<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20459
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________.
Commission file number 0-20713
-------
ENTREMED, INC.
--------------
(Exact name of registrant as specified in its charter)
Delaware 58-1959440
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9640 Medical Center Drive
Rockville, Maryland
-------------------
(Address of principal executive offices)
20850
-----
(Zip code)
(301) 217-9858
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the most recent practicable date.
Class Outstanding at August 11, 1999
- --------------------------- ------------------------------
Common Stock $.01 Par Value 14,669,983
<PAGE> 2
ENTREMED, INC.
Table of Contents
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
----
<S> <C>
Item 1 -- Financial Statements
Consolidated Balance Sheets
as of June 30, 1999 and December 31, 1998 3
Consolidated Statements of
Operations for the Three Months Ended
June 30, 1999 and 1998, and the Six Months
Ended June 30, 1999 and 1998 4
Consolidated Statements of Cash
Flows for the Six Months Ended June 30, 1999
and 1998 5
Notes to Consolidated Financial
Statements 6
Item 2 -- Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8
Part II. OTHER INFORMATION
Item 1 -- Legal Proceedings 11
Item 2 -- Changes in Securities 11
Item 3 -- Defaults upon Senior Securities 11
Item 4 -- Submission of Matters to Vote of
Security Holders 11
Item 5 -- Other Information 12
Item 6 -- Exhibits and Reports on Form 8-K 12
SIGNATURES 13
</TABLE>
2
<PAGE> 3
ENTREMED, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------------- -----------------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 17,514,233 $ 30,818,689
Short term investments 1,501,845 4,352,371
Interest receivable 73,363 186,927
Accounts receivable 358,860 112,383
Prepaid expenses and other 7,784 170,877
----------------- -----------------
Total current assets 19,456,085 35,641,247
Furniture and equipment, net 4,082,070 2,979,237
Other assets 955,534 953,519
----------------- -----------------
Total assets $ 24,493,689 $ 39,574,003
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,471,039 $ 2,093,017
Accrued liabilities 1,199,515 1,332,682
Deferred revenue 1,372,500 2,945,833
----------------- -----------------
Total current liabilities 6,043,054 6,371,532
Minority interest 23,210 14,407
Stockholders' equity:
Convertible preferred stock, $1.00 par and $1.50
Liquidation value:
5,000,000 shares authorized, none issued and
outstanding at June 30, 1999 (unaudited)
and December 31, 1998 - -
Common stock, $.01 par value:
35,000,000 shares authorized, 13,177,192 (unaudited)
and 13,123,031 shares issued and outstanding at
June 30, 1999 and December 31, 1998, respectively 131,772 131,230
Additional paid-in capital 78,760,100 78,364,136
Accumulated deficit (60,464,447) (45,307,302)
----------------- -----------------
Total stockholders' equity 18,427,425 33,188,064
----------------- -----------------
Total liabilities and stockholders' equity $ 24,493,689 $ 39,574,003
================= =================
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 4
ENTREMED, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six months ended
June 30, June 30,
1999 1998 1999 1998
-------------------------------- -----------------------------------
<S> <C> <C> <C> <C>
Revenues:
Collaborative research and development $ 1,042,500 $ 1,042,500 $ 2,085,000 $ 2,085,000
Licensing 50,000 50,000 100,000 100,000
Grant revenues - 72,985 158,819 135,456
Royalty revenues 236,531 - 428,211 -
Other revenues - - 1,040 -
-------------- ------------ --------------- --------------
Total revenues 1,329,031 1,165,485 2,773,070 2,320,456
-------------- ------------ --------------- --------------
Expenses:
Research & development 7,619,140 2,345,299 14,726,595 5,844,730
General & administrative 2,003,069 1,221,010 3,898,907 2,526,900
-------------- ------------ --------------- --------------
9,622,209 3,566,309 18,625,502 8,371,630
Investment income 284,873 588,193 695,287 1,126,417
-------------- ------------ --------------- --------------
Net loss $ (8,008,305) $ (1,812,631) $ (15,157,145) $ (4,924,757)
============== ============ =============== ==============
Net loss per share (basic and diluted) $ (0.61) $ (0.15) $ (1.15) $ (0.40)
============== ============ =============== ==============
Weighted average number of shares
outstanding (basic and diluted) 13,165,522 12,437,363 13,144,832 12,369,153
============= ============ =============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 5
ENTREMED, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1999 1998
----------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss $ (15,157,145) $ (4,924,757)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 457,489 371,375
Loss on disposal of furniture & equipment 65,674 -
Minority interest 8,803 21,984
Changes in assets and liabilities:
Accounts receivable (246,477) (255,886)
Interest receivable 113,564 137,031
Prepaid expenses and other 161,078 85,724
Accounts payable 1,378,022 35,282
Accrued liabilities (133,167) (437,159)
Deferred revenue (1,573,333) (350,000)
-------------- -------------
Net cash used by operating activities (14,925,492) (5,316,406)
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Maturities of short-term investments 2,850,526 31,954,030
Purchases of short-term investments - (15,745,080)
Purchases of furniture & equipment (1,625,996) (321,527)
-------------- -------------
Net cash provided by investing activities 1,224,530 15,887,423
-------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from option and warrant exercises 396,506 2,511,326
-------------- -------------
Net cash provided by financing activities 396,506 2,511,326
-------------- -------------
Net increase (decrease) in cash and cash equivalents (13,304,456) 13,082,343
Cash and cash equivalents at beginning of period 30,818,689 18,232,491
-------------- -------------
Cash and cash equivalents at end of period $ 17,514,233 $ 31,314,834
============== =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 6
ENTREMED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial information of
EntreMed, Inc. (the "Company") includes the accounts of its 85% owned
subsidiary, Cytokine Sciences, Inc. Cytokine Sciences was formed in June
1996 and was capitalized with $250,000 by EntreMed for the purpose of
acquiring the assets of Innovative Therapeutics, Inc., which acquisition
was completed in July 1996 in exchange for 15% of the common stock of
Cytokine Sciences, Inc.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and in accordance with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, such
consolidated financial statements d o not include all of the information
and disclosures 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 six month period ended June 30, 1999 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 1999. For further information, refer to the Company's
audited financial statements and footnotes thereto included in the
Company's Form 10-K for the year ended December 31, 1998.
2. COMPREHENSIVE INCOME
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income" ("Statement 130"), which establishes standards for reporting and
display of comprehensive income and its components (revenues, expenses,
gains and losses) in financial statements. Statement 130 is effective for
fiscal years beginning after December 15, 1997. The Company adopted
Statement 130 in 1998 and has not presented a statement of comprehensive
income because the effect of the components of comprehensive income is
not material to its consolidated financial statements.
6
<PAGE> 7
3. CONTINGENCIES
The Company is a defendant in a lawsuit initiated in August 1995 in the
United States District Court for the Eastern District of Tennessee by
Bolling, McCool & Twist ("BMT"), a consulting firm. In the suit, BMT
asserts that the Company breached an agreement between BMT and the
Company by failing to pay BMT certain fees it asserts are owed under the
agreement. More specifically, BMT has asserted a claim for the payment of
services rendered in the approximate amount of $50,000 and seeks a
success fee in an unspecified amount in connection with the BMS
Collaboration. The judge in the case bifurcated the proceeding into two
phases: an adjudication of whether the Company breached its agreement
with BMT and then a damage phase. After a trial on the merits the jury
found in favor of BMT on the breach of contract claim. A trial to
determine damages had been scheduled for April 14, 1998. However, on
April 6, 1998, the court issued an Order pursuant to which damages were
limited to those arising during the term of the Agreement, which
terminated on November 1, 1995. On May 6, 1999, the court confirmed its
decision by granting the Company's motion for summary judgment and
limiting the Company's damages to approximately $50,000 plus interest.
Thus, this litigation at the trial level has been concluded. BMT has
filed an appeal and the Company has cross-appealed. The Company cannot
predict the outcome of such appeal. However, the Company intends to
continue to contest any further action vigorously and believes that this
proceeding will not have a material adverse effect on the Company or on
its financial condition, although there can be no assurance that this
will be the case.
4. SUBSEQUENT EVENT
On July 27, 1999, the Company completed an offering of 1,478,118 shares
of its common stock, par value $.01 per share, Series 1 Warrants to
purchase a total of 739,059 shares of Common Stock at an exercise price
of $33.02 and Series 2 Warrants to purchase a total of 739,059 shares of
Common Stock at an exercise price of $25.45. The offering resulted in
gross proceeds to the Company, prior to the deduction of fees and
commissions, of approximately $30.1 million. The net proceeds from the
offering will be used by the Company for continued clinical development
of the Company's products, working capital and general corporate
purposes, at the discretion of the Company's management.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL
Since its inception in September 1991, the Company has devoted
substantially all of its efforts and resources to sponsoring and conducting
research and development on its own behalf and through collaborations with
corporate partners and academic research and clinical institutions, and
establishing its facilities and hiring personnel. In December 1995, the Company
entered into a collaboration agreement with Bristol-Myers Squibb Company ("BMS")
in which BMS made an equity investment in the Company and agreed to pay certain
research and development fees and expenses, license fees, milestone payments,
and royalties on net sales, if any. In August 1997, the Company reacquired the
commercial rights to thalidomide from BMS. In December 1998, the Company
sublicensed, on a worldwide basis, its intellectual property covering
thalidomide to Celgene Corporation ("Celgene"). On February 9, 1999, the Company
and BMS agreed to modify the research agreement whereby the Company assumed all
responsibility for preclinical and clinical work on the Angiostatin(R) protein.
On July 1, 1999, the Company and Calbiochem-Novabiochem Corp. ("Calbiochem")
entered into a non-exclusive, worldwide licensing agreement under which
Calbiochem will have the right to sell research grade Endostatin(TM) protein and
Angiostatin(R) protein for non-commercial research purposes. Through June 30,
1999, with the exception of license fees and research and development funding
from BMS and royalty payments from Celgene's sales of thalidomide as well as
certain research grants, the Company has not generated any revenue from
operations. The Company anticipates its revenue sources for the next several
years to include royalty payments from Celgene's sales of thalidomide and
Calbiochem's sales of research grade Endostatin(TM) protein and Angiostatin(R)
protein, research grants and future collaboration payments from collaborators
under arrangements entered into in the future. The timing and amounts of such
revenues, if any, will likely fluctuate and depend upon the achievement of
specified milestones, and results of operations for any period may be unrelated
to the results of operations for any other period.
RESULTS OF OPERATIONS
Three and Six Months Ended June 30, 1999 and June 30, 1998
Revenues increased approximately 14% from approximately $1,165,000 for
the three months ended June 30, 1998 ("1998 Three Months") to approximately
$1,329,000 for the three months ended June 30, 1999 ("1999 Three Months"). This
increase is due to royalty income from Celgene Corporation on the sale of
thalidomide. For the six months ended June 30, 1999 ("1999 Six Months"),
revenues were approximately $2,773,000 as compared to $2,320,000 the six months
ended June 30, 1998 ("1998 Six Months"), a 20% increase. This increase is due to
an increase in grant revenue earned under a Small Business Innovative Research
program from the National Institutes of Health awarded to the Company in May
1997 and royalty income from Celgene Corporation on the sale of thalidomide. The
collaborative research and development fees relate to the amortization over five
years of a one-time payment from BMS, of $2,500,000 received in December 1995
and the amortization of semi-annual payments of $1,835,000 under the BMS
collaboration agreement. The license fee represents the amortization over five
years of a one-time $1,000,000 license fee received in December 1995 under the
BMS collaboration agreement.
Research and development expenses increased by approximately 225% from
approximately $2,345,000 in the 1998 Three Months to approximately $7,619,000 in
the 1999 Three Months and by approximately 152% from approximately $5,845,000 in
the 1998 Six Months to approximately $14,727,000 in the 1999 Six Months.
Research and development expenditures include sponsored research payments to
academic collaborators,
8
<PAGE> 9
including a $1,000,000 payment to Children's Hospital in March 1999 and March
1998 and expenses related to the Company's internal research programs. The
increase in research and development costs reflects increased efforts in the
Company's internal and sponsored research and product development programs
related to its antiangiogenesis technologies. Overall, research personnel
increased from 42 as of June 30, 1998 to 54 as of June 30, 1999. Research and
development expenses are expected to continue to increase as the Company
continues to expand its research and development efforts.
General and administrative expenses increased approximately 64% from
approximately $1,221,000 in the 1998 Three Months to approximately $2,003,000 in
the 1999 Three Months. For the 1999 Six Months, general and administration
expenses were approximately $3,899,000 as compared to approximately $2,527,000
for the 1998 Six Months, a 54% increase. The overall increase in general and
administrative expenses during the 1999 periods compared to comparable periods
of 1998 resulted primarily from the increase in administrative costs associated
with adding administrative staff to support the Company's research efforts and
external collaborations the Company is conducting, investigating potential
strategic relationships, and obtaining professional services. Investment income
decreased approximately 52% from approximately $588,000 in the 1998 Three Months
to approximately $285,000 in the 1999 Three Months and decreased approximately
38% from approximately $1,126,000 in the 1998 Six Months to approximately
$695,000 in the 1999 Six Months. This overall decrease in investment income
during the 1999 periods compared to comparable periods of 1998 is due to the
reduction of the Company's cash and short term investments as such working
capital components are used to fund the Company's operations.
Liquidity and Capital Resources
At June 30, 1999, the Company had cash and cash equivalents of
approximately $17,514,000 and short-term investments of approximately $1,502,000
with working capital of approximately $13,413,000, primarily representing the
net proceeds of the Company's private placements of equity securities and its
initial public offering, payments from BMS, including equity investments and
various grants.
On July 27, 1999, the Company completed an offering of 1,478,118 shares
of its common stock, par value $.01 per share, Series 1 Warrants to purchase a
total of 739,059 shares of Common Stock at an exercise price of $33.02 and
Series 2 Warrants to purchase a total of 739,059 shares of Common Stock at an
exercise price of $25.45. The offering resulted in gross proceeds to the
Company, prior to the deduction of fees and commissions, of approximately $30.1
million. The net proceeds from the offering will be used by the Company for
continued clinical development of the Company's products, working capital and
general corporate purposes, at the discretion of the Company's management.
The Company's cash resources have been used to finance research and
development, including sponsored research, capital expenditures, including
leasehold improvements to the Company's new facility, and general and
administrative expenses. Over the next several years, the Company expects to
incur substantial additional research and development costs, including costs
related to early-stage research, preclinical and clinical trials, increased
administrative expenses to support its research and development operations and
increased capital expenditures for expanded research capacity, various equipment
needs and facility improvements.
The Company is a party to sponsored research agreements and clinical
trials requiring the Company to fund an aggregate of approximately $2,185,000
through 2000 (including $1,400,000 to Children's Hospital) and license
agreements requiring future milestone payments of up to $3,735,000 and
additional payments upon attainment of regulatory milestones.
9
<PAGE> 10
On February 9, 1999, the original Bristol-Myers Squibb Collaboration was
modified such that the final payment of $611,667 under the agreement was paid on
June 5, 1999. As amended, Bristol-Myers Squibb has no further funding obligation
to the Company after August 9, 1999.
YEAR 2000 COMPLIANCE
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. As a result,
those computer programs having time-sensitive software would recognize a date
using "00" as the year 1900 rather than the year 2000.
Based on a recent assessment, the Company determined that its accounting
software will need to be updated or modified. This should be accomplished
through updates from the software manufacturer. The Company does not expect any
material costs associated with this modification or any disruptions to its
primary operations.
The Company has queried its significant supplier that does not share
information systems with the Company (external agent). To date, the Company is
not aware of any external agent with a Year 2000 issue that would materially
impact the Company's results of operations, liquidity, or capital resources.
However, the Company has no means of ensuring that external agents will be Year
2000 ready. The inability of external agents to complete the Year 2000
resolution process in a timely fashion could materially impact the Company. The
effect of non-compliance by external agents is not determinable.
The Company anticipates no other year 2000 problems which are reasonably
likely to have a material adverse effect on the Company's operations. There can
be no assurance, however, that such problems will not arise.
To date, the Company has not incurred significant costs in connection
with the implementation of its Year 2000 Plan. The Company does not expect
future costs to be significant.
- -----------------------------
Statements herein that are not descriptions of historical facts are
forward-looking and subject to risk and uncertainties. Actual results could
differ materially from those currently anticipated due to a number of factors,
including those set forth in the Company's Securities and Exchange Commission
filings under "Risk Factors", including risks relating to the early stage of
products under development; uncertainties relating to clinical trials'
dependence on third parties' future capital needs; and risks relating to the
commercialization, if any, of the Company's proposed products (such as
marketing, safety, regulatory, patent, product liability, supply, competition
and other risks).
10
<PAGE> 11
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
This information as set forth in Note 3 of "Notes to Consolidated
Financial Statements" appearing in Item 1 of Part I of this report is
incorporated herein by reference.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULT UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
(a) The Company's annual meeting of stockholders was held on June 24,
1999 ("Annual Meeting").
(b) Not applicable.
(c) At the Annual Meeting, the stockholders considered and approved the
following proposals:
(i) Election of Directors. The following sets forth the nominees who
were elected directors of the Company for the term expiring in the year
indicated as well as the number of votes cast for, against or withheld:
<TABLE>
<CAPTION>
Term
(Year Votes
Expires) Name For Against Withheld
- -------- ---- --- ------- --------
<S> <C> <C> <C>
2002 Jerry Finkelstein 10,918,705 55,533 -
2002 Mark C.M. Randall 10,919,050 55,188 -
</TABLE>
(ii) Approval of 1999 Long-Term Incentive Plan. At the Annual Meeting
the stockholders approved and ratified the Company's 1999 Long-Term Incentive
Plan (the "1999 Plan") reserving 750,000 shares of Common Stock for issuance
under the 1999 Plan. This proposal received 4,830,183 votes in favor, 372,458
votes against and 49,450 abstentions. In addition, 5,722,147 shares were not
voted.
(iii) Ratification of Appointment of Ernst & Young LLP. At the Annual
Meeting, stockholders ratified the selection of Ernst & Young LLP as the
independent auditors. The proposal received 10,944,976 votes in favor, 13,491
votes against, and 15,771 abstentions.
11
<PAGE> 12
Item 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBIT AND REPORTS ON FORM 8-K
(a) The following exhibits are filed with this report:
10.32 1999 Long-Term Incentive Plan
10.33 Amendment to Research Agreement, dated June 24, 1999,
between the Registrant and Children's Hospital
27.1 Financial Data Schedule
(b) No reports on Form 8-K were filed by Registrant during the
quarter ended June 30, 1999.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ENTREMED, INC.
(Registrant)
Date: August 16, 1999 /s/ John W. Holaday
------------------------------------
John W. Holaday, Ph.D.
President and Chief Executive Officer
Date: August 16, 1999 /s/ R. Nelson Campbell
------------------------------------
R. Nelson Campbell
Chief Financial Officer
13
<PAGE> 1
EXHIBIT 10.32
ENTREMED, INC.
ENTREMED, INC.
1999 LONG-TERM INCENTIVE PLAN
1. PURPOSE AND TYPES OF AWARDS
EntreMed, Inc., a Delaware corporation (the "Corporation"), maintained the
EntreMed, Inc. Amended and Restated 1996 Stock Option Plan (the "Prior Plan").
The Prior Plan has been replaced with the 1999 Long-Term Incentive Plan as set
forth herein, effective March 31, 1999, subject to the approval of the
stockholders of the Corporation within twelve months of such effective date (the
"Plan"). Notwithstanding anything herein to the contrary, nothing in this Plan
shall adversely affect the rights or obligations, under any Award granted under
the Prior Plan, of any grantee or holder of an Award without such person's
approval.
The purpose of the Plan is to promote the long-term growth and
profitability of the Corporation by: (i) providing key people with incentives to
improve stockholder value and to contribute to the growth and financial success
of the Corporation and (ii) enabling the Corporation to attract, retain and
reward the best-available persons.
The Plan permits the granting of stock options (including incentive stock
options qualifying under Code section 422 and nonqualified stock options), stock
appreciation rights, restricted or unrestricted stock awards, phantom stock,
performance awards, or any combination of the foregoing.
2. DEFINITIONS
Under this Plan, except where the context otherwise indicates, the
following definitions apply:
(a) "Administrator" shall have the meaning set forth in Section 3(a).
(b) "Affiliate" shall mean any entity, whether now or hereafter existing,
which controls, is controlled by, or is under common control with, the
Corporation (including, but not limited to, joint ventures, limited liability
companies, and partnerships). For this purpose, "control" shall mean ownership
of 50% or more of the total combined voting power or value of all classes of
stock or interests of the entity.
(c) "Award" shall mean any stock option, stock appreciation right, stock
award, phantom stock award, or performance award.
(d) "Board" shall mean the Board of Directors of the Corporation.
1
<PAGE> 2
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended, and
any regulations promulgated thereunder.
(f) "Common Stock" shall mean shares of common stock of the Corporation,
$.01 par value.
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(h) "Fair Market Value" of a share of the Corporation's Common Stock for
any purpose on a particular date shall mean the last reported sale price per
share of Common Stock, regular way, on such date or, in case no such sale takes
place on such date, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on a
national securities exchange or included for quotation on the Nasdaq-National
Market, or if the Common Stock is not so listed or admitted to trading or
included for quotation, the last quoted price, or if the Common Stock is not so
quoted, the average of the high bid and low asked prices, regular way, in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System or, if such system is no longer in use,
the principal other automated quotations system that may then be in use or, if
the Common Stock is not quoted by any such organization, the average of the
closing bid and asked prices, regular way, as furnished by a professional market
maker making a market in the Common Stock as selected in good faith by the
Administrator or by such other source or sources as shall be selected in good
faith by the Administrator. If, as the case may be, the relevant date is not a
trading day, the determination shall be made as of the next preceding trading
day. As used herein, the term "trading day" shall mean a day on which public
trading of securities occurs and is reported in the principal consolidated
reporting system referred to above, or if the Common Stock is not listed or
admitted to trading on a national securities exchange or included for quotation
on the Nasdaq-National Market, any business day.
(i) "Grant Agreement" shall mean a written document memorializing the
terms and conditions of an Award granted pursuant to the Plan and shall
incorporate the terms of the Plan.
(j) "Participants" shall have the meaning set forth in Section 5.
(k) "Parent" shall mean a corporation, whether nor or hereafter existing,
within the meaning of the definition of "parent corporation" provided in Code
section 424(e), or any successor thereto.
(l) "Performance Goals" shall mean performance goals established by the
Administrator which may be based on one or more business criteria selected by
the Administrator that apply to an individual or group of individuals, a
business unit, or the Corporation and/or one or more of its Affiliates either
separately or together, over such performance period as the Administrator may
designate, including, but not limited to,
2
<PAGE> 3
business criteria based on operating income, earnings or earnings growth, sales,
return on assets, equity or investment, regulatory compliance, satisfactory
internal or external audits, improvement of financial ratings, achievement of
balance sheet or income statement objectives, or any other objective goals
established by the Administrator, and may be absolute in their terms or measured
against or in relationship to other companies comparably, similarly or otherwise
situated.
(m) "Subsidiary" and "subsidiaries" shall mean only a corporation or
corporations, whether now or hereafter existing, within the meaning of the
definition of "subsidiary corporation" provided in section 424(f) of the Code,
or any successor thereto.
(n) "Ten-Percent Stockholder" shall mean a grantee who (applying the rules
of Code section 424(d)) owns stock possessing more than 10% of the total
combined voting power or value of all classes of stock or interests of the
Corporation or an Affiliate.
3. ADMINISTRATION
(a) Administration of the Plan. The Plan shall be administered by the
Board or by such committee or committees as may be appointed by the Board from
time to time (the Board, committee or committees hereinafter referred to as the
"Administrator").
(b) Powers of the Administrator. The Administrator shall have all the
powers vested in it by the terms of the Plan, such powers to include authority,
in its sole and absolute discretion, to grant Awards under the Plan, prescribe
Grant Agreements evidencing such Awards and establish programs for granting
Awards.
The Administrator shall have full power and authority to take all other
actions necessary to carry out the purpose and intent of the Plan, including,
but not limited to, the authority to: (i) determine the eligible persons to
whom, and the time or times at which Awards shall be granted; (ii) determine the
types of Awards to be granted; (iii) determine the number of shares to be
covered by or used for reference purposes for each Award; (iv) impose such
terms, limitations, restrictions and conditions upon any such Award as the
Administrator shall deem appropriate, including, but not limited to, whether a
stock option shall be an incentive stock option or a nonqualified stock option,
any exceptions to nontransferability, any Performance Goals applicable to
Awards, any provisions relating to vesting, any circumstances in which the
Awards would terminate, the period during which Awards may be exercised, and the
period during which Awards shall be subject to restrictions; (v) modify, amend,
extend or renew outstanding Awards, accept the surrender of outstanding Awards
and substitute new Awards, or specify a lower or higher exercise price, or a
longer or shorter term, for any substituted Awards than the surrendered Awards,
or impose any other provisions that are authorized by this Plan (provided
however, that, except as provided in Section 7(f)(ii) of the Plan, any
modification that would materially adversely affect any outstanding Award shall
not be made without the consent of the holder); (vi) accelerate, extend (as long
as such extension shall not cause the Plan to fail to comply with Code section
422, if applicable) or otherwise change the time in which an Award may be
exercised or becomes payable
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and to waive or accelerate the lapse, in whole or in part, of any restriction or
condition with respect to such Award, including, but not limited to, any
restriction or condition with respect to the vesting or exercisability of an
Award due to termination of any grantee's employment or other relationship with
the Corporation; and (vii) establish objectives and conditions, if any, for
earning Awards and determining whether Awards will be paid after the end of a
performance period.
In making these determinations, the Administrator may take into account
the nature of the services rendered or to be rendered by the Award recipients,
their present and potential contributions to the success of the Corporation and
its Affiliates, and such other factors as the Administrator in its discretion
shall deem relevant. Subject to the provisions of the Plan, the Administrator
shall have full power and authority, in its sole and absolute discretion, to
administer and interpret the Plan and to adopt and interpret such rules,
regulations, agreements, guidelines and instruments for the administration of
the Plan and for the conduct of its business as the Administrator deems
necessary or advisable.
(c) Non-Uniform Determinations. The Administrator's determinations under
the Plan (including, without limitation, determinations of the persons to
receive Awards, the form, amount and timing of such Awards, the terms and
provisions of such Awards and the Grant Agreements evidencing such Awards) need
not be uniform and may be made by the Administrator selectively among persons
who receive, or are eligible to receive, Awards under the Plan, whether or not
such persons are similarly situated.
(d) Limited Liability. To the maximum extent permitted by law, no member
of the Administrator shall be liable for any action taken or decision made in
good faith relating to the Plan or any Award thereunder.
(e) Effect of Administrator's Decision. All actions taken and decisions
and determinations made by the Administrator on all matters relating to the Plan
pursuant to the powers vested in it hereunder shall be in the Administrator's
sole and absolute discretion and shall be conclusive and binding on all parties
concerned, including the Corporation, its stockholders, any Participants and any
other employee, consultant, or director of the Corporation, and their respective
successors in interest.
4. SHARES AVAILABLE FOR THE PLAN
(a) Maximum Issuable Shares. Subject to adjustments as provided in Section
7(f), the shares of Common Stock that may be issued with respect to Awards
granted under the Plan shall not exceed an aggregate of 750,000 shares of Common
Stock. The Corporation shall reserve such number of shares for Awards under the
Plan, subject to adjustments as provided in Section 7(f). If any Award, or
portion of an Award, under the Plan expires or terminates unexercised, becomes
unexercisable or is forfeited or otherwise terminated, surrendered or canceled
as to any shares, or if any shares of Common Stock are surrendered to the
Corporation in connection with any Award (whether or not such surrendered shares
were acquired pursuant to any Award), the shares subject to such Award and the
surrendered shares shall thereafter be available for
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further Awards under the Plan; provided, however, that any such shares that are
surrendered to the Corporation in connection with any Award or that are
otherwise forfeited after issuance shall not be available for purchase pursuant
to incentive stock options intended to qualify under Code section 422.
(b) Maximum Awards. Subject to adjustments as provided in Section 7(f),
the maximum number of shares of Common Stock subject to Awards of any
combination that may be granted during any one calendar year of the Corporation
to any one individual under this Plan shall be limited to 150,000.
5. PARTICIPATION
Participation in the Plan shall be open to all persons who are at the time of
the grant of an Award employees (including persons who may become employees),
officers, directors, and consultants of the Corporation, or of any Affiliate of
the Corporation, as may be selected by the Administrator from time to time. A
Participant who has been granted an Award may, if he or she is otherwise
eligible, be granted additional Awards if the Administrator so determines.
6. AWARDS
The Administrator, in its sole discretion, establishes the terms of all
Awards granted under the Plan. All Awards shall be subject to the terms and
conditions provided in the Grant Agreement.
(a) Stock Options. The Administrator may from time to time grant to
eligible Participants Awards of incentive stock options as that term is defined
in Code section 422 or nonqualified stock options; provided, however, that
Awards of incentive stock options shall be limited to employees of the
Corporation or of any Parent or Subsidiary of the Corporation. Options intended
to qualify as incentive stock options under Code section 422 must have an
exercise price at least equal to Fair Market Value on the date of grant or at
least 110% of Fair Market Value in the case of a Ten-Percent Stockholder, [but
nonqualified stock options may be granted with an exercise price less than Fair
Market Value.] No stock option shall be an incentive stock option unless so
designated by the Administrator at the time of grant and such designation is
reflected in the Grant Agreement evidencing such stock option.
(b) Stock Appreciation Rights. The Administrator may from time to time
grant to eligible Participants Awards of Stock Appreciation Rights ("SARs"). A
SAR may be exercised in whole or in part as provided in the applicable Grant
Agreement and entitles the grantee to receive, subject to the provisions of the
Plan and the Grant Agreement, a payment having an aggregate value equal to the
product of (i) the excess of (A) the Fair Market Value on the exercise date of
one share of Common Stock over (B) the base price per share specified in the
Grant Agreement, multiplied by (ii) the number of shares covered by the SAR, or
portion thereof, which is exercised. Payment by the Corporation of the amount
receivable upon any exercise of a SAR may be made by the delivery of Common
Stock or cash, or any combination of Common Stock and cash, as
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specified in the Grant Agreement. If upon settlement of the exercise of a SAR a
grantee is to receive a portion of such payment in shares of Common Stock, the
number of shares shall be determined by dividing such portion by the Fair Market
Value of a share of Common Stock on the exercise date. No fractional shares
shall be used for such payment and the Administrator shall determine whether
cash shall be given in lieu of such fractional shares or whether such fractional
shares shall be eliminated.
(c) Stock Awards. The Administrator may from time to time grant restricted
or unrestricted stock Awards to eligible Participants in such amounts, on such
terms and conditions (which terms and conditions may condition the vesting or
payment of Stock Awards on the achievement of one or more Performance Goals),
and for such considerations, including no consideration or such minimum
consideration as may be required by law, as it shall determine.
(d) Phantom Stock. The Administrator may from time to time grant Awards to
eligible Participants denominated in stock-equivalent units ("Phantom Stock") in
such amounts and on such terms and conditions as it shall determine, which terms
and conditions may condition the vesting or payment of Phantom Stock on the
achievement of one or more Performance Goals. Phantom Stock units granted to a
Participant shall be credited to a bookkeeping reserve account solely for
accounting purposes and shall not require a segregation of any of the
Corporation's assets. An Award of Phantom Stock may be settled in Common Stock,
in cash, or in a combination of Common Stock and cash, as specified in the Grant
Agreement. Except as otherwise provided in the applicable Grant Agreement, the
grantee shall not have the rights of a stockholder with respect to any shares of
Common Stock represented by a Phantom Stock unit solely as a result of the grant
of a Phantom Stock unit to the grantee.
(e) Performance Awards. The Administrator may, in its discretion, grant
performance Awards, which become payable on account of attainment of one or more
Performance Goals established by the Administrator. Performance Awards may be
paid by the delivery of Common Stock or cash, or any combination of Common Stock
and cash, as specified in the Grant Agreement.
7. MISCELLANEOUS
(a) Investment Representations. The Administrator may require each person
acquiring shares of Common Stock pursuant to Awards hereunder to represent to
and agree with the Corporation in writing that such person is acquiring the
shares without a view to distribution thereof. The certificates for such shares
may include any legend that the Administrator deems appropriate to reflect any
restrictions on transfer. All certificates for shares issued pursuant to the
Plan shall be subject to such stock transfer orders and other restrictions as
the Administrator may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Common Stock is then listed or interdealer quotation system upon which
the Common Stock is then quoted, and any applicable federal or state securities
laws. The Administrator may place a legend or legends on any such certificates
to make appropriate reference to such restrictions.
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(b) Compliance with Securities Law. Each Award shall be subject to the
requirement that if, at any time, counsel to the Corporation shall determine
that the listing, registration or qualification of the shares subject to such an
Award upon any securities exchange or interdealer quotation system or under any
state or federal law, or the consent or approval of any governmental or
regulatory body, or that the disclosure of nonpublic information or the
satisfaction of any other condition is necessary in connection with the issuance
or purchase of shares under such an Award, such Award may not be exercised, in
whole or in part, unless such satisfaction of such condition shall have been
effected on conditions acceptable to the Administrator. Nothing herein shall be
deemed to require the Corporation to apply for or to obtain such listing,
registration or qualification, or to satisfy such condition.
(c) Withholding of Taxes. Grantees and holders of Awards shall pay to the
Corporation or its Affiliate, or make provision satisfactory to the
Administrator for payment of, any taxes required to be withheld in respect of
Awards under the Plan no later than the date of the event creating the tax
liability. The Corporation or its Affiliate may, to the extent permitted by law,
deduct any such tax obligations from any payment of any kind otherwise due to
the grantee or holder of an Award. In the event that payment to the Corporation
or its Affiliate of such tax obligations is made in shares of Common Stock, such
shares shall be valued at Fair Market Value on the applicable date for such
purposes.
(d) Loans. The Corporation or its Affiliate may make or guarantee loans to
grantees to assist grantees in exercising Awards and satisfying any withholding
tax obligations.
(e) Transferability. Except as otherwise determined by the Administrator
or provided in a Grant Agreement, no Award granted under the Plan shall be
transferable by a grantee except by will or the laws of descent and
distribution. Unless otherwise determined by the Administrator in accordance
with the provisions of the immediately preceding sentence, during the lifetime
of the grantee, the Award may be exercised only by the grantee, by such
permitted transferees or, during the period the grantee is under a legal
disability, by the grantee's guardian or legal representative. Except as
provided above, the Award may not be assigned, transferred, pledged,
hypothecated or disposed of in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or similar process.
(f) Adjustments; Business Combinations.
(i) Adjustments for Events Affecting Common Stock. In the event of changes
in the Common Stock of the Corporation by reason of any stock dividend,
spin-off, split-up, reverse stock split, recapitalization, reclassification,
merger, consolidation, liquidation, business combination or exchange of shares
and the like, the Administrator shall, in its discretion, make appropriate
substitutions for or adjustments to the maximum number and kind of shares
reserved for issuance or with respect to which Awards may be granted under the
Plan to any individual as provided in Section 4 of the Plan and to the number,
kind and price of shares covered to any individual by outstanding Awards
(without changing the aggregate purchase price as to which such Awards remain
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<PAGE> 8
exercisable) and shall, in its discretion and without the consent of holders of
Awards, make any other substitutions for or adjustments in outstanding Awards,
including but not limited to reducing the number of shares subject to Awards or
providing or mandating alternative settlement methods such as settlement of the
Awards in cash or in shares of Common Stock or other securities of the
Corporation or of any other entity, or in any other matters which relate to
Awards as the Administrator shall, in its sole discretion, determine to be
necessary or appropriate.
(ii) Pooling of Interests Transaction. Notwithstanding anything in the
Plan to the contrary and without the consent of holders of Awards, the
Administrator, in its sole discretion, may make any modifications to any Awards,
including but not limited to cancellation, forfeiture, surrender or other
termination of the Awards in whole or in part regardless of the vested status of
the Award, in order to facilitate any business combination that is authorized by
the Board to comply with requirements for treatment as a pooling of interests
transaction for accounting purposes under generally accepted accounting
principles.
(iii) Adjustments for Other Events. The Administrator is authorized to
make, in its discretion and without the consent of holders of Awards,
adjustments in the terms and conditions of, and the criteria included in, Awards
in recognition of unusual or nonrecurring events affecting the Corporation, or
the financial statements of the Corporation or any Affiliate, or of changes in
applicable laws, regulations, or accounting principles, whenever the
Administrator determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan.
(g) Substitution of Awards in Merger and Acquisitions. Awards may be
granted under the Plan from time to time in substitution for Awards held by
employees or directors of entities who become or are about to become employees
or directors of the Corporation or an Affiliate as the result of a merger or
consolidation of the employing entity with the Corporation or an Affiliate, or
the acquisition by the Corporation or an Affiliate of the assets or stock of the
employing entity. The terms and conditions of any substitute Awards so granted
may vary from the terms and conditions set forth herein to the extent that the
Administrator deems appropriate at the time of grant to conform the substitute
Awards to the provisions of the awards for which they are substituted.
Substitute Awards shall not be counted toward the share limit imposed by Section
4(b).
(h) Foreign Participants. The Administrator may, without amending the
Plan, modify Awards granted to Participants who are foreign nationals or
employed outside the United States to recognize differences in laws, rules,
regulations or customs of such foreign jurisdictions with respect to tax,
securities, currency, employee benefit or other matters.
(i) Termination, Amendment and Modification of the Plan. The Board may
amend, alter or terminate the Plan, or portion thereof, at any time.
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(j) Non-Guarantee of Employment or Service. Nothing in the Plan or in any
Grant Agreement shall confer on an individual any legal or equitable right
against the Corporation, any Affiliate or the Administrator, except as expressly
provided in the Plan or the Grant Agreement. Nothing in the Plan or in any Grant
Agreement thereunder shall (i) constitute inducement, consideration, or contract
for employment or service between an individual and the Corporation or any
Affiliate; (ii) confer any right on an individual to continue in the service of
the Corporation or any Affiliate; or (iii) shall interfere in any way with the
right of the Corporation or any Affiliate to terminate such service at any time
with or without cause or notice, or to increase or decrease compensation for
such service.
(k) Other Employee Benefits. Except as to plans that by their terms
include such amounts as compensation, the amount of any compensation deemed to
be received by a Participant as a result of the exercise of an Award or the sale
of shares received upon such exercise will not constitute compensation with
respect to which any other employee benefits of such Participant are determined,
including, without limitation, benefits under any bonus, pension,
profit-sharing, life insurance or salary continuation plan, except as otherwise
specifically determined by the Administrator.
(l) No Trust or Fund Created. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Corporation and a grantee or any other person. To the
extent that any grantee or other person acquires a right to receive payments
from the Corporation pursuant to an Award, such right shall be no greater than
the right of any unsecured general creditor of the Corporation.
(m) Governing Law. The validity, construction and effect of the Plan, of
Grant Agreements entered into pursuant to the Plan, and of any rules,
regulations, determinations or decisions made by the Administrator relating to
the Plan or such Grant Agreements, and the rights of any and all persons having
or claiming to have any interest therein or thereunder, shall be determined
exclusively in accordance with applicable federal laws and the laws of the State
of Delaware without regard to its conflict of laws principles.
(n) Effective Date, Termination Date. The Plan is effective as of March
31, 1999, the date on which the Plan, as a replacement to the Prior Plan, was
adopted by the Board, subject to the approval of the stockholders of the
Corporation within twelve months of such effective date. No Award shall be
granted under the Plan after the close of business on March 31, 2009. Subject to
other applicable provisions of the Plan, all Awards made under the Plan prior to
such termination of the Plan shall remain in effect until such Awards have been
satisfied or terminated in accordance with the Plan and the terms of such
Awards.
Date Approved by the Stockholders: June 24, 1999
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Exhibit 10.33
ENTREMED, INC.
CHILDREN'S HOSPITAL RESEARCH AGREEMENT
This Agreement ("Agreement") entered into this 24th day of June, 1999
(the "Effective Date"), by and between Children's Hospital, 300 Longwood Avenue,
Boston, Massachusetts 02115-5737 ("Hospital"), and EntreMed, Inc., 9640 Medical
Center Drive, Suite 200, Rockville, Maryland 20850 ("EntreMed")
WHEREAS, Hospital owns certain inventions that may be useful in the
treatment of diseases in humans or animals and is interested in having a
corporate sponsor and licensee to clinically develop these inventions;
WHEREAS, EntreMed is interested in funding and/or implementing the
clinical development of certain of the inventions in return for options for
licensing certain of the inventions;
WHEREAS, Hospital and EntreMed entered into a Children's Hospital
Research Agreement dated September 29, 1993, as amended on August 23, 1995 (the
"1993 Agreement);
WHEREAS, the parties now wish to amend and restate the 1993 Agreement in
its entirety as of the Effective Date by entering into three agreements dated
June 24, 1999; and
WHEREAS, the research program contemplated by this Agreement is of mutual
interest and benefit to Hospital and to EntreMed and may further the practice of
medicine and the research agenda of the Hospital in a manner consistent with its
status as a non-profit, tax-exempt, teaching Hospital.
NOW, THEREFORE, the parties agree as follows:
1. Scope of Work
(a) Hospital agrees to use reasonable efforts to perform the Research
and Clinical Development Program entitled "Angiogenesis Research
Program" ("Program") in accordance with Exhibit A, attached hereto
and made a part of this Agreement as the same may be amended by
the parties from time to time.
(b) Any alteration in or amendment to the Program must be approved in
writing by both Hospital and EntreMed prior to such alteration or
amendment being effective.
2. Period of Performance
(a) The Program shall be conducted during the period beginning on the
Effective Date, through September 29, 2000, and will be subject to
renewal only by written mutual agreement of EntreMed and Hospital.
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3. Principal Investigator
(a) The Principal Investigator for the Program will be Dr. M. Judah
Folkman ("Principal Investigator") of the Department of Surgery.
In the event the Principal Investigator becomes unable to complete
the Program for any reason, EntreMed and Hospital may mutually
agree upon a substitute Principal Investigator, in which event
this Agreement shall continue in full force and effect. If
EntreMed and Hospital cannot agree on a substitute, either party
may immediately thereafter terminate this Agreement, subject to
the requirements of Section 11(f) of this Agreement.
4. Research Program Support
(a) Primary Program Support. EntreMed agrees to pay Hospital One
Million Four Hundred Thousand Dollars ($1,400,000) to fund the
Program in accordance with the conditions and terms of this
Agreement.
(b) Payments. On September 29, 1999, EntreMed will pay Hospital the
sum of $700,000 and thereafter will make one additional payment of
$700,000 on March 29, 2000, in accordance with the conditions and
terms set forth herein.
(c) Payments. Payments of all sums due hereunder shall be made by
check payable as follows:
Children's Hospital
Research Finance Office
300 Longwood Avenue
Boston, MA 02115-5737
(d) Late Payments. Late payments shall bear interest from the due date
until payment at a rate of the lower of one and one-half percent
(1 1/2%) per month, or the maximum amount permitted by law. The
payment of such interest shall not forclose Hospital from
exercising any other rights it may have as a consequence of the
lateness of any payment, including without limitation termination
under Article 11(d).
5. Equipment
(a) Equipment purchased as part of the Program shall be owned by
the Hospital, shall be physically located at the Hospital, and
shall remain as property of the Hospital following completion of
the Program.
6. Publications
(a) EntreMed acknowledges that Hospital is an academic medical center
and that Dr. Folkman and his collaborators shall be free to
publish results of their studies without restraint.
Notwithstanding this, Hospital agrees to send EntreMed copies of
any manuscripts resulting from the Program and submitted for
consideration for publication or any abstracts that are submitted
to a conference no later than the same day the manuscript or
abstract is submitted. Hospital agrees to use reasonable efforts
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to notify EntreMed at least one month in advance of any instances where
the results of the Program will be presented at a conference by
invitation and without abstract. EntreMed will notify Hospital if any
action is necessary to secure patent protection for the technology and
Hospital agrees to take such action, subject to the terms and conditions
hereof. If EntreMed so elects, Hospital agrees to include in any
publication of the results of the Program acknowledgment of EntreMed's
financial and technical support.
7. Intellectual Property
(a) Any invention conceived or first reduced to practice by Hospital
or Hospital personnel in the performance of the Program shall be
owned by Hospital ("Invention"). Any invention conceived or first
reduced to practice by EntreMed or EntreMed personnel at
EntreMed's facilities during the term of this Agreement shall be
owned by EntreMed. Any invention conceived or first reduced to
practice jointly by Hospital or Hospital personnel and EntreMed or
EntreMed personnel shall be jointly owned by Hospital and
EntreMed; for jointly-owned inventions, Hospital agrees to offer
an option to license the Hospital's interest in the invention
according to Section 7(c).
(b) Hospital agrees to notify EntreMed as soon as possible when a new,
potentially patentable Invention has been identified and disclosed
to the Technology Transfer Office. EntreMed will immediately order
a patentability and infringement search and, if the Invention is
patentable, will be responsible, at EntreMed's expense, for filing
and prosecuting patent applications on behalf of Hospital in
Hospital's name covering the new Inventions, with appropriate and
timely review and approval by Hospital. EntreMed shall solicit
Hospital's comments prior to any significant actions required
during filing and prosecution and provide Hospital with drafts of
proposed actions and responses sufficiently in advance to allow
time for comment and with file copies after the action is
completed. If EntreMed decides not to file a patent application,
EntreMed will notify Hospital within [ninety) [90] days of
receiving disclosure of the new Invention and if EntreMed decides
not to maintain prosecution of any patent application, EntreMed
will notify Hospital in a timely fashion. Hospital may elect to
file or maintain prosecution of such patent rights at its own
expense; and Hospital shall be entitled to dispose of such patent
rights without limitation, and EntreMed shall have no further
option, license or other rights thereto.
(c) For Inventions for which EntreMed shall elect to file and maintain
prosecution of a patent application, Hospital grants to EntreMed
an exclusive nine-month option to decide whether or not to
negotiate an exclusive license. Such option period shall begin at
the date of filing of a provisional patent application or a
non-provisional patent application. At the end of the nine-month
option period after filing of a provisional patent application,
EntreMed may request an additional six-month option period. In
consideration for granting the additional six-month period,
EntreMed will agree to file a non-provisional patent application
at EntreMed's expense. If EntreMed chooses to license such patent
rights during either option period, EntreMed shall have an
additional three-month period in which to negotiate and enter into
a license on the terms and conditions of the model license
agreement (Exhibit B). During this three-month period, EntreMed
will provide a development plan to Hospital which will include a
time frame for implementation of the
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development plan. This development plan will be updated
semiannually. If EntreMed chooses not to license each patent
rights, Hospital shall have the right to license to a third party;
and EntreMed shall have no further option, license or other rights
thereto.
(d) Any license granted pursuant to this Agreement shall conform to
the terms and conditions of the License attached as Exhibit B.
(e) Any license granted pursuant to this Article shall be subject to a
reservation of the unrestricted right of Hospital and inventors
(while employed by Hospital or other non-profit institution) to
use subject matter claimed in the licensed patent(s) or patent
application(s) for research purposes only at no cost to Hospital
and the right to license to non-profit institutions for research
purposes only.
(f) EntreMed shall retain all invention disclosures submitted by
Hospital in confidence and use its best efforts to prevent their
disclosure to third parties. EntreMed shall be relieved of this
obligation only when this information becomes publicly available
through no fault of EntreMed.
8. Indemnification
(a) EntreMed shall indemnify, defend and hold harmless Hospital and
its board members, officers, medical staff, employees, and agents
from and against any and all liability, damage, loss or expense
(including reasonable attorneys' fees and expenses of litigation)
incurred by or imposed upon it or any one of them in connection
with any claims, suits, actions, demands or judgments arising out
of, resulting from or related to performance under this Agreement,
regardless of the theory of liability (including, but not limited
to, actions in the form of tort, warranty, or strict liability),
to the extent that such liability, loss, damage or expense is the
result of the acts or omissions of EntreMed or any of its board
members, officers, agents, servants, and employees.
(b) EntreMed agrees, at its own expense, to provide attorneys
reasonably acceptable to the Hospital to defend against any
actions brought or filed against any party indemnified hereunder
with respect to the subject of indemnity contained herein, whether
or not such actions are rightfully brought. Hospital shall
promptly notify EntreMed if any such action shall be brought or
flied or claim made.
(c) This Article 8 shall survive expiration or termination of this
Agreement.
9. Biological Materials Transfer
(a) Unique clones, chemicals, proteins or reagents developed or
discovered under the Program by Hospital may be shared with
scientists at non-profit academic or governmental institutions
upon execution of Hospital's Materials Transfer Agreement for
commercially significant materials. Requests for such materials
that originate from commercial entities will be discussed with
EntreMed, and Hospital will consider the potential effect of such
transfers on the Program before deciding whether to transfer such
materials.
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10. Timely Pre-Clinical and Clinical Development
(a) As a condition to obtaining a license to the patent rights to
Inventions under Section 7, EntreMed agrees to support clinical
development, clinical trial and regulatory management of licensed
products. If EntreMed decides to sublicense the licensed product
and patent rights, in whole or for a field of use, the sublicensee
must be acceptable to Hospital in that such sublicensee can
provide the resources required to bring the Invention to the
marketplace. Such acceptance of a sublicensee by Hospital will not
be unreasonably withheld.
(b) EntreMed agrees to notify Hospital in a timely way of its decision
to discontinue preclinical or clinical development of any licensed
product and its reasons for doing so. The license(s) held by
EntreMed to Patent Rights (as defined in the license agreement for
such licensed product) for that Licensed Product (as defined in
the license agreement for such licensed product) will be
terminated upon notice from Hospital.
11. Term and Termination
(a) The term of this Agreement begins on the Effective Date and
terminates on September 29, 2000, unless sooner terminated as
provided below.
(b) Performance under this Agreement may be terminated by EntreMed at
any time with or without cause, and by Hospital without cause,
upon one (1) year prior written notice to the other party. If
Hospital terminates this Agreement under this Article 11(b), all
options and rights to Inventions and patent rights granted in this
Agreement to EntreMed shall remain in effect under Article 7 and
all licenses granted prior to the effective date of termination
shall remain in effect subject to the terms of the applicable
license agreement entered into between EntreMed and Hospital.
EntreMed shall continue to fund the Program for the shorter of
either one year following notice of termination or the remainder
of the term set forth in Article 11(a).
(c) In the event of termination by EntreMed under Article 11(b), all
options and rights to Inventions and patent rights granted in
Article 7 shall immediately terminate this Agreement and
coincidentally with EntreMed's notice of termination. Any license
agreement granted to EntreMed under Article 7 prior to such notice
of termination, shall survive, subject to the terms of said
license agreement.
(d) In the event of EntreMed's material breach of this Agreement,
including without limitation, failure to meet its payment
obligation under Article 4, Hospital shall have the right to give
notice of breach, and EntreMed shall have thirty (30) days to
cure. If EntreMed shall not cure such breach within the thirty-day
period, Hospital shall have the right to immediately terminate
this Agreement and all options and rights to Inventions and patent
rights granted in Article 7 and/or all license and other rights
granted in any license agreements executed prior to the date of
notice of termination of Article 7 rights under this Agreement or
the 1993 Agreement, such notice to be given in writing to
EntreMed.
5
<PAGE> 6
(e) In the event of termination by Hospital under Article 11(b), and
upon sending its notice of termination, Hospital agrees to
promptly take all responsible steps to reduce the costs to
EntreMed, and Hospital shall return at termination any unexpended
funds to EntreMed less any non-refundable costs including
non-cancelable obligations Hospital has incurred in the
performance of the Program prior to the date of notice of such
termination. In no event shall such deduction exceed the total
support specified in Article 4.
(f) In the event of termination under Article 3 and upon the
terminating party sending its notice of termination, Hospital
agrees to promptly take all responsible steps to reduce the costs
to EntreMed, and Hospital shall return at termination any
unexpended funds to EntreMed less any non-refundable costs
including, but not limited to non-cancelable obligations Hospital
has incurred in the performance of the Program prior to the date
of notice of such termination. In no event shall such deduction
exceed the total support specified in Article 4. EntreMed agrees
to fund salaries of essential personnel for a period of nine
months from notice of termination. All options and rights to
Inventions and patent rights granted in Article 7 to EntreMed
shall remain in effect and all licenses granted prior to the
effective date of termination shall remain in effect subject to
the terms of the applicable license agreement entered into between
EntreMed and Hospital.
(g) The following provisions shall survive any expiration or
termination of this Agreement: 4(a) as to the Option, 5(a), 7(a),
8, 11(b), 11(c), 11(f), 11(g), 12(a), 15 (except (b) and (g) and
16.
12. Communications
(a) Notice. All medical/scientific and other communications, reports,
and notices shall be delivered by hand or sent by first class mail
postage prepaid and addressed as follows:
If to EntreMed:
President
EntreMed, Inc.
9640 Medical Center Drive, Suite 200
Rockville, MD 20850
With a copy to:
James Dean Johnson, Ph.D.
Jones & Askew
2400 Monarch Tower
2434 Peachtree Road
Atlanta, GA 30326
6
<PAGE> 7
If to Hospital:
For all medical/scientific communications:
Judah Folkman, M.D.
Department of Surgery
Children's Hospital
300 Longwood Avenue
Boston, MA 02115-5737
With a copy to:
Director
Technology Transfer Office
Children's Hospital
300 Longwood Avenue
Boston, MA 02115-5737
For all other communications, reports, and notices:
Director
Technology Transfer Office
Children's Hospital
300 Longwood Avenue
Boston, MA 02115-5737
(b) For the purpose of facilitating EntreMed's understanding of the
research activities conducted by Hospital pursuant to the Program,
Hospital will permit duly authorized employees or representatives
of EntreMed to visit its facilities where the research is
conducted, or attend restricted-access Hospital seminars on or off
site, at reasonable times and with prior reasonable notice and
approval by the Principal Investigator. All such visits, seminars
or other communications, including without limitation, informal
conversations, email and the like concerning research activities,
will bc subject to the Mutual Nondisclosure Agreement between the
parties of even date as this Agreement.
(c) All communications regarding the business terms in this Agreement
shall be exclusively between EntreMed and the Technology Transfer
Office.
13. Use of Names
(a) Each party agrees not to use or cite in any manner the name of the
other, its employees or Principal Investigator in any commercial
or non-commercial advertising, article, press release or in any
other forms of writing or publication medium, or orally to the
extent practical, without the prior written permission of the
party or individual whose name is to be used except as required by
law. Hospital agrees to respond to any submission by EntreMed in a
timely manner, and EntreMed agrees to submit such writings, and
summarized oral comments to the extent practical, for approval at
least ten (10) days prior to submission for public release.
EntreMed agrees that any such writings or publications or oral
comments or
7
<PAGE> 8
presentations, and any references in its other communications to
the public or third parties, will accurately reflect the
contractual relationship between the parties and will not
misrepresent or mislead others as to the nature of the
relationship. The parties agree to meet within thirty (30) days
alter the Effective Date to establish a set of rules to assist
them in complying with this Article 13.(a).
(b) EntreMed agrees not to disclose any of Hospital's confidential or
proprietary information in Invention disclosures or reports, data
concerning scientific discoveries, data from evaluations, research
results and the like in any commercial or non-commercial
advertising, article, press release or in any other forms of
writing or publication medium or to any third party without the
prior written permission of Hospital.
14. Representations and Warranties. Hospital represents and warrants to EntreMed
as follows:
(a) The execution and delivery of this Agreement by Hospital have been
duly and validly authorized and this Agreement constitutes a
legal, valid and binding obligation of Hospital, enforceable in
accordance with its terms. The execution, delivery and performance
of this Agreement does not conflict with or violate any charter
document or, to Hospital's knowledge, any contract binding upon
Hospital.
(b) Hospital has not received notice of any assertion that any of the
patents or subject Inventions infringe upon any third party's
know-how, patent or other intellectual property rights, except as
otherwise provided in writing to EntreMed, Inc.
(c) Hospital is and will be, during the term of this Agreement and
thereafter, the owner of all rights in and to the inventions
conceived or first reduced to practice by hospital or its
employees or independent contractors as a part of and/or the
projects which are included in the Program.
EntreMed represents and warrants to Hospital as follows:
(a) The execution and delivery of this Agreement by EntreMed have been
duly and validly authorized and this Agreement constitutes a
legal, valid and binding obligation of EntreMed enforceable in
accordance with its terms. The execution, delivery and performance
of this Agreement does not conflict with or violate any charter
document or, to EntreMed's knowledge, any contract binding upon
EntreMed.
15. General Provisions
(a) All rights and remedies hereunder will be cumulative and not
alternative, and this Agreement shall be construed and governed by
the laws of the Commonwealth of Massachusetts.
(c) Neither party may assign, transfer or delegate its rights, duties
or obligations hereunder without the prior written consent of the
other, and any assignment, transfer or delegation in violation of
this provision shall be void. Subject to the terms
8
<PAGE> 9
of this provision, this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective
successors and assigns. Notwithstanding anything herein to the
contrary, in the event EntreMed merges with another entity, is
acquired by another entity, or sells all or substantially all of
its assets to another entity, EntreMed may assign its rights and
obligations hereunder to, in the event of a merger or
acquisition, the surviving entity, and in the event of a sale,
the acquiring entity, without Hospital's consent so long as: (i)
EntreMed is not then in breach of this Agreement; (ii) the
proposed assignee has a net worth at least equivalent to the net
worth EntreMed had as of the date of this Agreement; (iii)
EntreMed provides written notice of the assignment to Hospital,
together with documentation sufficient to demonstrate the
requirements set forth in subparagraphs (i) and (ii) above, at
least twenty (20) days prior to the effective date of the
proposed assignment; and (iv) Hospital receives from the proposed
assignee, in writing, at least twenty (20) days prior to the
effective date of the assignment an agreement to perform the
obligations of EntreMed under this Agreement.
(c) This Agreement may be amended only by written agreement signed by
both parties.
(d) It is expressly agreed by the parties hereto that the Hospital and
EntreMed are independent contractors and nothing in this Agreement
is intended to create an employer relationship, joint venture, or
partnership between the parties. Neither party has the authority
to bind the other.
(e) This Agreement and its Exhibits constitute the entire agreement
between the parties with respect to the subject matter hereof and
supersedes all proposals, negotiations and other communications
between the parties, whether written or oral, with respect to the
subject matter hereof.
(f) If any provisions of this Agreement shall be held to be invalid,
illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions of this Agreement shall
not be impaired thereby.
(g) The use of vertebrate animals in the conduct of work under this
Agreement shall comply with applicable portions of the Animal
Welfare Act (P.L. 89-544 as amended) and will follow the
guidelines prescribed in DHEW, NIH Publication No. 78-23,
"Guide for the Care and Use of Laboratory Animals," as amended,
and in any applicable state or local regulations.
(h) EXCEPT AS PROVIDED IN ARTICLE 14, AND TO THE EXTENT PERMITTED BY
APPLICABLE LAW, HOSPITAL MAKES NO WARRANTY, EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE OR
NONINFRINGEMENT, WITH RESPECT TO ANY PATENT, TRADEMARK, COPYRIGHT,
SOFTWARE, TRADE SECRET, TANGIBLE RESEARCH PROPERTY, INVENTION,
RESEARCH RESULTS, INFORMATION OR DATA PROVIDED OR UNDER OPTION TO
ENTREMED HEREUNDER AND HEREBY DISCLAIMS THE SAME, AND HOSPITAL
SHALL NOT BE LIABLE FOR ANY DIRECT, CONSEQUFNTIAL OR OTHER DAMAGES
SUFFERED BY ENTREMED OR ANY LICENSEE OR
9
<PAGE> 10
OTHERS RESULTING FROM USE OF THE SAME OR ANY RESULTING PRODUCT OR
PROCESS.
16. 1993 Agreement
(a) Hospital and EntreMed hereby terminate the 1993 Agreement, except
that Articles 5(a), 7, 8, 14(a), (c), second 14(a), and 15 shall
survive.
(b) All Inventions under the 1993 Agreement shall be governed by the
provisions of any license agreement as amended from time to time,
entered into prior to the Effective Date, subject to Article II of
this Agreement, or the provisions of this amended and restated
Agreement, if no license agreement has been cxecuted as of the
Effective Date.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
<TABLE>
<CAPTION>
CHILDREN'S HOSPITAL ENTRMED, INC.
<S> <C>
By: /s/ William G. New By: /s/ John W. Holaday, Ph.D.
----------------------------------- ------------------------------
William G. New John W. Holaday, Ph.D.
Title: V.P. Research Administration Title: President and CEO
----------------------------------- ---------------------------
Date: June 24, 1999 Date: June 24, 1999
----------------------------------- ----------------------------
/s/ M. Judah Folkman, M.D. Date: June 24, 1999
- --------------------------------------------- ----------------------------
M. Judah Folkman, M.D.
</TABLE>
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND THE CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 17,514,233
<SECURITIES> 1,501,845
<RECEIVABLES> 358,860
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,456,085
<PP&E> 5,959,539
<DEPRECIATION> 1,877,469
<TOTAL-ASSETS> 24,493,689
<CURRENT-LIABILITIES> 6,043,054
<BONDS> 0
0
0
<COMMON> 131,772
<OTHER-SE> 18,427,425
<TOTAL-LIABILITY-AND-EQUITY> 24,493,689
<SALES> 0
<TOTAL-REVENUES> 2,773,070
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 18,625,502
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (15,157,145)
<INCOME-TAX> 0
<INCOME-CONTINUING> (15,157,145)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,157,145)
<EPS-BASIC> (1.15)
<EPS-DILUTED> (1.15)
</TABLE>
