.
8.5 In the event that either party exercises its right to
manufacture Products for the other party pursuant to Section 8.1 or 8.2, the
parties shall enter into a separate Supply Agreement, to be negotiated in good
faith, and containing terms consistent with those set forth herein and other
commercially reasonable terms, including without limitation commitments for
timely development of necessary manufacturing capacity, record keeping and
audit rights, and other customary terms and conditions.
9. Royalty Records and Reports.
9.1 Reports. Within 60 days after the end of any quarter during
the term of this Agreement commencing with the quarter in which the first
commercial sale of a Product subject to payment of royalties hereunder occurs
and including the quarter during which this Agreement expires or is terminated,
each party will provide the other quarterly reports as set forth in this
Section 9. With respect to all Products subject to royalties hereunder, such
report shall include gross revenues and Net Sales, on a country-by-country
basis, from sales of Products by such party, or its Affiliates or sublicensees,
together with the calculation of royalties due to the other party hereunder
with respect to such Net Sales. In such reports, gross revenues, Net Sales
and royalties shall be (A) expressed in U.S. dollars for sales of Products
invoiced in U.S. dollars, and (B) expressed in the currency in which the gross
revenues were received, if such gross revenues were not received in U.S.
dollars, together with the U.S. dollar equivalent of such amounts, calculated
in accordance with the procedures used generally by the reporting party for
converting sales in foreign currencies to U.S. Dollars.
9.2 Records.
9.2.1 Sales Records. Each party selling a Product
shall keep,. and shall require its Affiliates and sublicensees to keep,
detailed records of Product sales, which records shall be sufficiently complete
to enable all amounts specified in Section 9.1 and Article 6 to be determined
or calculated. Such records shall be retained for a period of at least five
years after the date on which such costs were incurred or such revenues were
received.
9.2.2 Costs. Each party shall keep detailed records
of Research Costs and Precommercialization Costs with respect to which such
party seeks reimbursement or payment under this Agreement. Such records shall
be retained for a period of at least five years after the date on which such
costs were incurred. If either party fails to keep such records, then such
party shall not be entitled to reimbursement of the costs in question.
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9.3 Audits. Each party shall make available, and shall require
its Affiliates and sublicensees to make available, the records described in
Section 9.2 for inspection during the period referred to in Section 9.2 by a
certified public or chartered accountant retained by the other party for such
purpose and subject to the reasonable approval of the party being audited,
solely for the purpose of verifying the amount of royalties or costs payable to
such other party. Such inspections may be made no more than once in each
calendar year, at reasonable times mutually agreed upon by the parties after at
least 15 days written notice to the audited entity. The accountant shall
execute a reasonable confidentiality agreement prior to commencing any such
inspection, shall be authorized to disclose to the auditing party only the
amounts of royalties or costs payable hereunder. Such inspections shall be at
the expense of the auditing party, unless net sales are underreported, or costs
are over-reported by an amount in excess of five percent of the correct amount,
in which case the cost of the audit shall be paid by the party whose books and
records, or whose Affiliate's or sublicensee's books and records, were audited.
9.4 Withholding Taxes. The selling party shall be entitled to
deduct from the royalties payable hereunder the amount of any withholding
taxes, value-added taxes or other taxes, levies or charges with respect to such
amounts, other than United States taxes, payable by the selling party, its
Affiliates or sublicensees, or any taxes required to be withheld by the selling
party, its Affiliates or sublicensees, to the extent the selling party, its
Affiliates or sublicensees pay to the appropriate governmental authority on
behalf of the non-selling party such taxes, levies or charges. The selling
party shall use reasonable efforts to minimize any such taxes, levies or
charges required to be withheld on behalf of the non-selling party by the
selling party, its Affiliates or sublicensees. The selling party promptly
shall deliver to the non-selling party proof of payment of a such taxes, levies
and other charges, together with copies of all communications from or with such
governmental authority with respect thereto.
10. Payment Procedures.
10.1 Timing. Royalties are payable under Article 6, for any
quarter, within 90 days after the end of such quarter.
10.2 Payment Method. Payments under this Agreement shall be made
by wire transfer of U.S. funds to a bank account designated by the party
receiving such payments. In the event that payments arising from sales of
Products in a particular country cannot be remitted in whole or in part to the
U.S. because of legal restrictions, the parties shall consult and endeavor to
resolve the problem in a manner satisfactory to the party to which such
payments are owed; provided that at the owed party's request, payments arising
from sale of Products in such country shall be made, at the owed party's
election either by payment in the U.S. of such amount by a U.S. parent of the
seller of the Product or by wire transfer to a bank account in the country of
sale designated by such party.
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11. Term and Termination.
11.1 Term. This Agreement shall become effective on the
Effective Date and, unless terminated earlier in accordance with the provisions
of this Article 11 or extended by mutual agreement of the parties, shall expire
in a given country upon the later to occur of (A) the expiration, cancellation
or revocation in such country of the last claim of an issued patent covering
such Product and contained within the other party's Technology; or (B) the
tenth anniversary of the first commercial sale of such Product in such country.
At such time, the party which is commercializing such Product shall have a
royalty free, perpetual, nonexclusive license under the other party's
technology licensed to it under this Agreement to develop, improve, make, have
made, use and sell such Product.
11.2 Default. If either party defaults in the performance of any
of its material obligations hereunder and if after notice thereof such default
is: (i) a payment default and is not corrected within 30 days or (ii) other
kind of default not corrected within 60 days, then the non-defaulting party, at
its option, may, in addition to any other remedies it may have, terminate this
Agreement by giving written notice of termination to the defaulting party.
11.3 Survival. Except as otherwise set forth herein, or as
otherwise agreed, the parties' rights and obligations pursuant to the following
Articles and Sections shall survive any termination of this Agreement in
accordance with their terms:
(a) In all events: Article 1, Section 4.3, Section
4.4, Section 5.1.1, Section 5.3, Section 9.2, Section 9.3, Article 11, Section
12.3, Article 13, Article 14, Article 15, Article 16, Section 17.1, Section
17.2, Section 17.7, and Section 17.9.
(b) In the event that the termination arrangement
causes one or both parties to continue to develop, make, have made, use or sell
any Products, such provisions of this Agreement as are applicable thereto.
The provisions of Sections 15 and 16 shall survive any termination of this
Agreement for a period of three years after such termination. Termination of
this Agreement shall not relieve the parties of any obligation accruing prior
to such termination.
12. Representations and Warranties.
12.1 By Both Parties. Each party represents that it (i) has all
right, power and authority necessary to enter into this agreement and to grant
the rights granted herein, (ii) has obtained all approvals and authorizations
that it is required to obtain in connection with this Agreement under
applicable laws and regulations, and (iii) has not entered, and will not enter,
into any arrangements or agreements inconsistent with this Agreement.
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12.2 By RPI. RPI hereby represents and warrants as follows:
As of the Effective Date, each of the Licenses listed in
Exhibit B is in full force and effect. During the term of this Agreement, RPI
agrees to perform all of its obligations under such Licenses (including all
obligations in order to maintain the exclusivity of the Licenses), and RPI
further agrees that it will not terminate any of such Licenses without Chiron's
prior consent. RPI shall immediately notify Chiron in the event that RPI
receives notice of its alleged breach or non-compliance pursuant to any of such
Licenses and shall take all steps necessary to cure or otherwise remedy the
alleged breach. RPI shall immediately notify Chiron in the event that RPI
becomes aware of any alleged breach by USB of its obligations to UPI under such
Licenses (including those obligations necessary to maintain the exclusivity of
the Licenses). During the term of this Agreement, RPI shall take all steps
necessary to cure or otherwise remedy the alleged breach by USB.
12.3 Disclaimer of Warranties. NEITHER PARTY MAKES ANY
WARRANTIES OTHER THAN THE WARRANTIES EXPRESSLY MADE IN THIS AGREEMENT, AND EACH
PARTY SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS
OF A PARTICULAR PURPOSE OR NONINFRINGEMENT WITH RESPECT TO ANY TECHNOLOGY, DATA
OR PRODUCTS.
13. Indemnity.
13.1 Collaboration. Each party (the "Indemnifying Party") shall
defend the other party and such other party's Affiliates, officers, directors,
shareholders, employees and agents (collectively, the "Indemnified Parties" for
purposes of this Section 13.1) against any claims made against the Indemnified
Parties by third parties to the extent that such claims arise out of negligent,
reckless or intentionally wrongful acts or omissions of the Indemnifying Party
or its Affiliates in the course of performing its activities in the course of
the Feasibility Study or the Screening Program or out of breaches of this
Agreement by the Indemnifying Party, and the Indemnifying Party shall either
settle such claims or pay all damages and costs finally awarded against the
Indemnified Parties by a court of competent jurisdiction as a result of such
claims. The Indemnifying Party shall have no liability for any such claim if
the Indemnified Parties do not notify the Indemnifying party promptly in
writing of the claim, give the Indemnifying Party the exclusive control of the
defense and settlement thereof, and provide all reasonable assistance in
connection therewith, at the Indemnifying Party's expense.
13.2 Additional Indemnity by Chiron for Products. Chiron shall
defend RPI and RPI's Affiliates, officers, directors, shareholders and agents
(collectively, the "Indemnified Parties" for purposes of this Section 13.2)
against any claims made against the Indemnified Parties by third parties to the
extent that such claims arise out of the manufacture, use or sale of any
Product
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developed by Chiron; and shall either settle such claims or pay all damages and
costs finally awarded against the Indemnified Parties by a court of competent
jurisdiction as a result of such claims. Chiron shall have no liability for
any such claim (i) unless it receives prompt written notification of such
claim, is given exclusive control of the defense and settlement thereof, and is
provided with all reasonable assistance in connection therewith by the
Indemnified Parties, at Chiron's expense, or (ii) to the extent that such claim
arises out of RPI's breach of this Agreement or any Supply Agreement entered
into pursuant to Section 8.1, or RPI's negligence or willful misconduct.
13.3 Additional Indemnity by RPI for Products. RPI shall defend
Chiron and Chiron's affiliates, officers, directors, shareholders and agents
(collectively, the "Indemnified Parties" for purposes of this Section 13.3)
against any claims made against the Indemnified parties by third parties to the
extent that such claims arise out of the manufacture, use or sale of any
Product developed by RPI; and shall either settle such claims or pay all
damages and costs finally awarded against the indemnified Parties by a court of
competent jurisdiction as a result of such claims. RPI shall have no liability
for any such claim (i) unless it receives prompt written notification of such
claim, is given exclusive control of the defense and settlement thereof, and is
provided with all reasonable assistance in connection therewith by the
Indemnified Parties, at RPI's expense, or (ii) to the extent that such claim
arises out of Chiron's breach of this Agreement or any Supply Agreement entered
into pursuant to Section 8.2, or Chiron's negligence or willful misconduct.
13.4 Right to Reimbursement. Without limiting the right of the
parties under Sections 13.1, 13.2, and 13.3, a party which is entitled to
indemnification against a lawsuit under Sections 13.1, 13.2 or 13.3, and is not
provided such indemnification by the other party, shall have the right to
defend itself in such suit and obtain reimbursement from the other party for
its reasonable legal fees and other costs incurred in defending itself in such
suits, and for any payments or amounts which it pays as a result of settlements
made or judgments awarded in such suit. Such right of reimbursement shall be
in addition to all other remedies which the party defending itself under this
Section 13.4 possesses with respect to the other party.
13.5 Insurance. Each party shall maintain product liability
insurance with respect to its development, manufacture and sale of Products, in
such amount as it customarily maintains with respect to its development,
manufacture and sale of other comparable products, and shall name the other
party as an additional insured party. Each party shall maintain such insurance
while it develops, manufactures or sells Products, and thereafter shall
maintain such insurance in effect for a reasonable period after the cessation
of sale or other distribution of such Product. Each party shall provide a copy
of the policy providing such product liability insurance to the other party
promptly after such policy becomes effective, and shall thereafter notify such
other party promptly after any change in the terms of such policy.
14. Limitation of Liability.
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IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR LOST PROFITS OR
ANY CONSEQUENTIAL, SPECIAL, INCIDENTAL, OR INDIRECT DAMAGES OF SUCH OTHER
PARTY, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, ARISING OUT OF THIS
AGREEMENT. CHIRON AND RPI ACKNOWLEDGE THAT THE AMOUNTS PAYABLE AND THE
OBLIGATIONS INCURRED HEREUNDER BY EACH PARTY ARE BASED IN PART UPON THESE
LIMITATIONS, AND FURTHER ACKNOWLEDGE THAT THESE LIMITATIONS SHALL APPLY
NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.
15. Confidentiality.
15.1 Confidential Information. As used in this Agreement, the
term "Confidential Information" shall mean any information disclosed by one
party to the other pursuant to this Agreement which the recipient knows or has
a reason to know is deemed confidential or proprietary by the disclosing party.
15.2 Confidentiality. Each party shall treat as confidential all
Confidential Information of the other party, shall not use such Confidential
Information except as set forth herein, and shall use reasonable efforts not to
disclose such Confidential Information to any third party. Without limiting
the foregoing, each of the parties shall use at least the same degree of care
which it uses to prevent the disclosure of its own confidential information of
like importance to prevent the disclosure of Confidential Information disclosed
to it by the other party under this Agreement. Each party shall promptly
notify the other party of any actual or suspected misuse or unauthorized
disclosure of the other party's Confidential Information.
15.3 Exceptions. Notwithstanding the above, neither party shall
have liability to the other with regard to any Confidential Information of the
other which the receiving party can demonstrate:
(i) was in the public domain at the time it was
disclosed or has entered the public domain through no fault of the receiving
party;
(ii) was known to the receiving party, at the time of
disclosure, as demonstrated by files in existence at the time of disclosure;
(iii) is disclosed with the prior written approval of
the disclosing party;
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CONFIDENTIAL
(iv) was independently developed by the receiving party
without any use of the Confidential Information, as demonstrated by files
created at the time of such independent development;
(v) became known to the receiving party, without
restriction, from a source other than the disclosing party without breach of
this Agreement by the receiving party and otherwise not in violation of the
disclosing party's rights;
(vi) is disclosed generally to third parties by the
disclosing party without restrictions similar to those contained in this
Agreement; or
(vii) is disclosed pursuant to the order or requirement
of a court, administrative agency, or other governmental body; provided,
however, that the receiving party shall provide prompt written notice thereof
to the disclosing party to enable the disclosing party to seek a protective
order or otherwise prevent or restrict such disclosure.
15.4 Return of Confidential Information. Upon expiration or
termination of this Agreement each party shall upon request return all tangible
Confidential Information received from the other party.
15.5 Publication and Disclosure of Results and Data.
(a) Chiron shall have the right to publish the Feasibility Study
Results, the Screening Results or other Chiron Proprietary Product Data in its
sole discretion, provided that it does not disclose RPI Confidential
Information.
(b) RPI shall not have the right to receive, nor shall it have the
right to publish or disclose, results of the Feasibility Study without
Chiron's prior written consent.
The parties acknowledge that RPI wishes to be able to receive and
utilize Feasibility Study results and data which may be helpful in improving
RPI's screening technology, and RPI wishes to be able to disclose Feasibility
Study results to third parties in order to attract additional customers for
gene function studies. Chiron shall have the right to determine, in its sole
discretion, whether such use by RPI of Feasibility Study results and/or
disclosure by RPI to third parties of the identity of Feasibility Study Targets
or Feasibility Study results or data would place Chiron at a competitive
disadvantage, for example by disclosing Chiron trade secrets or Chiron
proprietary information that may provide a competitive advantage to others. If
Chiron determines that no such competitive disadvantage would result, Chiron
will disclose such Feasibility Study Results to RPI for use in improving its
screening technology, and permit RPI to disclose such target identity, results
or data to other potential gene function collaborators of RPI subject to
confidentiality obligations no less restrictive than those contained in this
Article 15.
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(c) RPI shall not have the right to publish or disclose any Screening
Results, or Chiron Proprietary Product Data, or other data or information
arising from the Collaboration. Chiron may elect to provide Screening Results
to RPI for its internal use in improving RPI's screening technology, if Chiron
determines that no competitive disadvantage would result to Chiron, under the
same standards as are set forth in Section 15.5(b) above.
(d) Any publication shall appropriately acknowledge the scientific
contributions of the other party.
16. Confidentiality of Agreement.
Chiron and RPI agree that the terms and conditions of this Agreement contained
in Section 2, 3 and 6 shall be treated as Confidential Information and shall
not be disclosed to any third party without the prior consent of the other
party. Notwithstanding the statements above in this Section 16, either party
may disclose any of the terms and conditions of this Agreement:
(i) as required by any court or other governmental body;
(ii) as otherwise required by law;
(iii) to legal counsel of the parties;
(iv) in confidence, to accountants, banks, and financing
sources, and other advisors or consultants of the parties;
(v) in connection with the enforcement of this Agreement or
rights under this Agreement;
(vi) in confidence, in connection with a merger, acquisition, or
similar transaction;
(vii) which have been previously disclosed in a joint press
release by the parties hereto; or
(viii) in confidence, to a third party to the extent reasonably
necessary to permit the consideration of a bona fide collaboration which would
involve rights, obligations or limitations arising under this Agreement,
provided that such collaboration is not prohibited under this Agreement.
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In the event of any disclosure pursuant to (i) or (ii) above, the
disclosing party shall use all reasonable efforts to obtain confidential
treatment of materials so disclosed. The parties intend to issue a mutually
approved press release with respect to this Agreement. Neither party shall
make public disclosures of the terms and conditions, not previously disclosed,
except in accordance with this Article 16.
17. General.
17.1 Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of California, without
reference to conflict of laws provisions.
17.2 Partial Invalidity. If any provision in this Agreement
shall be found or be held to be invalid or unenforceable in any jurisdiction in
which this Agreement is being performed, then the meaning of said provision
shall be construed, to the extent feasible, so as to render the provision
enforceable, and if no feasible interpretation would save such provision, it
shall be severed, solely in such jurisdiction, from the remainder of this
Agreement, which shall remain in full force and effect; provided that the
remainder is consistent with the intent of the parties as evidenced by this
Agreement as a whole. In such event, the parties shall negotiate, in good
faith, a substitute, valid and enforceable provision, effective solely in such
jurisdiction, which most nearly effects the parties' intent in entering into
this Agreement.
17.3 Relationship of the Parties. Both parties are independent
contractors under this Agreement, and nothing contained in this Agreement is
intended nor is it to be construed so as to constitute Chiron and RPI as
partners or joint venturers with respect to this Agreement. Employees of each
party remain employees of said party and shall be considered at no time agents
of or to be obligated to render a fiduciary duty to the other.
17.4 Modification. No alteration, amendment, waiver,
cancellation or any other change in any term or condition of this Agreement
shall be valid or binding on either party unless the same shall have been
mutually assented to in writing by both parties.
17.5 Waiver. The failure of either party to enforce at any time
any of the provisions of this Agreement, or the failure to require at any time
performance by the other party of any of the provisions of this Agreement,
shall in no way be construed to be a present or future waiver of such
provisions, nor in any way affect the right of either party to enforce each and
every such provision thereafter. The express waiver by either party of any
provision, condition or requirement of this Agreement shall not constitute a
waiver of any future obligation to comply with such provision, condition or
requirement.
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17.6 Assignment. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns. Neither party may assign any of its rights, obligations or privileges
(by operation of law or otherwise) hereunder without the prior written consent
of the other party, which shall not be unreasonably withheld, provided, that
either party shall have the right to assign its rights, obligations and
privileges hereunder to an Affiliate or a successor in business or an acquirer
of all or substantially all of its business or assets to which this Agreement
pertains without obtaining the consent of the other party.
17.7 Notices. Any notice required or permitted to be given by
either party under this Agreement shall be in writing, and shall be personally
delivered or sent by certified or registered letter, or by telecopy confirmed
by registered or certified letter, to the other party at the address set forth
below, or such new address as may from time to time be supplied hereunder by
the parties hereto. Notices will be deemed effective upon receipt.
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If to Chiron: Chiron Corporation
4560 Horton Street
Emeryville, CA 94608-2916
Attention: President, Chiron Technologies
Copy to: General Counsel
If to RPI: Ribozyme Pharmaceuticals, Inc.
2950 Wilderness Place
Boulder, CO 80301
Attention: Chief Executive Officer
Copy to: General Counsel
17.8 Force Majeure. Notwithstanding anything else in this
Agreement, no default, delay or failure to perform on the part of either party
shall be considered a breach of this Agreement if such default, delay or
failure to perform is shown to be due to causes beyond the reasonable control
of the party charged with a default, including, but not limited to, causes such
as strikes, lockouts or other labor disputes, riots, civil disturbances,
actions or inactions of governmental authorities or suppliers, epidemics, war,
embargoes, severe weather, fire, earthquakes, acts of God or other deities,
acts of the public enemy, nuclear disasters, or default of a common carrier;
provided, that for the duration of such force majeure the party charged with
such default must continue to use all reasonable efforts to overcome such force
majeure.
17.9 Dispute Resolution. In the event of any disagreement
arising hereunder, the matter shall be referred to the Chief Executive Officers
("CEOs") of each company. The CEOs shall negotiate in good faith to resolve
such dispute for 30 days, or for such longer period of time as may be specified
herein or to which the CEOs may agree. If such negotiations do not result in a
mutually satisfactory resolution of the issue in question (an "Impasse"), then
the matter shall be resolved by any procedure agreed to by the CEOs or, in the
absence of such an agreed procedure, through such remedies as may be available
at law or equity.
17.10 Representations. It is the mutual desire and intent of the
parties to provide certainty as to their future rights and remedies against
each other by defining the extent of their mutual undertakings as provided
herein. Each of the parties hereto acknowledges and agrees (i) that no
representation or promise not expressly contained in this Agreement has been
made by the other party hereto or by any of its agents, employees,
representatives or attorneys; (ii) that this Agreement is not being entered
into on the basis of, or in reliance on, any promise or representation,
expressed or implied, covering the subject matter hereof, other than those
which are set forth expressly in this Agreement; and (iii) that each party has
had the opportunity to be
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represented by counsel of its own choice in this matter, including the
negotiations which preceded the execution of this Agreement.
17.11 Entire Agreement. The terms and conditions herein contained
constitute the entire agreement between the parties and supersede all previous
agreements and understandings, whether oral or written, between the parties
hereto with respect to the subject matter hereof.
17.12 License of Intellectual Property. All rights and licenses
granted under this Agreement by one party ("Licensor") to the other party
("Licensee") are, and shall be deemed to be, for purposes of Section 365(n) of
the U.S. Bankruptcy Code, licenses of rights to "intellectual property" as
defined under Section 101 of the U.S. Bankruptcy Code. The parties agree that
Licensee, as the licensee of such rights under this Agreement, may fully
exercise all of its rights and elections under the Bankruptcy Code. The
parties further agree that, in the event a Licensee elects to retain its rights
as a licensee in Licensor's bankruptcy proceedings, such Licensee shall be
entitled to a complete duplicate of (or complete access to, as appropriate) any
technology licensed to Licensee by Licensor hereunder, and all embodiments of
such technology, and such embodiments of such technology, if not already in its
possession, shall be promptly delivered to Licensee (i) upon any such
commencement of a bankruptcy proceeding upon written request therefor by
Licensee unless Licensor elects to continue to perform all of its obligations
under this Agreement, or (ii) if not delivered under (i) above, upon the
rejection of this Agreement by or on behalf of Licensor upon written request
for such embodiments by Licensee.
17.13 No Fiduciary Duty. The provisions contained in this
Agreement are not intended to create and shall not create any fiduciary duty on
either party and shall not require either party to expend funds or efforts or
commit resources in excess of that expressly provided herein.
17.14 [ ]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by duly authorized officers or representatives as of the date first above
written.
CHIRON CORPORATION RIBOZYME PHARMACEUTICALS, INC.
By: By:
------------------------------ ------------------------------
Print Name: Print Name:
---------------------- ----------------------
Title: Title:
---------------------------- --------------------------
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Exhibits
Exhibit A - Excluded Targets
Exhibit B - RPI Licenses and Patents
Exhibit C - Example of Transfer Price Structure
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EXHIBIT A
Excluded Targets
[ ]
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EXHIBIT B
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<CAPTION>
=======================================================================================================================
TITLE ISSUE DATE U.S. PATENT NO. FOREIGN STATUS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RNA Ribozyme Polymerases, 01/22/91 4,987,071 Europe - Allowed broad claims;
Dephosphorylases, Restriction interviewed with the Japanese
Endoribonucleases and Methods patent office in April
- -----------------------------------------------------------------------------------------------------------------------
RNA Ribozyme Polymerases, and Methods 08/06/91 5,037,746
- -----------------------------------------------------------------------------------------------------------------------
RNA Ribozyme Polymerases, 03/03/92 5,093,246;
Dephosphorylases, Restriction
Endoribonucleases and Methods
- -----------------------------------------------------------------------------------------------------------------------
RNA Ribozyme Restriction 05/26/92 5,116,742
Endoribonucleases and Methods
- -----------------------------------------------------------------------------------------------------------------------
RNA Ribozyme Polymerases, N/A Alllowed-no patent
Dephosphorylases, Restriction number yet
Endoribonucleases and Methods
=======================================================================================================================
</TABLE>
-32-
<PAGE> 33
CONFIDENTIAL
EXHIBIT C
EXAMPLE OF TRANSFER PRICE STRUCTURE
[ ]
-33-
<PAGE> 1
EXHIBIT 11
Ribozyme Pharmaceuticals, Inc.
Computation of Pro Forma Net Loss Per Share
<TABLE>
<CAPTION>
Quarter Quarter Six Months Six Months
ending ending ending ending
06/30/96 06/30/95 06/30/96 06/30/95
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Weighted average common shares
outstanding .................................... 5,796,578 981,306 3,418,554 975,855
Net effect of dilutive common stock
options and warrants pursuant to
Staff Accounting Bulletin No. 83 ............... -- 99,877 -- 99,877
Assumed conversion of preferred stock
from original date of issuance,
pursuant to staff policy ....................... 392,433 1,757,292 1,312,196 1,721,876
----------- ----------- ----------- -----------
Total .......................................... 6,189,011 2,838,475 4,730,750 2,797,608
Net loss ....................................... $(5,053,671) $(2,805,184) $(8,156,097) $(6,321,466)
=========== =========== =========== ===========
Pro forma net loss per share ................... $ (0.82) $ (0.99) $ (1.72) $ (2.26)
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
FINANCIAL STATEMENTS OF RIBOZYME PHARMACEUTICALS, INC. FOR THE THREE AND SIX
MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
(B) FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 21,088,945
<SECURITIES> 4,541,659
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 26,363,594
<PP&E> 7,553,249
<DEPRECIATION> 2,823,691
<TOTAL-ASSETS> 33,345,563
<CURRENT-LIABILITIES> 4,085,716
<BONDS> 2,647,454
<COMMON> 68,295
0
0
<OTHER-SE> 26,527,983
<TOTAL-LIABILITY-AND-EQUITY> 33,345,563
<SALES> 0
<TOTAL-REVENUES> 1,110,574
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,665,998
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 449,196
<INCOME-PRETAX> (8,156,097)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,156,097)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,156,097)
<EPS-PRIMARY> (1.72)
<EPS-DILUTED> 0
</TABLE>
