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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-20711
VIRUS RESEARCH INSTITUTE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 22-3098869
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
61 MOULTON STREET 02138
CAMBRIDGE, MA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 864-6232
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
<S> <C>
None None
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $0.001 par value per share
(TITLE OF CLASS)
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant, based upon the closing sale price of the Common Stock on
February 2, 1998 as reported on the Nasdaq National Market, was approximately
$22,484,000. Shares of Common Stock held by each officer and director and by
each person who owns 5% or more of the outstanding Common Stock have been
excluded in that such persons may be deemed to be affiliates. This determination
of affiliate status is not necessarily a conclusive determination for other
purposes.
As of February 2, 1998, Registrant had outstanding 8,928,314 shares of
Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for Registrant's 1998 Annual Meeting of
Stockholders to be held on May 7, 1998 are incorporated by reference in Part III
of this Form 10-K.
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FORWARD-LOOKING STATEMENTS:
In addition to historical information, this Form 10-K includes
forward-looking statements. These statements involve risks and uncertainties
that could cause actual results to differ from those reflected in the
forward-looking statements. Certain factors that might cause such a difference
are discussed in the second paragraph of the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
Page 15 of this Form 10-K.
PART I
ITEM 1. BUSINESS
GENERAL
Virus Research Institute, Inc. (the "Company") is engaged in the discovery
and development of systems for the delivery of vaccines and immunotherapeutics,
and improved and novel vaccines for adults and children. The Company is
developing a portfolio of proprietary vaccine delivery systems designed to
improve the efficacy, lower the cost of administration and improve patient
compliance for a variety of vaccine products. As part of the Company's strategy
to bring its vaccine delivery technologies to market, the Company collaborates
with corporate partners that offer substantial market presence, unique antigens
and/or complementary technologies. The Company and its collaborators currently
are applying the Company's vaccine delivery systems to develop vaccines for the
prevention of influenza, Lyme disease, respiratory syncytial virus (RSV) and H.
pylori infections. The Company has entered into agreements with Pasteur Merieux
Connaught ("PMC"), Pasteur Merieux-OraVax ("PM-O") and CSL, Ltd., Australia
("CSL") pursuant to which these companies may utilize the Company's vaccine
delivery systems in developing a number of vaccines. During 1997, the Company
entered into a collaboration with SmithKline Beecham (SB) for the development
and commercialization of the Company's oral rotavirus vaccine. Rotavirus
infection causes acute diarrhea and dehydration in infants. The Company is also
developing its own proprietary vaccines utilizing antigens licensed exclusively
by the Company, including a vaccine for HSV2, the virus that causes genital
herpes. In addition, the Company is engaged in the research and development of
Therapore(TM), a novel system for the delivery of immunotherapeutics for chronic
viral infections and cancers.
While vaccines have proven to be safe and effective for the prevention of
certain infectious diseases, the Company believes that there is significant
potential for improvement, including: enhancement of the immune response;
reduction in the number of doses required for an effective immune response;
increase in the percentage of the population responding to certain vaccines;
delivery of vaccines through methods other than by injection; and stimulation of
a mucosal immune response. To address these shortcomings, the Company is
developing vaccine delivery systems that may lead to more effective and less
costly vaccines, increased patient compliance and the introduction of new
vaccines.
The Company's strategy is to utilize its expertise in the design and
application of vaccine delivery systems to develop vaccine products for
infectious diseases that have significant and growing market potential. The
Company is developing three vaccine delivery systems. The Adjumer(TM) vaccine
delivery system utilizes a novel polymer, which is a synthetic polyphosphazene
derivative ("PCPP"), as an adjuvant for use with a variety of antigens
administered by injection. The Company believes that Adjumer(TM)-formulated
vaccines will be capable of producing an enhanced and longer-lived immune
response with fewer injections. In preclinical studies, Adjumer(TM)-formulated
vaccines elicited an immune response that was greater than either vaccines
formulated with alum, the only approved adjuvant for commercial use in humans,
or non-adjuvanted vaccines. The Micromer(TM) vaccine delivery system utilizes a
mixture of PCPP and antigens formed into hydrogel microparticles for the
intranasal and oral delivery of vaccines. Mucosal vaccine delivery has potential
advantages over conventional delivery by injection, including ease of
administration and the generation of immunity at the mucosal surfaces, where
most infectious organisms enter the body, as well as the generation of systemic
(blood and other organs) immunity. The VibrioVec(TM) vaccine delivery system
utilizes a recombinant bacterial vector for the oral delivery of antigens to the
gastrointestinal tract. The Company believes that VibrioVec(TM)-delivered
vaccines will be capable of inducing both a systemic and a mucosal immune
response.
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The Company is developing Therapore(TM) for the treatment and prevention of
certain persistent viral infections and cancers. Early stage research studies
indicate that Therapore(TM) is distinguished from other systems by its ability
to deliver large proteins and peptides with high efficiency. Therapore(TM)
transports these therapeutic polypeptides into the cell where normal cellular
processes induce potent cell mediated immune responses. The Company believes
that Therapore(TM)-delivered antigens will be capable of producing an enhanced
cell mediated response with fewer injections.
VACCINE OVERVIEW
The Vaccine Market. Vaccines have long been recognized as a safe and
cost-effective method for preventing infection caused by certain bacteria and
viruses. The Centers for Disease Control and Prevention (the "CDC") have
estimated that every dollar spent on vaccination saves $16 in healthcare costs.
There are currently 16 vaccines in routine use in the United States against such
life-threatening infectious organisms as tetanus, diphtheria, poliovirus,
hepatitis A virus, hepatitis B virus, Haemophilus influenzae B, measles, mumps
and rubella. From 1990 to 1996, annual worldwide vaccine sales increased from
$1.6 billion to $4.0 billion, a compound annual growth rate of approximately
16.5%. The Company believes that this growth may be accelerated as a result of
advances in vaccine technologies and formulations that address the shortcomings
of existing vaccines. Areas of potential improvement include enhancement of
immune responses, which could lead to a reduction in the number of doses
required for effective protection as well as effective immunization in a higher
percentage of the population, and delivery of vaccines through methods other
than injection. The vaccine market may also expand due to the introduction of
new purified antigens, produced as a result of advances in molecular biology.
The Company also believes that the growing awareness and incidence of certain
infectious diseases, such as H. pylori, hepatitis C virus, HIV1 and HSV2
infection, could further expand the vaccine market.
The Immune System and Vaccines. The function of the human immune system is
to respond to pathogens, including infectious bacteria and viruses, that enter
the body. However, a pathogen may establish an infection and cause disease
before it is eliminated by an immune response. Antibodies are produced as part
of the immune response to antigens, which are components of the pathogen. These
antibodies can continue to circulate in the human body for many years, providing
continued protection against reinfection by the same pathogen.
Protective antibodies can be produced in both the systemic and mucosal
branches of the immune system. The systemic immune system produces IgG
antibodies to protect against infection occurring in blood and deep tissue. The
mucosal immune system produces IgA antibodies that protect against infection
occurring in the mucosal layer lining the digestive, respiratory and
genitourinary tracts. Mucosal immunity may act as a first line of defense, by
attacking pathogens at the point of entry into the body, prior to systemic
penetration, as well as by targeting certain pathogens such as H. pylori,
influenza and rotavirus that propagate exclusively at the mucosal layer.
Vaccines are a pre-emptive means of generating a protective antibody
response. A vaccine consists of either a weakened pathogen or pathogen-specific,
non-replicating antigens which are deliberately administered to induce the
production of antibodies. When weakened pathogens are used as a vaccine, they
replicate in the body, extending presentation to the immune system and inducing
the production of antibodies without causing the underlying disease. When
non-replicating antigens are used as a vaccine, they must be delivered in
sufficient quantity and remain in the body long enough to generate an effective
antibody response. To achieve this goal, many vaccines require multiple
administrations. Of the 16 vaccines currently in routine use, 14 are delivered
by injection and stimulate only systemic immunity. Only polio and typhoid
vaccines can be administered orally and induce both a mucosal and a systemic
immune response. Both of these vaccines are live, weakened pathogens that
localize in the intestines and do not require a separate vaccine delivery
system.
Adjuvants. The antigens contained in many injectable vaccines will not
produce an immune response sufficient to confer protection against infection and
require the use of an adjuvant to sustain the presentation of the antigens to
the human immune system. Alum (aluminum hydroxide) is the only adjuvant
currently approved by the FDA for commercial use in humans. While alum has
gained widespread use, it does not
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sufficiently enhance the immune response to permit administration of many
existing injected vaccines in a single dose. In the case of certain vaccines,
such as influenza, alum is ineffective as an adjuvant.
The Company believes that alum will not prove to be sufficiently effective
for use with many of the new purified recombinant antigens being developed.
Further, alum cannot be used for mucosal delivery of vaccines. Accordingly, the
Company believes that there is a significant need for a new adjuvant that is
safe, works with a wide variety of antigens, induces a protective immune
response with only one or two injections and can be administered mucosally.
These attributes could result in certain benefits, including cost savings and
improved patient compliance.
COMPANY VACCINE DELIVERY SYSTEMS
The Company is developing a portfolio of proprietary vaccine delivery
systems designed to improve the efficacy, lower the cost of administration and
improve patient compliance for a variety of vaccine products. The following
summarizes the Company's three main vaccine delivery systems:
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DELIVERY SYSTEM COMPOSITION DELIVERY METHOD POTENTIAL BENEFITS(1)
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Adjumer(TM)................ Water Soluble Polymer Injectable Enhanced systemic immune
response; fewer
injections
Micromer(TM)............... Polymer Mucosal Systemic and mucosal
Microparticles immune responses; no
injections
VibrioVec(TM).............. Genetically Oral Systemic and mucosal
Engineered Bacterial immune responses;
Vector targeted delivery; no
injection; single dose
</TABLE>
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(1) Based upon preclinical studies conducted by the Company. The Company's
vaccine delivery systems are in various stages of development. The summary
information included in the above table is qualified in its entirety by the
detailed discussion of each of the vaccine delivery systems that follows.
Adjumer(TM). The Company is developing Adjumer(TM), a proprietary vaccine
delivery system as an adjuvant to enhance the immune response to injected
vaccines. Adjumer(TM) is a water soluble, synthetic derivative of the polymer
polyphosphazene (PCPP). The water soluble nature of PCPP facilitates a simple
aqueous-based manufacturing process for vaccines, thereby preserving the
integrity of the antigen.
In preclinical studies conducted by the Company, Adjumer(TM) demonstrated
sustained presentation of influenza, hepatitis B, HSV2, HIV1 and tetanus
antigens to the immune system. In those preclinical studies, single
intramuscular injections of Adjumer(TM)-formulated vaccines elicited a higher
immune response than both alum-formulated vaccines and non-adjuvanted vaccines
as measured by resulting IgG antibody levels. In additional preclinical studies,
an Adjumer(TM)-formulated influenza vaccine using lower antigen doses sustained
higher antibody levels over a longer time period than both alum-formulated
vaccines and non-adjuvanted vaccines. In certain other preclinical studies
Adjumer(TM)-formulated vaccines produced an effective immune response in a
higher percentage of animals than in animals receiving existing vaccine
formulations. Furthermore, in these studies, as well as tests conducted using
Adjumer(TM) alone, the Company observed no material adverse reactions when
Adjumer(TM) was administered at effective levels.
Based on these preclinical results, the Company believes that an
Adjumer(TM)-formulated vaccine may provide a number of benefits over existing
injected vaccines. These benefits include reducing the number of doses required
for an effective immune response, thereby improving compliance; providing cost
savings as a result of the reduction in the number of doses and the amount of
antigen required; and increasing the time period over which immune protection
can be sustained. In addition, based on the results of these preclinical
studies, the Company believes that an Adjumer(TM)-formulated vaccine may be able
to induce an immune response in a number of subjects who would not otherwise
respond to existing vaccines. The first human
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clinical trials of a vaccine using Adjumer(TM) as a delivery system commenced in
1996. See "Product Development Programs."
Micromer(TM). The Company is conducting ongoing research on Micromer(TM),
a proprietary vaccine delivery system designed to facilitate the mucosal
(intranasal or oral) delivery of antigens and stimulate both the systemic and
mucosal branches of the immune system. The focus of the Company's current
efforts are on intranasal delivery. Micromer(TM) is synthesized utilizing a
manufacturing process in which PCPP and an antigen are formulated into hydrogel
microparticles. The Company believes that the physical characteristics of these
microparticles will facilitate absorption by mucosal surfaces.
In preclinical studies conducted by the Company, several
Micromer(TM)-formulated antigens delivered intranasally elicited both a mucosal
(IgA) immune response and a systemic (IgG) immune response. IgA antibodies were
detected at all mucosal sites, and the level of IgG antibodies was comparable to
the level obtained through Adjumer(TM)-formulated injections of the same
antigen. A Micromer(TM)-formulated influenza vaccine required only a single,
intranasal dose to provide an immune response sufficient to protect the animals
against subsequent infection by the influenza virus. In addition to conducting
further research on the Micromer(TM) vaccine delivery system, the Company has
commenced research on additional Micromer(TM)-formulated vaccines.
VibrioVec(TM). The Company is developing VibrioVec(TM), a proprietary
vaccine delivery system that uses a bacterial vector for the oral delivery of
antigens. This vector is a live organism that has been genetically altered to
make it non-virulent, incapable of reacquiring virulence and capable of
delivering selected antigens. VibrioVec(TM) is an attenuated form of the
bacterium Vibrio cholerae.
In preclinical studies conducted by the Company, single, oral doses of
VibrioVec(TM) engineered to express genes encoding antigens from selected
bacteria have generated systemic and mucosal immune responses that protected
against infection from the virulent organism. In addition, in 1995 the Company
completed Phase II human clinical studies involving more than 100 subjects
administering VibrioVec(TM) as a potential cholera vaccine. The subjects in this
study showed no clinically significant vaccine-related side effects. Separate
clinical trials will be needed to test each antigen proposed to be delivered by
VibrioVec(TM).
Based on its preclinical studies, the Company believes that VibrioVec(TM)
will be an effective oral delivery system that can deliver antigens to the
gastrointestinal tract where the VibrioVec(TM) vector will grow and express the
antigens for a limited period of time. The Company is currently inserting the
genes which encode certain H. pylori antigens into VibrioVec(TM) to determine if
the vector containing these genes can grow and express the antigen.
STRATEGY
The Company's strategy is to utilize its expertise to design and develop
vaccine and immunotherapeutic products that have significant and growing market
potential; to establish commercial alliances that permit funding of clinical
development and rapid commercialization; and to retain rights to important
market opportunities.
Develop Novel Vaccine Delivery Systems. The Company is developing a
portfolio of vaccine delivery systems to address shortcomings in currently
available delivery methods, as well as to provide new methods of vaccine
delivery. The Company's vaccine delivery systems, which are based on a novel
polymer and on bacterial vectors, have the potential to improve existing
injectable vaccines and to permit intranasal and oral delivery of vaccines.
These systems may be applicable to most of the vaccines in routine use and may
enable the introduction of new vaccines to prevent bacterial or viral diseases
for which there is currently no adequate treatment or prevention. The Company
intends to pursue the broad application of its current vaccine delivery systems,
as well as to continue to invest in the development of new vaccine delivery
technologies.
Develop Proprietary Vaccines. The Company is currently developing several
proprietary vaccines believed to have significant near-term commercial promise.
The Company is continuing to seek exclusive licenses for suitable antigens to be
used to develop vaccines with a significant market potential. The Company
believes that the development of its own proprietary vaccines complements its
development of novel vaccine
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delivery systems. The Company believes that its ability to combine its vaccine
delivery technology with its own proprietary antigens may lead to the
introduction of new vaccines with competitive advantage.
Develop Immunotherapeutic Products. The Company is developing
Therapore(TM), a proprietary technology that uses a bacterial protein system for
the injectable delivery of proteins and peptides to generate potent
cell-mediated immune responses. The bacterial protein system is a bacterial
toxin that has been genetically altered to make it non-toxic, and capable of
transporting certain antigens. Based on research conducted to date, the Company
believes that Therapore(TM) will be able to introduce both peptide and protein
antigens into human cells leading to the development of potent cell-mediated
immune responses. The Company believes Therapore(TM) will be a core technology
in the development of novel immunotherapeutic products and that the development
of these products complements its development of novel vaccine delivery systems
and proprietary vaccines. The Company intends to pursue the broad application of
Therapore(TM) across the field of persistent viral infections and cancers.
Establish Collaborations for Product Development and Commercialization.
The Company has entered into and intends to seek additional collaborative
agreements with established vaccine companies to develop vaccines utilizing the
Company's vaccine delivery systems and its collaborators' antigens. By entering
into these collaborations, the Company believes it will benefit from the
antigen development work already performed by its collaborators and from access
to their extensive clinical testing capabilities, wide distribution and
marketing infrastructure and market presence. This strategy may permit the
Company to take advantage of the expertise of its collaborators and thereby
expedite commercialization of products incorporating the Company's technologies.
With respect to the proprietary vaccines and immunotherapeutics being
developed, the Company generally intends to seek collaborators who will be
responsible for completing the clinical testing and for the manufacturing and
marketing of the product. However, the Company intends to develop such
proprietary vaccines and immunotherapeutics to the point at which it believes it
can establish the most commercially favorable collaborations. The Company
believes that this strategy will allow the successful market introduction of
products incorporating the Company's technologies without the Company incurring
the substantial costs associated with Phase II and III clinical development.
One of the Company's significant collaborative arrangements is with PMC.
The Company is a party to two license agreements entered into in December 1994
and August 1995 with PMC relating to Adjumer(TM)- and Micromer(TM)-formulated
vaccines, respectively, for the prevention of a variety of infectious diseases.
Under the agreements, PMC has been granted the exclusive right to make, use and
sell Adjumer(TM)- and Micromer(TM)-formulated vaccines for prevention of
influenza, Lyme disease and diseases caused by meningococcus and the
co-exclusive right (exclusive, except for the right of the Company or one other
person licensed by the Company) to make, use and sell Adjumer(TM)- and
Micromer(TM)-formulated vaccines directed against five other pathogens,
including pneumococcus and RSV. The licenses to PMC apply to specified
territories, including North and South America, Europe, Africa, Thailand and the
countries of the former Soviet Union. The Company has retained rights to make,
use, sell and license Adjumer(TM)- and Micromer(TM)-formulated vaccines against
the subject infections in most of the Far East, including China and Japan,
subject to certain geographical extension rights available to PMC.
PMC made a $3.0 million equity investment in the Company in December 1994
upon the execution of the agreement relating to Adjumer(TM). In addition, in
connection with this collaboration, in 1996 PMC made milestone payments of $4.5
million to the Company and an additional equity investment of $1.0 million in
the Company. Contingent upon achieving certain milestones, PMC has agreed to pay
the Company up to an additional $6.2 million in connection with the development
of Adjumer(TM)-formulated vaccines for influenza and Lyme disease. Contingent
upon achieving certain milestones, PMC has also agreed to make payments, on a
product by product basis with respect to the development of other Adjumer(TM)-
and Micromer(TM)-formulated vaccines. PMC is required to fund all costs
associated with the development and commercialization, including the costs of
clinical trials, of any vaccines it elects to develop utilizing the Company's
technology. In addition, the Company will be entitled to royalties based on net
sales of any vaccine products developed and sold by PMC pursuant thereto.
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In connection with its agreement relating to Micromer(TM), the Company
agreed to conduct research through 1997 to develop Micromer(TM)-formulated
vaccines directed against influenza and PIV. Through December 31, 1997, PMC has
paid the Company $2.5 million to fund this research. The Company will fund the
costs associated with any Phase I clinical trial of a Micromer(TM)-formulated
influenza vaccine (see "Product Development Programs").
Under the agreement relating to Adjumer(TM), the Company was required to
use commercially reasonable efforts to establish a process capable of yielding
quantities of clinical grade PCPP for use by PMC in clinical studies. The
Company has satisfied this requirement. In addition, the Company has facilitated
the production of commercial grade PCPP in a contractor's cGMP manufacturing
facility according to agreed upon specifications. The PMC agreement, while
reserving to PMC the right to manufacture PCPP, anticipates that the Company
will supply PCPP under a cost-plus supply agreement.
The Company also has a collaborative arrangement with Pasteur
Merieux-OraVax for the use of the Company's vaccine delivery system,
VibrioVec(TM), to develop vaccines against H. pylori infections. The agreement
grants to PM-O a worldwide license to use VibrioVec(TM) for the delivery of
specific H. pylori antigens. A license issue fee as well as research support
payments totalling $1.0 million has been earned under this agreement through
December 31, 1997. The agreement also provides for future milestone payments and
royalties on net sales of any future products developed by PM-O. The option
previously granted to PM-O for the use of PCPP in the delivery of H. pylori
vaccines has expired.
During 1997, the Company entered into an agreement with SmithKline Beecham
(SB) to collaborate on the development and commercialization of the Company's
oral rotavirus vaccine. Rotavirus infection causes acute diarrhea and
dehydration in infants. Under the terms of the agreement, SB will receive an
exclusive worldwide license to commercialize the Company's rotavirus vaccine.
The Company will be responsible for continuing the Phase II clinical efficacy
study of the rotavirus vaccine which was initiated in 1997 (see "Product
Development Programs"). Upon successful completion of the Phase II study, SB
will assume responsibility for all subsequent clinical and other development
activities. SB made an initial license payment in 1997 upon execution of the
agreement and has agreed to make further payments upon the achievement of
certain milestones. In addition, the Company will be entitled to royalties based
on net sales of the rotavirus vaccine.
In January 1998, the Company entered into an agreement with Heska
Corporation whereby Heska will have the right to use PCPP in certain animal
health vaccines. The agreement provides for the payment of license fees,
milestone and royalties based on net sales of PCPP-formulated animal vaccines.
PRODUCT DEVELOPMENT PROGRAMS
The Company and its collaborators are engaged in research and development
efforts on vaccine programs using the Company's technologies. The Company and
PMC, the leading worldwide supplier of influenza vaccines, are currently
collaborating on the development of an Adjumer(TM)-formulated vaccine for
influenza. The Company is conducting research on the mucosal administration of
an influenza vaccine using its Micromer(TM) vaccine delivery system. Influenza
accounts for an average of 20,000 deaths annually in the United States; the
greatest number of fatalities occur among the elderly. In preclinical studies
conducted by the Company and PMC, an Adjumer(TM)-formulated influenza vaccine
produced a significantly enhanced and longer-lived immune response than one of
the influenza vaccines currently on the market. PMC completed Phase I human
clinical trials of this Adjumer(TM)-formulated influenza vaccine in France
during 1997. A total of 48 young and 41 elderly adults participated in this
study, which was designed to measure the safety and level of immune response to
the vaccine. Based on the results of the study, which showed the Adjumer(TM)-
formulated vaccine was well tolerated and elicited improved responses, a Phase
II safety and immunogenicity study was initiated by PMC during 1997. A total of
430 elderly adults participated in the Phase II study, which was conducted in
Peru. Preliminary results of the Phase II clinical trial confirmed that the
Adjumer(TM)-formulated vaccine was well tolerated. However, results of the Phase
II study appear to be inconsistent in certain respects with Phase I results. The
degree of improvement in immune responses elicited by the Adjumer(TM) influenza
vaccine was less in comparison to the control group than was elicited in the
Phase I study. At the same time, certain control group results also appear to be
significantly higher in Phase II than in
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Phase I. The Company and PMC are currently analyzing and assessing the results
of the Phase II study to determine the appropriate next steps to take with the
clinical development of the product.
PMC is continuing to investigate the use of Adjumer(TM) in other vaccines.
The Company understands that Phase I trials of Adjumer(TM)-formulated vaccines
for Lyme disease and for RSV will be initiated by PMC during 1998.
The Company is also developing a novel vaccine against rotavirus infection.
Rotavirus, a major cause of diarrhea and vomiting in infants, affects
approximately 80% of the approximately 4 million infants born each year in the
United States. As a result, on an annual basis, about 500,000 infants require
medical attention and 50,000 are hospitalized. The economic burden in the United
States is estimated at over $1 billion in direct and indirect costs. The Company
anticipates a vaccine against rotavirus disease will become a universal
pediatric vaccine. The Company has completed Phase I clinical trials of an
orally delivered live human rotavirus vaccine selected to elicit a broadly
protective immune response to the most prevalent strains of rotavirus. During
1997 the Company completed a Phase I/II clinical trial designed to define the
optimal vaccine dose and optimal age for immunization. Based on the assessment
of the safety and immunogenicity of the vaccine, the Company initiated a Phase
II efficacy study in 1997. The results of this study are expected to be
available by mid-1998 and depending upon the outcome of this study, the Company
anticipates that the product will advance to Phase III clinical studies in 1999.
As discussed in the preceding section, following the successful completion of
the Phase II clinical trial, SB will assume financial responsibility for all
subsequent clinical and development activities.
The Company is developing a vaccine against HSV2, a sexually transmitted
virus which causes genital herpes. HSV2 has an estimated incidence of 500,000
new cases occurring in the United States each year. At present, there is no
approved vaccine for prevention of HSV2 infection. The Company plans to initiate
Phase I clinical trials of the vaccine for the prevention of genital herpes
during 1998. In addition, the Company is currently conducting animal studies in
preparation for a Phase I trial of a Micromer(TM)-formulated influenza vaccine
during the second half of 1998.
During 1997, the Company received an exclusive worldwide license from
Harvard College to Therapore(TM), which the Company believes to be the core of a
novel technology for the development of immunotherapeutics. The system is
initially being evaluated in therapies to treat chronic viral infections such as
Hepatitis B, Hepatitis C and HIV, and cancers including melanoma.
COMPETITION
Competition in the biotechnology and vaccine industries is intense. The
Company faces competition from many companies in the United States and abroad,
including a number of large pharmaceutical companies, firms specialized in the
development and production of vaccines, adjuvants and vaccine delivery systems
and major universities and research institutions. Most of the Company's
competitors have substantially greater resources, more extensive experience in
conducting preclinical studies and clinical testing and obtaining regulatory
approvals for their products, greater operating experience, greater research and
development and marketing capabilities and greater production capabilities than
those of the Company. There can be no assurance that the Company's competitors
will not develop technologies and products that are safer or more effective than
any which are being developed by the Company or which would render the Company's
technology and products obsolete and noncompetitive, and the Company's
competitors may succeed in obtaining FDA approval for products more rapidly than
the Company. There can be no assurance that the vaccines under development by
the Company and its collaborators will be able to compete successfully with
existing products or products under development by other companies, universities
and other institutions or that they will attain regulatory approval in the
United States or elsewhere. The Company believes that the principal competitive
factors in the vaccine market are product quality, measured by efficacy and
safety, ease of administration and price.
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The Company's competitive position will also depend upon its ability to
attract and retain qualified personnel, obtain patent protection or otherwise
develop proprietary products or processes and secure sufficient capital
resources for the often lengthy period between technological conception and
commercial sales.
MANUFACTURING
The Company has no manufacturing facilities, no experience in volume
manufacturing and plans to rely upon collaborators or contract manufacturers to
manufacture its proposed products for both clinical and commercial purposes. The
Company believes that there is currently sufficient capacity worldwide for the
production of its potential products by the Company's collaborators or through
contract manufacturers.
To date, the Company has been arranging on a purchase order basis with
contract manufacturers for the manufacture of PCPP and vaccines in quantities
sufficient for preclinical studies and for clinical trials of the Company's
rotavirus vaccine candidate. The Company has a contract for the development and
initial supply of the starting materials for PCPP but does not yet have a
written contract with a manufacturer for production of PCPP or for any other
components of its vaccine delivery systems or vaccine candidates. The
manufacturing processes for the Company's vaccine delivery systems and vaccines
utilize known technologies. The Company believes that the vaccine delivery
systems and vaccines it currently has under development can be readily scaled up
to permit manufacture in commercial quantities. However, there can be no
assurance that the Company will not encounter difficulties in scaling up the
manufacturing processes.
In addition, the Company has facilitated the production of commercial grade
PCPP in a contractor's cGMP manufacturing facility according to agreed upon
specifications. The PMC agreement, while reserving to PMC the right to
manufacture PCPP, anticipates that the Company will supply PCPP under a
cost-plus supply agreement.
The Company intends to establish manufacturing arrangements with
manufacturers that comply with the FDA's requirements and other regulatory
standards, although there can be no assurance that the Company will be able to
do so. In the future, the Company may, if it becomes economically attractive to
do so, establish its own manufacturing facilities to produce any vaccine
products that it may develop. In order for the Company to establish a
manufacturing facility, the Company will require substantial additional funds
and will be required to hire and retain significant additional personnel and
comply with the extensive cGMP regulations of the FDA applicable to such
facility. The product manufacturing facility would also need to be licensed for
the production of vaccines by the FDA.
MARKETING
Under the terms of existing and future collaborative agreements, the
Company relies and expects to continue to rely on the efforts of its
collaborators for the sale and marketing of any vaccine products. There can be
no assurance that the Company's collaborators will market vaccine products
incorporating the Company's technologies, or, if marketed, that such efforts
will be successful. The failure of the Company's collaborators to successfully
market products will have an adverse effect on the Company's business.
The Company has retained, and in the future intends to retain, marketing
rights to certain of its vaccine delivery systems and vaccine candidates in
selected geographic areas. The Company intends to seek marketing and
distribution agreements and/or co-promotion agreements for the distribution of
vaccines in such territories. The Company believes that these arrangements could
enable the Company to generate a higher level of financial return than might be
obtained from early stage licensing and collaboration agreements for its vaccine
candidates. The Company has no marketing and sales staff and limited experience
relating to vaccine marketing. If the Company determines in the future to engage
in direct marketing of vaccine products, it will be required to recruit an
experienced marketing group and incur significant additional expenditures. There
can be no assurance that the Company will be able to establish a successful
marketing force.
8
<PAGE> 10
PATENTS, LICENSES AND PROPRIETARY RIGHTS
Licenses
The Company has entered into several significant license agreements
relating to technology which is being developed by the Company or its
collaborators, including licenses from: Massachusetts Institute of Technology
covering certain proprietary technologies for vaccine delivery related to PCPP
microparticles; Penn State Research Foundation covering the production of
polyphosphazene polymer; Harvard College relating to proprietary technology
involving genetically altered Vibrio and Salmonella typhi strains; Cincinnati
Children's Hospital involving proprietary rights and technologies relating to an
attenuated rotavirus strain for a rotavirus vaccine; Harvard College and the
Dana Farber Cancer Institute relating to a genetically-altered HSV2 virus for
herpes virus vaccines; and Harvard College for a novel immunotherapy delivery
system to be developed to deliver products for the treatment of chronic viral
infections and cancers. In general, these institutions have granted the Company
an exclusive worldwide license (with right to sublicense) to certain proprietary
technologies (including rights to patents and patent applications) to make, use
and sell products using the licensed technology, subject to the reservation by
the licensor of a non-exclusive right to use the technologies for non-commercial
purposes. Generally, the term of each license is through the expiration of the
last of the patents issued with respect to the technologies covered by such
license. The Company has generally agreed to use its reasonable efforts to
develop and commercialize products and achieve certain milestones and pay
license fees, milestone payments and royalties based on the net sales of the
licensed products or to pay a percentage of sublicense income. If the Company
breaches its obligations, the licensor has the right to terminate the license,
and, in some cases, convert the license to a non-exclusive license.
Patents and Proprietary Rights
The Company's policy is to protect its technology by filing patent
applications. In addition to filing patent applications in the United States,
the Company has filed, and intends to file, patent applications in foreign
countries on a selective basis. The Company also relies on trade secrets,
unpatented know-how and technological innovation to develop and maintain its
competitive position.
The Company owns an issued United States patent which expires on July 12,
2013, and corresponding foreign applications, directed to the use of vaccines
which incorporate the Company's Adjumer(TM) vaccine delivery technology. In
addition, the Company owns an issued United States patent which expires
September 21, 2013, and corresponding foreign applications, directed to the use
of vaccines incorporating the Company's Micromer(TM) vaccine delivery
technology. Further, the Company owns and has licensed other United States
patents and patent applications which are directed to technology which may be
useful for the Company's Micromer(TM) and Adjumer(TM) vaccine delivery systems
and corresponding foreign applications. The Company has an exclusive license to
a United States patent application, and corresponding foreign applications,
directed to a vector construct which is used in the Company's VibrioVec(TM)
vaccine delivery system. The Company has an exclusive license to an issued
United States patent which expires on December 12, 2012, directed to a rotavirus
antigen which forms a part of the Company's rotavirus vaccine and to a United
States patent application, and corresponding foreign applications, directed to a
defective HSV2 virus for use in the Company's vaccine directed against genital
herpes. The Company has an exclusive license to a United States patent
application which is directed to technology which may be useful for the
Company's Therapore(TM) system.
Although a patent has a statutory presumption of validity in the United
States, the issuance of a patent is not conclusive as to such validity or as to
the enforceable scope of the claims of the patent. There can be no assurance
that the Company's issued patents or any patents subsequently issued to or
licensed by the Company will not be successfully challenged in the future. The
validity or enforceability of a patent after its issuance by the patent office
can be challenged in litigation. If the outcome of the litigation is adverse to
the owner of the patent, third parties may then be able to use the invention
covered by the patent without payment. There can be no assurance that the
Company's patents will not be infringed or successfully avoided through design
innovation.
9
<PAGE> 11
There can be no assurance that patent applications owned by or licensed to
the Company will result in patents being issued or that, if issued, the patents
will afford protection against competitors with similar technology. It is also
possible that third parties may obtain patent or other proprietary rights that
may be necessary or useful to the Company. In cases where third parties are
first to invent a particular product or technology, it is possible that those
parties will obtain patents that will be sufficiently broad so as to prevent the
Company from using certain technology or from further developing or
commercializing certain vaccine delivery systems and vaccine candidates. If
licenses from third parties are necessary but cannot be obtained,
commercialization of the vaccine candidates would be delayed or prevented.
The Company is aware of a domestic patent and a foreign patent which cover
claims that could conflict with the Company's vaccine candidates and delivery
systems. The Company believes that the relevant claim under the domestic patent
is invalid and that the relevant claim under the foreign patent does not extend
to or restrict the Company's activities. There can be no assurance that the
applicable patent office or court would reach the same conclusions. In addition
to the patents and the patent applications referred to in the previous two
paragraphs, there may be other patent applications and issued patents belonging
to competitors that may require the Company to alter its vaccine candidates and
vaccine delivery systems, pay licensing fees or cease certain activities. If the
Company's vaccine candidates conflict with patents that have been or may be
granted to competitors, universities or others, such other persons could bring
legal actions against the Company claiming damages and seeking to enjoin
manufacturing and marketing of the affected products. If any such actions are
successful, in addition to any potential liability for damages, the Company
could be required to obtain a license in order to continue to manufacture or
market the affected products. There can be no assurance that the Company would
prevail in any such action or that any license required under any such patent
would be made available on acceptable terms or at all. The Company believes that
there may be significant litigation in the industry regarding patent and other
intellectual property rights. If the Company becomes involved in such
litigation, it could consume substantial resources.
The Company also relies on unpatented technology, trade secrets and
information and no assurance can be given that others will not independently
develop substantially equivalent information and techniques or otherwise gain
access to the Company's technology or disclose such technology, or that the
Company can meaningfully protect its rights in such unpatented technology, trade
secrets and information. The Company requires each of its employees, consultants
and advisors to execute a confidentiality agreement at the commencement of an
employment or consulting relationship with the Company. The agreements generally
provide that all inventions conceived by the individual in the course of
employment or in providing services to the Company and all confidential
information developed by, or made known to, the individual during the term of
the relationship shall be the exclusive property of the Company and shall be
kept confidential and not disclosed to third parties except in limited specified
circumstances. There can be no assurance, however, that these agreements will
provide meaningful protection for the Company's information in the event of
unauthorized use or disclosure of such confidential information.
GOVERNMENT REGULATION
The Company's activities and products are significantly regulated by a
number of governmental entities, especially by the FDA in the United States and
by comparable authorities in other countries. These entities regulate, among
other things, the manufacture, testing, safety, effectiveness, labeling,
documentation, advertising and sale of the Company's products. Product
development within this regulatory framework takes a number of years and
involves the expenditure of substantial resources. Many products that initially
appear promising ultimately do not reach the market because they are found to be
unsafe or ineffective when tested.
In the United States, vaccines for human use are subject to FDA approval as
"biologics" under the Public Health Service Act and "drugs" under the Federal
Food, Drug and Cosmetic Act. The steps required before a new product can be
commercialized include: preclinical studies in animals, clinical trials in
humans to determine safety and efficacy, and FDA approval of the product for
commercial sale.
The FDA provides that human clinical trials may begin thirty (30) days
after receipt and review of an Investigational New Drug application (IND),
unless the FDA requests additional information or changes to
10
<PAGE> 12
the study protocol within that period. The IND summarizes the preclinical
testing and outlines the plan for the clinical trial. Authorization to conduct a
clinical trial in no way assures that the FDA will ultimately approve the
product. Clinical trials are conducted in three sequential phases; in Phase I,
the product is given to a small number of healthy volunteers to test for safety
(adverse effects). Phase II trials are conducted on a limited group of the
target patient population; safety, optimal dosage and efficacy are studied. A
Phase III is performed in a large patient population over a wide geographic area
to prove that significant efficacy exists. The FDA has ongoing oversight over
all these trials and can order a temporary or permanent discontinuation if that
action is warranted. Such an action could materially and adversely affect the
company.
The results of the clinical trials and all supporting data are submitted to
the FDA for approval. A Biologics License Application (BLA) is submitted for a
biologic product; a New Drug Application (NDA) for a drug product. The interval
between IND filing and BLA/NDA filing is usually at least several years due to
the length of the clinical trials; and the BLA/NDA review process can take over
a year. During this time the FDA may request further testing, additional trials
or may turn down the application. Even with approval, the FDA frequently
requires post-marketing safety studies (known as Phase IV trials) to be
performed.
The FDA requires that the manufacturing facility that produces a licensed
product meet certain standards, undergo an inspection and obtain an
establishment license prior to commercial marketing of a vaccine.
The Advisory Committee on Immunization Practices (ACIP) of the CDC has a
role in setting the public market in the United States for most of the products
the Company intends to develop. The Committee makes recommendations on the
appropriate use of vaccines and related products and the CDC develops
epidemiologic data relevant to vaccine requirements and usage.
To market its products abroad, the Company is subject to varying foreign
regulatory requirements. Although international efforts are being made to
harmonize these requirements, applications must currently be made in each
country. The data necessary and the review time varies significantly from one
country to another. Approval by the FDA does not ensure approval by the
regulatory bodies of other countries.
The Company's collaborators are subject to all of the above-described
regulations in connection with the commercialization of products utilizing the
Company's technology.
PRODUCT LIABILITY
The testing and marketing of vaccines entail an inherent risk of product
liability attributable to unwanted and potentially serious health effects. If
and when the Company manufactures vaccines which are recommended for routine
administration to children, the Company will be required to participate in the
National Vaccine Injury Compensation Program. This program compensates children
having adverse reactions to certain routine childhood immunizations with funds
collected through an excise tax from the manufacturers of these vaccines.
The Company has clinical trial liability insurance coverage in the amount
of $2 million. However, there can be no assurance that such insurance coverage
is or will continue to be adequate or available. The Company intends to seek
product liability insurance coverage prior to commercialization of its product
candidates but there can be no assurance that insurance will be available at all
or in sufficient amounts to protect the Company at a reasonable cost.
HUMAN RESOURCES
As of December 31, 1997, the Company had 54 employees, 45 of whom were
engaged in research and development activities, including 15 Ph.D.'s. The
Company's employees are not governed by any collective bargaining agreement and
the Company believes that its relationship with its employees is good.
11
<PAGE> 13
ITEM 2. PROPERTIES
The Company currently leases approximately 17,800 square feet of laboratory
and office space in Cambridge, Massachusetts. The lease has a five year term,
which commenced on December 1, 1996, and is extendable at the Company's option
for an additional five years.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal year 1997.
Executive Officers of the Registrant
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
J. Barrie Ward, Ph.D. ................. 59 Chief Executive Officer and Chairman of the Board
William A. Packer...................... 63 President, Chief Financial Officer
Bryan E. Roberts, Ph.D. ............... 50 Executive Vice President
Lendon Payne, Ph.D., M.D. ............. 49 Vice President of Research
Dale R. Spriggs, Ph.D. ................ 46 Vice President of Development
Lisa P. McGillis....................... 38 Director of Finance
</TABLE>
J. Barrie Ward, Ph.D. has served as Chairman of the Board of Directors and
Chief Executive Officer since joining the Company in July 1994. From 1984 to
June 1994, Dr. Ward served as Director of the Microbiology Division of Glaxo
Research and Development Ltd., a pharmaceutical company, with responsibility for
infectious disease research. Dr. Ward received a Ph.D. in microbial biochemistry
from the University of Bath, England.
William A. Packer joined the Company in 1992 as President and a Director
and was also elected Chief Financial Officer in March 1996. Prior to joining the
Company, Mr. Packer held various senior management positions with SmithKline
Beecham plc, a pharmaceutical company, from 1964 to 1991, most recently as
Senior Vice President, Biologicals, where he was responsible for the direction
of SB's global vaccine business. Mr. Packer is a Fellow of the Institute of
Chartered Accountants in England and Wales.
Bryan E. Roberts, Ph.D. joined the Company in 1991. Dr. Roberts served as
Research Director from 1991 to 1993 and as Vice President of Research from 1993
until March 1996, when he was appointed Executive Vice President. From 1984 to
1990, Dr. Roberts was the Research Director of Applied BioTechnology, Inc., a
biotechnology company he co-founded. From 1978 to 1986, Dr. Roberts was an
Associate Professor of Biological Chemistry at the Harvard Medical School. Dr.
Roberts received a D.Phil. from the University of Oxford.
Lendon Payne, Ph.D., M.D. joined the Company in 1991 and in January 1997
became an officer of the Company. Dr. Payne served as a Research Director from
1993 to 1995, and since 1996, was the Vice President of Research. Dr. Payne
received his Ph.D. in virology and his M.D. from Karolinska Institute School of
Medicine, Stockholm, Sweden. Dr. Payne terminated his employment with the
Company on January 30, 1998.
Dale R. Spriggs, Ph.D. joined the Company in May 1993, and became an
officer of the Company in January 1997. Dr. Spriggs served as the Director of
Clinical Research and Development until May 1995, and as Director of Clinical
and Regulatory Affairs from May 1995 to March 1996, when he was appointed Vice
President of Development. From 1987 to 1993, Dr. Spriggs held several positions
at the National Institute of Allergy and Infectious Diseases. Dr. Spriggs
received a Ph.D. in microbiology from the University of Cincinnati College of
Medicine.
12
<PAGE> 14
Lisa P. McGillis joined the Company in 1994. In 1996, Ms. McGillis was
appointed Director of Finance. Ms. McGillis became an officer of the Company in
January 1997. Prior to joining the Company, Ms. McGillis served as Controller at
ISI Systems, Inc. and as a Certified Public Accountant at Price Waterhouse. Ms.
McGillis received a B.A. from Williams College and an M.S. in Accounting from
Northeastern University.
Scientific Advisory Board
The Company's Scientific Advisory Board currently consists of seven
individuals who have extensive experience in the field of polymer chemistry,
virology, infectious disease, immunology, microbiology and molecular genetics.
At the Company's request, the scientific advisors review and evaluate the
Company's research programs and advise the Company about technical matters in
the scientific fields in which the Company is involved. The Company's Scientific
Advisory Board generally meets as a group at least once a year to review and
discuss the Company's progress in research and development, and certain members
of the Scientific Advisory Board meet informally in smaller groups or
individually with Company scientists on a more frequent basis. Each member of
the Scientific Advisory Board has entered into a consulting agreement with the
Company. The consulting agreements are for varying terms and provide for each of
the members to render advice to the Company in the area of the Company's
business and such member's expertise. Members of the Scientific Advisory Board
are entitled to receive annual compensation of up to $10,000 for their services
and may receive options to purchase Common Stock under the Plan. In addition,
Drs. Essex and Mekalanos have separate consulting agreements with the Company
pursuant to which they receive additional compensation. It is possible that any
inventions or processes discovered by the scientific advisors will remain the
property of such person or of such persons' employers. In addition, the
institutions with which the scientific advisors are affiliated may make
available the research services of their personnel, including the scientific
advisors, to competitors of the Company pursuant to sponsored research
agreements.
The following table sets forth the name and current position of each
scientific advisor:
<TABLE>
<CAPTION>
NAME POSITION
- ---- --------
<S> <C>
Barry Bloom, M.D. ................... Retired (Former Executive Vice President, Pfizer, Inc.)
Robert Langer, Ph.D. ................ The Germeshausen Professor, Department of Chemical
Engineering, Massachusetts Institute of Technology
Myron Essex, D.V.M., Ph.D. .......... Chairman, Department of Cancer Biology, Harvard School of
Public Health, Chairman of Harvard AIDS Institute
Brian Mahy, Ph.D., Sc.D. ............ Director of Viral and Rickettsial Diseases, the Centers for
Disease Control and Prevention
John Mekalanos, Ph.D. ............... Chairman, Department of Microbiology and Molecular Genetics,
Harvard Medical School
Morton Swartz, M.D. ................. Chief, James Jackson Firm Medical Services & Infectious
Disease Unit of Massachusetts General Hospital, Professor,
Harvard Medical School
Hans Wigzell, Ph.D. ................. President, Karolinska Institute, Stockholm
</TABLE>
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<PAGE> 15
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) The Common Stock of the Company began trading in June 1996 (subsequent
to the initial public offering) on the NASDAQ National Market under the symbol
"VRII". The following table lists the high and low sales prices for each quarter
the common stock traded during 1996 and 1997. Prior to the offering in June
1996, no established public trading market existed.
<TABLE>
<CAPTION>
1997 QUARTER HIGH LOW 1996 QUARTER HIGH LOW
- ------------ ---- --- ------------ ---- ---
<S> <C> <C> <C> <C> <C>
First........................ 8 3/4 5 First........................ N/A N/A
Second....................... 8 4 3/4 Second....................... 12 1/4 9
Third........................ 7 1/8 5 Third........................ 9 1/4 5 7/8
Fourth....................... 9 1/2 3 1/4 Fourth....................... 8 1/4 4 3/4
</TABLE>
As of February 2, 1998, the approximate number of common shareholders of
record was 81. Many of these shares of Common Stock are held by brokers and
other institutions on behalf of stockholders. Consequently, the Company is
unable to estimate the total number of stockholders represented by these record
holders.
The Company has not paid a dividend with respect to its Common Stock nor
does the Company anticipate paying dividends in the foreseeable future.
(b) Use of Proceeds from the Company's Initial Public Offering (the "IPO")
(1) Effective date of Registration Statement on Form S-1: June 5, 1996;
Commission file number: 333-3378
(2) The Offering commenced on June 6, 1996.
(3) Not applicable.
(4) (i) All securities registered in the Offering were sold.
(ii) The managing underwriters of the Offering were:
Oppenheimer & Company, Inc.
Pacific Growth Equities, Inc.
(iii) Common Stock, par value $.001 per share
(iv) Issuer:
Amount registered -- 2,300,000 shares
Aggregate purchase price of the Offering amount
registered -- $27,600,000
Amount sold -- 2,300,000 shares
Aggregate Offering price of the amount sold -- $27,600,000
Selling Security holder: Not applicable
(v) $1,932,000 in underwriting discounts and expenses paid to
underwriters;
$925,000 of other expenses incurred; and
$2,857,000 in total underwriting discounts and expenses
(vi) Net offering proceeds to the Company: $24,743,000
(vii) Use of Proceeds:
Purchase and installation of machinery and equipment: $417,000
Repayment of indebtedness: $1,000,000
Working Capital -- $9,117,000
Temporary investments (money market account and short-term
instruments): $14,209,000
(viii) Use of proceeds does not represent a material change in the
use of proceeds described in the Offering prospectus.
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<PAGE> 16
ITEM 6. SELECTED FINANCIAL DATA
The selected financial information presented below has been derived from
the audited financial statements of the Company, and should be read in
conjunction with the Company's Financial Statements and related Notes thereto.
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FEBRUARY 11, 1991
------------------------------------------------------------------- (INCEPTION) THROUGH
1997 1996 1995 1994 1993 DECEMBER 31, 1997
----------- ----------- ----------- ----------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Licensing and option
revenue................ $ 905,556 $ 4,520,000 $ 770,000 $ 700,000 $ -- $ 6,895,556
Research and development
revenue................ 1,599,982 1,476,449 1,067,480 21,269 -- 4,165,180
Interest income.......... 1,298,857 851,082 126,249 163,591 83,610 2,523,389
----------- ----------- ----------- ----------- ----------- ------------
Total revenue... 3,804,395 6,847,531 1,963,729 884,860 83,610 13,584,125
EXPENSES:
Research and
development............ 7,557,055 5,262,507 5,734,427 5,756,042 4,205,781 31,566,535
General and
administrative......... 2,344,638 2,328,204 1,854,732 1,887,512 1,452,344 11,308,997
Depreciation............. 401,085 673,436 583,654 517,756 268,391 2,518,916
Interest and other
expense................ 65,971 165,320 87,944 52,332 84,315 719,199
----------- ----------- ----------- ----------- ----------- ------------
Total
expenses...... 10,368,749 8,429,467 8,260,757 8,213,642 6,010,831 46,113,647
----------- ----------- ----------- ----------- ----------- ------------
Net loss........ $(6,564,354) $(1,581,936) $(6,297,028) $(7,328,782) $(5,927,221) $(32,529,522)
=========== =========== =========== =========== =========== ============
Basic and diluted net
loss per common
share.................. $ (.74)
Shares used in computing
basic and diluted net
loss per common
share.................. 8,897,784
Pro forma basic and
diluted net loss per
common share........... $ (0.21) $ (1.03)
Shares used in computing
pro forma basic and
diluted net loss per
common share........... 7,639,726 6,104,671
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents............... $ 2,488,963 $15,209,180 $ 1,180,176 $ 5,669,490 $ 954,134
Total assets............................ 20,878,339 27,437,531 2,727,905 7,667,363 2,742,301
Notes payable........................... -- -- 923,315 -- --
Lease obligation payable, less current
portion............................... -- 64,351 210,842 46,838 220,028
Redeemable convertible preferred
stock................................. -- -- 24,527,073 24,508,053 12,581,906
Total stockholders' equity
(deficit).................... $19,409,847 $25,950,856 $(24,248,340) $(18,043,081) $(10,751,850)
</TABLE>
The Company has paid no cash dividends since inception.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company for the years ended December 31, 1997, 1996 and 1995
should be read in conjunction with the accompanying audited financial statements
and the related notes thereto.
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<PAGE> 17
This report may contain certain forward looking statements which involve
risks and uncertainties. Such statements are made in reliance upon safe harbor
provisions of the Private Securities Litigation Reform Act of 1995 and are
subject to certain factors which may cause the Company's plans and results to
differ significantly from the plans and results discussed in forward looking
statements. Factors that may cause such differences include, but are not limited
to: (i) the scope and results of preclinical and clinical testing, including the
progress and results of the Phase II rotavirus clinical trial and the further
review of the Phase I and Phase II Adjumer(TM)-formulated influenza vaccine
results and further clinical or preclinical testing after evaluation of the
results; (ii) the progress of the Company's research and development programs,
including further development of the Adjumer(TM) delivery system; (iii) changes
in existing and potential relationships with corporate collaborators; (iv) the
Company's ability to compete successfully with larger companies; (v) risks of
failure inherent in product development based on new technologies and novel
delivery systems; (vi) the Company's ability to attract and retain qualified
personnel; (vii) the time and costs of obtaining regulatory approvals, patents,
proprietary rights and licenses; (viii) the ability of the Company to establish
development and commercialization capacities or relationships; (ix) the costs of
manufacturing; and (x) the Company's ability to secure future funding.
OVERVIEW
Virus Research Institute, Inc. (the "Company") is engaged in the discovery
and development of systems for the delivery of vaccines and immunotherapeutics,
and improved and novel vaccines for adults and children. The Company is
developing a portfolio of proprietary vaccine delivery systems designed to
improve the efficacy, lower the cost of administration and improve patient
compliance for a variety of vaccine products. The Company and its collaborators
currently are applying the Company's vaccine delivery systems to develop
vaccines for the prevention of influenza, Lyme disease, respiratory syncytial
virus (RSV), and H. pylori infections. The Company has entered into long-term
collaboration agreements with Pasteur Merieux Connaught (PMC), Pasteur
Merieux-OraVax (PM-O) and CSL, Ltd. pursuant to which they may utilize the
Company's vaccine delivery systems in developing a number of vaccines. During
1997, the Company entered into a collaboration with SmithKline Beecham (SB) for
the development and commercialization of the Company's oral rotavirus vaccine.
The Company is also developing its own proprietary vaccine, utilizing antigens
licensed exclusively by the Company, for the virus causing genital herpes, HSV2.
In addition, the Company has acquired the exclusive license to Therapore(TM), a
novel delivery system for the delivery of immunotherapeutics for chronic viral
infections and cancers.
The Company is in the development stage and has devoted substantially all
of its resources to the research and development of its vaccine delivery systems
and vaccine candidates and general and administrative expenses. Through December
31, 1997 the Company has not generated any revenue from product sales, but has
received an aggregate of $13,584,000 in revenues from licensing and option
agreements, research and development agreements and grants, and interest income.
There can be no assurance that the Company will receive such revenue in the
future.
The Company has realized losses in every year since inception, principally
as a result of expenditures incurred in its research and development programs.
The Company expects to continue to incur significant operating losses over the
next several years due primarily to expanded research and development efforts,
preclinical and clinical testing of its product candidates, investment in new
technologies, investment in production capabilities for certain product
candidates and expenditures for commercialization activities. The Company's
results of operations may vary significantly from quarter to quarter and year to
year due to the timing of license and milestone payments, development
expenditures and other factors.
NEW DEVELOPMENTS
Preliminary results from the Company's Phase I/II clinical trial of its
rotavirus vaccine candidate became available during the first quarter of 1997.
Rotavirus infections are a major cause of acute diarrhea and dehydration in
infants. The clinical trial was a double-blinded, placebo controlled study
designed to define the optimal vaccine dose and optimal age for immunization.
The results demonstrated that the vaccine was
16
<PAGE> 18
generally well tolerated in younger infants and elicited broad immune responses
in all infants. Based on these findings and the results of an earlier Phase I
study, the Company initiated a Phase II efficacy study during the second quarter
of 1997. This trial, which is being conducted at four U.S. medical centers, is
designed to examine the vaccine's ability to prevent rotavirus disease and to
further study the safety of the vaccine. A total of 215 infants were enrolled in
the study and have been immunized with the vaccine. Results from the study are
expected to be available during 1998. The Company cautions investors that the
presence of statistically significant results in one clinical trial does not
ensure that these results will be repeated in subsequent trials.
During 1997, the Company established a collaboration with SB to develop and
commercialize the Company's rotavirus vaccine. The Company will be responsible
for the continuation of the Phase II efficacy study as discussed above.
Following successful completion of the Phase II trial, SB will assume
responsibility for and fund all subsequent clinical and other development
activities. The Company will be entitled to receive milestone payments and
royalties on vaccine sales under the agreement which grants SB exclusive
worldwide marketing rights to the rotavirus vaccine.
Based on the results of an earlier Phase I clinical trial, the Company's
collaborator, PMC, conducted a Phase II safety and immunogenicity clinical trial
of an Adjumer(TM)-formulated influenza vaccine during 1997. In the Phase I study
conducted in France, 48 young and 41 elderly adults were given single injections
of either the vaccine formulated with Adjumer(TM) or the same vaccine without
Adjumer(TM). A total of 430 elderly adults participated in the Phase II study,
which was conducted in Peru. Preliminary results of the Phase II clinical trial
confirmed that the Adjumer(TM)-formulated vaccine was well tolerated. However,
results of the Phase II study appear to be inconsistent in certain respects with
Phase I results. The degree of improvement in immune responses elicited by the
Adjumer(TM) influenza vaccine was less in comparison to the control group than
was elicited in the Phase I study. At the same time, certain control group
results also appear to be significantly higher in Phase II than in Phase I. The
Company and PMC are currently analyzing and assessing the results of the Phase
II study to determine the appropriate next steps to take with the clinical
development of the product. The Adjumer(TM) research and development program
with PMC, which encompasses a number of additional vaccine products, continues.
During 1997, the Company was granted an exclusive worldwide license by
Harvard University to Therapore(TM), a novel immunotherapeutic delivery system.
Therapore(TM) will initially be evaluated in therapies to deliver products for
the treatment of chronic viral infections and cancers. Under the terms of the
agreement, the Company will be obligated to pay license fees, milestone payments
and royalties to Harvard.
In January 1998, the Company entered into a license agreement with Heska
Corporation (Heska) to collaborate on the development and commercialization of a
number of Heska's animal health vaccines through the use of Adjumer(TM). Under
the terms of the agreement, based on progress in development, the Company will
be entitled to receive license fees, milestone payments and royalties.
RESULTS OF OPERATIONS
REVENUE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1996 1995
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Licensing and option..................................... $ 906 $4,520 $ 770
Research and development................................. 1,600 1,477 1,068
Interest income.......................................... 1,299 851 126
------ ------ ------
Total revenue.................................. $3,805 $6,848 $1,964
====== ====== ======
</TABLE>
Total revenue declined by $3,043,000 to $3,805,000 in 1997 from $6,848,000
in 1996 and increased by $4,884,000 in 1996 from $1,964,000 in 1995. Licensing
and option revenue declined by $3,614,000 from $4,520,000 in 1996 to $906,000 in
1997 due to the receipt in 1996 of $4,500,000 for the achievement of
17
<PAGE> 19
milestones pursuant to the agreement with PMC. Revenue in 1997 consisted
primarily of $650,000 related to agreements with PM-O. Revenue from licensing
and option sources in 1995 consisted primarily of $750,000 received under a
collaboration agreement with Chiron Corporation. Research and development
revenue increased by $123,000 to $1,600,000 in 1997 from $1,477,000 in 1996.
During 1997, the greater part of research and development revenue was generated
from agreements with PMC and PM-O. The Company's research and development
revenue in 1996 included $1,250,000 received from PMC while research and
development revenue in 1995 consisted primarily of a payment of $625,000
received in conjunction with the PMC agreement. Interest income increased by
$448,000 to $1,299,000 in 1997 from $851,000 in 1996 and by $725,000 in 1996
from $126,000 in 1995. The increase is due to an increase in cash, cash
equivalents and investments derived principally from the proceeds of the
Company's initial public offering.
EXPENSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1997 1996 1995
------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Research and development................................ $ 7,557 $5,263 $5,734
General and administrative.............................. 2,345 2,328 1,855
Depreciation............................................ 401 673 584
Interest and other...................................... 66 165 88
------- ------ ------
Total expenses................................ $10,369 $8,429 $8,261
======= ====== ======
</TABLE>
The Company's total expenses increased by $1,940,000 to $10,369,000 in 1997
from $8,429,000 in 1996 and increased by $168,000 in 1996 from $8,261,000 in
1995. Research and development expenses increased by $2,294,000 to $7,557,000 in
1997 from $5,263,000 in 1996. The increase is primarily attributable to costs
associated with the polyphosphazene manufacturing and scale up process and to an
increase in rotavirus clinical trial costs. Research and development expenses
declined by $471,000 to $5,263,000 in 1996 from $5,734,000 in 1995 principally
due to a reduction in outside consulting costs, the conclusion of certain
sponsored research agreements and a reduction in polyphosphazene manufacturing
costs. General and administrative expenses increased slightly, by $17,000, to
$2,345,000 in 1997 from $2,328,000 in 1996. A reduction in foreign withholding
taxes associated with milestone payments from PMC was offset by higher investor
relations and other costs associated with being a public company. General and
administrative costs increased by $473,000 to $2,328,000 in 1996 from $1,855,000
in 1995 principally due to an increase in compensation and recruiting costs, and
the payment of $250,000 in foreign withholding taxes associated with milestone
payments from PMC. These increases were partially offset by reductions in
consulting and legal costs. Depreciation expense declined $272,000 to $401,000
in 1997 from $673,000 in 1996 as a result of the full depreciation of various
leasehold improvements. From 1995 to 1996, depreciation expense increased
$89,000 to $673,000 in 1996 from $584,000 in 1995 due to the Company's increased
investment in laboratory equipment and leasehold improvements during that time..
Interest and other expense declined $99,000 to $66,000 in 1997 from $165,000 in
1996 and increased by $77,000 in 1996 from $88,000 in 1995. Interest and other
expense in 1996 reflects the increased costs associated with short term loans
entered into in 1995 and 1996. These short term loans were either repaid or
converted into common stock upon completion of the Company's initial public
offering.
LIQUIDITY AND CAPITAL RESOURCES
From inception (February 11, 1991) through December 31, 1997, the Company's
cash expenditures have exceeded revenues. The Company's operations have been
funded principally through the sale of equity, loans from stockholders,
equipment lease financing and payments under licensing, option and research and
development agreements. Net cash used by the Company's operations since
inception was $30,088,000, primarily to fund research and development efforts
and general and administrative expenses. Since inception the Company has
incurred $3,149,000 in capital expenditures, primarily for leasehold
improvements and equipment for the Company's laboratories. During the year ended
December 31, 1997 the Company incurred
18
<PAGE> 20
$235,000 in capital expenditures primarily on expenditures required for the
polyphosphazene manufacturing process and on improvements to its laboratory
facilities. The Company anticipates incurring approximately $400,000 in capital
expenditures during 1998, primarily on equipment necessary for the
polyphosphazene manufacturing process.
From inception through December 31, 1997, the Company raised net proceeds
of approximately $51,829,000 through the sale of equity securities. Included in
this amount are net proceeds of $24,743,000 from the Company's initial public
offering in 1996 and the conversion to common stock of an aggregate of
$7,974,000 in notes payable to certain stockholders. In addition, from inception
the Company has funded $751,000 of capital expenditures through sale and
leaseback transactions.
In December 1994, PMC made a $3,000,000 equity investment in the Company in
connection with the execution of a collaboration agreement relating to
Adjumer(TM). In January 1996, PMC and OraVax, Inc. each made an equity
investment of $250,000 in connection with the execution of an option agreement
relating to VibrioVec(TM). PMC made an additional equity investment of
$1,000,000 in April 1996 associated with the Adjumer(TM) collaboration
agreement. These amounts are included in the $51,829,000 referenced above.
As of December 31, 1997 the Company's federal net operating loss
carryforwards were approximately $12,480,000. If not used, the tax loss
carryforwards will expire at various dates through 2012. The Company's ability
to use these carryforwards is subject to limitations resulting from an ownership
change as defined in Internal Revenue Code Sections 382 and 383. See Note H of
Notes to Financial Statements.
The Company has undertaken an assessment of the cost and impact on
operations of addressing the Year 2000 issue in connection with its computer
systems. As a result of such assessment, the Company believes that all of its
major software will be Year 2000 compliant and the Company does not believe the
Year 2000 issue will have a material impact on its business, operations or
financial condition.
The Company expects to incur substantial additional costs, including those
related to research and development activities, preclinical studies, clinical
trials, obtaining regulatory approvals, process scale up and manufacture and the
expansion of its facilities. The Company anticipates that its existing funds,
which include the proceeds from its initial public offering and interest earned
thereon, should be sufficient to fund its operating and capital requirements as
currently planned for the next twenty months. However, the Company's cash
requirements may vary materially from those now planned, due to many factors,
including, but not limited to, the progress of the Company's research and
development programs, the scope and results of preclinical and clinical testing,
changes in existing and potential relationships with corporate collaborators,
the time and cost in obtaining regulatory approvals, the costs involved in
obtaining and enforcing patents, proprietary rights and any necessary licenses,
the ability of the Company to establish development and commercialization
capacities or relationships, the costs of manufacturing and other factors. In
the future, the Company may need to raise substantial additional funds through
further financing, including public or private equity offerings and
collaborations with corporate partners. There can be no assurance that funds
will be available on terms acceptable to the Company, if at all. If adequate
funds are not available, the Company may be required to delay, scale back, or
eliminate certain of its product development programs or to license to others
the right to commercialize products or technologies the Company would otherwise
seek to develop and commercialize itself, any of which could have a material
adverse effect on the Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted as a separate section of this Form
10-K. See Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
19
<PAGE> 21
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding Directors required by this Item is incorporated
by reference to the Section entitled "Proposal 1: Election of Directors" of the
Company's Proxy Statement for the 1998 Annual Meeting of Stockholders (the
"Proxy Statement"). The information regarding Executive Officers is included in
Part I of this Form 10-K.
The information regarding Compliance with Section 16(a) of the Exchange Act
required by this Item is incorporated by reference to the Section entitled
"Section 16(a) Beneficial Ownership Reporting Compliance" of the Company's Proxy
Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
Section entitled "Compensation of Executive Officers" of the Company's Proxy
Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to the
Section entitled "Security Ownership of Management and Certain Beneficial
Owners" of the Company's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to the
Section entitled "Certain Relationships and Related Transactions" of the
Company's Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following financial statements are filed as part of this Form 10-K.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. 24
Balance Sheets as of December 31, 1997 and 1996............. 25
Statements of Operations for the years ended December 31,
1997, 1996 and 1995, and for the period February 11, 1991
(Inception) through December 31, 1997..................... 26
Statement of Changes in Stockholders' Equity (Deficit) for
the period February 11, 1991 (Inception) through
December 31, 1997......................................... 27
Statements of Cash Flows for the years ended December 31,
1997, 1996 and 1995, and for the period February 11, 1991
(Inception) through December 31, 1997..................... 28
Notes to Financial Statements............................... 29
</TABLE>
2. Financial Statement Schedule and Auditors' Report
Schedules are omitted since the required information is inapplicable or
because the information required is shown in the Financial Statements or Notes
thereto.
20
<PAGE> 22
3. Exhibits
The following exhibits are filed herewith or are incorporated by reference
to exhibits previously filed with the Commission.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
3.1(2) Amended and Restated Certificate of Incorporation of Virus
Research Institute, Inc.
3.2(2) Amended and Restated By-Laws of Virus Research
Institute, Inc.
10.1(1) Virus Research Institute, Inc. 1992 Equity Incentive Plan,
as amended and restated.
10.2(1) Form of Stock Option Agreement.
10.3(3) Lease dated December 1, 1996, between the Registrant and
Moulton Realty Company.
10.4(1) Series D Convertible Preferred Stock Purchase Agreement
dated December 20, 1994.
10.5(1) Series D Convertible Preferred Stock Purchase Agreement
dated January 5, 1996.
10.6(1) Second Amended and Restated Stockholders Agreement dated
April 8, 1994 and amendments.
10.7(1) Form of Warrant Agreement dated as of February 10, 1994.
10.8(1) Form of Warrant to purchase shares of Common Stock dated
February 10, 1994 issued pursuant to Exhibit 10.7.
10.9(1) Loan Agreement dated as of September 14, 1995 between the
Registrant and certain stockholders, with forms of
Convertible Promissory Note and Warrant Agreement attached.
10.10(1) Form of Warrant to purchase shares of Common Stock dated
December 14, 1995 issued pursuant to Exhibit 10.9.
10.11(1) Warrants issued to Comdisco, Inc. ("Comdisco") to purchase
shares of Series A Preferred Stock and Series C Preferred
Stock.
10.12(1) Master Lease Agreement dated as of August 31, 1992, between
the Registrant and Comdisco.
10.13(1) License Agreement, dated as of May 1, 1992, between the
Registrant and the President and Fellows of Harvard College
("Harvard") as amended.
10.14(1) License and Clinical Trials Agreement, dated as of February
27, 1995, between the Registrant and The James N. Gamble
Institute of Medical Research (assigned to Children's
Hospital of Cincinnati).
10.15(1) License Agreement, dated as of March 12, 1995, between the
Registrant, Harvard and Dana-Farber Cancer Institute.
10.16(1) License Agreement, dated December 6, 1991, between the
Registrant and Massachusetts Institute of Technology.
10.17(1) License Agreement, dated March 8, 1995, between the
Registrant and The Penn State Research Foundation.
10.18(1) License Agreement, dated as of December 13, 1994, between
the Registrant and Pasteur Merieux Serums & Vaccins S.A.
("Pasteur Merieux").
10.19(1) License Agreement, dated as of August 2, 1995, between the
Registrant and Pasteur Merieux.
10.20(1) Option Agreement, dated as of November 22, 1995, among the
Registrant, Pasteur Merieux, OraVax, Inc., OraVax Merieux
Co. and Merieux OraVax S.N.C. relating to PCPP.
10.21(1) Option Agreement dated as of November 22, 1995, among the
Registrant, Pasteur Merieux, OraVax, Inc., OraVax Merieux
Co. and Merieux OraVax S.N.C. relating to VibrioVec(TM).
</TABLE>
21
<PAGE> 23
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
10.22(1) Research Agreement, dated January 10, 1996, between the
Registrant and CSL Limited.
10.23(1) Collaborative Research and License Agreement, dated as of
June 22, 1995, between the Registrant and SmithKline
Beecham plc.
10.24(1) Research and Development License and Option for Commercial
License Agreement, dated as of December 28, 1995, between
the Registrant and Chiron Corporation.
10.25(4) License Agreement, dated as of December 1, 1997, between the
Registrant and SmithKline Beecham PLC.
10.26(4) License Agreement, dated as of March 25, 1997, among the
Registrant, Pasteur Merieux, OraVax, Inc., OraVax Merieux
Co. and Merieux OraVax S.N.C.
10.27(4) License Agreement, dated as of March 28, 1997, among the
Registrant and Harvard.
10.28(4) License Agreement, dated as of December 1, 1997, among the
Registrant, Pasteur Merieux, OraVax, Inc., OraVax Merieux
Co. and Merieux OraVax S.N.C.
11.1 Statement Regarding Computation of Earnings Per Share.
23.1 Consent of Richard A. Eisner & Company, LLP.
27.1 Financial Data Schedule.
</TABLE>
- ---------------
(1) Incorporated by reference to the relevant exhibit to Virus Research
Institute, Inc.'s Registration Statement on Form S-1 (File No. 333-3378) as
filed with the SEC on June 6, 1996.
(2) Incorporated by reference to the relevant exhibit to Virus Research
Institute, Inc.'s Form 10-Q for the quarter ended June 30, 1996 as filed
with the SEC on August 8, 1996.
(3) Incorporated by reference to the relevant exhibit to Virus Research
Institute, Inc.'s Form 10-K for the year ended December 31, 1996 as filed
with the SEC on March 26, 1997.
(4) Confidential treatment requested.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the fourth quarter
of fiscal 1997.
22
<PAGE> 24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of
Cambridge, Commonwealth of Massachusetts on the 17th day of March, 1998.
VIRUS RESEARCH INSTITUTE, INC.
By: /s/ J. BARRIE WARD, PH.D.
------------------------------------
J. Barrie Ward, Ph.D.
Chief Executive Officer and
Chairman of the Board
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ J. BARRIE WARD, PH.D. Chief Executive Officer and March 17, 1998
- ----------------------------------------------------- Chairman of the Board
J. Barrie Ward, Ph.D. (principal executive
officer)
/s/ WILLIAM A. PACKER President, Chief Financial March 17, 1998
- ----------------------------------------------------- Officer and Director
William A. Packer (principal financial
officer)
/s/ LISA P. MCGILLIS Director of Finance March 17, 1998
- ----------------------------------------------------- (principal accounting
Lisa P. McGillis officer)
Director March 17, 1998
- -----------------------------------------------------
John W. Littlechild
/s/ ALAN M. MENDELSON Director March 17, 1998
- -----------------------------------------------------
Alan M. Mendelson
/s/ FREDERICK W. KYLE Director March 17, 1998
- -----------------------------------------------------
Frederick W. Kyle
/s/ ROBERT J. HENNESSEY Director March 17, 1998
- -----------------------------------------------------
Robert J. Hennessey
</TABLE>
23
<PAGE> 25
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Virus Research Institute, Inc.
Cambridge, Massachusetts
We have audited the accompanying balance sheets of Virus Research
Institute, Inc. (a development stage company) as at December 31, 1997 and
December 31, 1996, and the related statements of operations, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1997, and for the period from February 11, 1991
(inception) through December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present fairly,
in all material respects, the financial position of Virus Research Institute,
Inc. at December 31, 1997 and December 31, 1996, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1997, and the period from February 11, 1991 (inception)
through December 31, 1997 in conformity with generally accepted accounting
principles.
RICHARD A. EISNER & COMPANY, LLP
Cambridge, Massachusetts
January 30, 1998
24
<PAGE> 26
VIRUS RESEARCH INSTITUTE, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (Note E)....................... $ 2,488,963 $ 15,209,180
Marketable securities (Note E)........................... 15,968,923 10,339,985
Contract receivable (Note C)............................. 1,000,000 --
Interest receivable...................................... 352,186 218,285
Prepaid expenses......................................... 273,224 220,534
Other current assets..................................... 42,616 659
------------ ------------
Total current assets.................................. 20,125,912 25,988,643
NONCURRENT ASSETS:
Marketable securities (Note E)........................... 0 499,891
Leasehold improvements and equipment (net of accumulated
depreciation and amortization of $2,416,568 at
December 31, 1997 and $2,015,483 at December 31, 1996)
(Note D).............................................. 715,234 881,363
Other assets............................................. 37,193 67,634
------------ ------------
Total noncurrent assets............................... 752,427 1,448,888
------------ ------------
Total assets..................................... $ 20,878,339 $ 27,437,531
============ ============
CURRENT LIABILITIES:
Accounts payable......................................... $ 24,769 $ 43,809
Accrued consulting and research fees..................... 709,295 810,677
Accrued employee benefits................................ 91,636 71,636
Accrued legal............................................ 192,453 112,000
Other accrued expenses................................... 377,987 229,123
Current portion of lease obligation payable (Note
F(2))................................................. 72,352 155,079
------------ ------------
Total current liabilities............................. 1,468,492 1,422,324
Lease obligation payable, less current portion (Note
F(2)).................................................... -- 64,351
Commitments (Notes C and F)
Stockholders' equity (Notes A and G):
Preferred stock -- $.001 par value; 5,000,000 shares
authorized, none issued............................... -- --
Common stock -- $.001 par value; 30,000,000 shares
authorized; 8,928,314 shares issued at December 31,
1997 and 8,845,027 shares issued at December 31,
1996.................................................. 8,928 8,845
Additional paid-in capital............................... 51,930,441 51,907,179
Deficit accumulated during the development stage......... (32,529,522) (25,965,168)
------------ ------------
Total stockholders' equity............................ 19,409,847 25,950,856
------------ ------------
Total liabilities and stockholders' equity....... $ 20,878,339 $ 27,437,531
============ ============
</TABLE>
See Notes to Financial Statements
25
<PAGE> 27
VIRUS RESEARCH INSTITUTE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FEBRUARY 11, 1991
----------------------------------------- (INCEPTION) THROUGH
1997 1996 1995 DECEMBER 31, 1997
----------- ----------- ----------- -------------------
<S> <C> <C> <C> <C>
REVENUE (NOTE B(1)):
Licensing and option revenue..... $ 905,556 $ 4,520,000 $ 770,000 $ 6,895,556
Research and development
revenue........................ 1,599,982 1,476,449 1,067,480 4,165,180
Interest income.................. 1,298,857 851,082 126,249 2,523,389
----------- ----------- ----------- ------------
Total revenue.......... 3,804,395 6,847,531 1,963,729 13,584,125
EXPENSES:
Research and development (Note
C)............................. 7,557,055 5,262,507 5,734,427 31,566,535
General and administrative....... 2,344,638 2,328,204 1,854,732 11,308,997
Depreciation..................... 401,085 673,436 583,654 2,518,916
Interest and other expense....... 65,971 165,320 87,944 719,199
----------- ----------- ----------- ------------
Total expenses......... 10,368,749 8,429,467 8,260,757 46,113,647
----------- ----------- ----------- ------------
Net loss............... $(6,564,354) $(1,581,936) $(6,297,028) $(32,529,522)
=========== =========== =========== ============
Basic and diluted net loss per
common share................... $ (0.74)
===========
Shares used in computing basic
and diluted net loss per common
share.......................... 8,897,784
Pro forma basic and diluted net
loss per common share.......... $(0.21) $ (1.03)
=========== ===========
Shares used in computing pro
forma basic and diluted net
loss per common share.......... 7,639,726 6,104,671
</TABLE>
See Notes to Financial Statements
26
<PAGE> 28
VIRUS RESEARCH INSTITUTE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DEFICIT
COMMON STOCK ACCUMULATED
-------------------- ADDITIONAL DURING
PAR PAID-IN DEVELOPMENT
SHARES VALUE CAPITAL STAGE TOTAL
---------- ------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sale of common stock.................... 1,667 $ 2 $ 498 $ -- $ 500
Net loss -- February 11, 1991
(inception) through December 31,
1991.................................. (862,597) (862,597)
---------- ------- ----------- ------------ ------------
Balance December 31, 1991............... 1,667 2 498 (862,597) (862,097)
Sale of common stock.................. 607 1 1,819 1,820
Recapitalization: 1,000 for 1 stock
split............................... 2,271,060 2,271 (2,271) --
Surrender of common stock by HCV II... (1,291,667) (1,292) 905 (387)
Sale of common stock.................. 48,275 48 7,193 7,241
Net loss for the year................. (3,967,604) (3,967,604)
---------- ------- ----------- ------------ ------------
Balance December 31, 1992............... 1,029,942 1,030 8,144 (4,830,201) (4,821,027)
Cancellation of shares pursuant to
founders' plan amendment............ (282,000) (282) (564) (846)
Purchase and cancellation of treasury
shares.............................. (105,917) (106) (2,662) (2,768)
Stock options exercised............... 83 -- 12 12
Net loss for the year................. (5,927,221) (5,927,221)
---------- ------- ----------- ------------ ------------
Balance December 31, 1993............... 642,108 642 4,930 (10,757,422) (10,751,850)
Stock options exercised............... 1,475 2 321 323
Founder option exercised.............. 43,333 43 37,007 37,050
Stock warrants exercised.............. 185 -- 178 178
Net loss for the year................. (7,328,782) (7,328,782)
---------- ------- ----------- ------------ ------------
Balance December 31, 1994............... 687,101 687 42,436 (18,086,204) (18,043,081)
Stock options exercised............... 2,903 3 1,766 1,769
Common stock warrants issued in
conjunction with notes payable...... 90,000 90,000
Net loss for the year................. (6,297,028) (6,297,028)
---------- ------- ----------- ------------ ------------
Balance December 31, 1995............... 690,004 690 134,202 (24,383,232) (24,248,340)
Conversion of notes payable to
investors........................... 217,927 218 987,874 988,092
Cashless exercise of stock warrants... 17,363 17 (17) --
Conversion of redeemable convertible
preferred stock..................... 5,553,579 5,554 26,003,825 26,009,379
Stock options exercised............... 66,154 66 40,900 40,966
Shares issued at Initial Public
Offering............................ 2,300,000 2,300 27,597,700 27,600,000
Costs of offering..................... (2,857,305) (2,857,305)
Net loss for the year................. (1,581,936) (1,581,936)
---------- ------- ----------- ------------ ------------
Balance December 31, 1996............... 8,845,027 8,845 51,907,179 (25,965,168) 25,950,856
Cashless exercise of stock warrants... 20,924 21 (21) --
Stock options exercised............... 62,363 62 23,283 23,345
Net loss for the year................. (6,564,354) (6,564,354)
---------- ------- ----------- ------------ ------------
Balance December 31, 1997............... 8,928,314 $ 8,928 $51,930,441 $(32,529,522) $ 19,409,847
========== ======= =========== ============ ============
</TABLE>
See Notes to Financial Statements
27
<PAGE> 29
VIRUS RESEARCH INSTITUTE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FEBRUARY 11, 1991
----------------------------------------- (INCEPTION) THROUGH
1997 1996 1995 DECEMBER 31, 1997
------------ ------------ ----------- -------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss........................... $ (6,564,354) $ (1,581,936) $(6,297,028) $(32,529,522)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization... 409,077 700,188 599,435 2,569,442
Conversion of accrued interest
to preferred stock............ -- 46,026 -- 58,373
Changes in operating assets and
liabilities:
Contract receivable........... (1,000,000) -- -- (1,000,000)
(Increase) decrease in prepaid
expenses and other
assets..................... (198,108) (164,869) 112,784 (582,093)
Increase in accounts payable
and accrued expenses....... 128,896 127,320 157,611 1,396,140
------------ ------------ ----------- ------------
Net cash used in operating
activities............... (7,224,489) (873,271) (5,427,198) (30,087,660)
Cash flows from investing activities:
Purchases of marketable securities,
net of redemptions.............. (5,129,047) (10,839,876) -- (15,968,923)
Capital expenditures............... (234,955) (349,312) (129,561) (3,149,247)
Other.............................. -- -- -- (46,182)
------------ ------------ ----------- ------------
Net cash used in investing
activities............... (5,364,002) (11,189,188) (129,561) (19,164,352)
Cash flows from financing activities:
Proceeds from notes payable........ -- -- 1,000,000 7,973,668
Sale and leaseback related to
capital acquisitions............ -- -- 250,000 751,311
Principal payments on lease
obligations..................... (155,070) (174,503) (183,344) (839,265)
Sale of common stock............... 23,344 27,640,966 1,769 27,713,203
Sale of preferred stock............ -- 1,500,140 -- 19,258,613
Offering costs..................... -- (2,875,140) (980) (3,112,941)
Founders' shares reacquired........ -- -- -- (846)
Purchase of treasury stock......... -- -- -- (2,768)
------------ ------------ ----------- ------------
Net cash provided by (used
in) financing
activities............... (131,726) 26,091,463 1,067,445 51,740,975
Net increase (decrease) in cash and
cash equivalents................... (12,720,217) 14,029,004 (4,489,314) 2,488,963
Cash and cash equivalents, beginning
of period.......................... 15,209,180 1,180,176 5,669,490 --
------------ ------------ ----------- ------------
Cash and cash equivalents, end of
period............................. $ 2,488,963 $ 15,209,180 $ 1,180,176 $ 2,488,963
============ ============ =========== ============
Supplemental disclosure of cash flow
information:
Interest paid during the period.... $ 27,530 $ 63,473 $ 61,915 $ 258,193
</TABLE>
See Notes E, F and G with respect to noncash financing and leasing transactions.
See Notes to Financial Statements
28
<PAGE> 30
VIRUS RESEARCH INSTITUTE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
(NOTE A) -- THE COMPANY:
Virus Research Institute, Inc. (the "Company") is a development stage
company engaged in the discovery and development of systems for the delivery of
vaccines and immunotherapeutics, and improved and novel vaccines for adults and
children.
The Company has incurred substantial losses since inception while it has
been in the development stage and such losses are expected to continue. In June
1996, the Company completed an initial public offering of 2,300,000 shares of
common stock for $12.00 per share, resulting in net proceeds of approximately
$24,743,000. The Company anticipates that the proceeds from the initial public
offering in conjunction with payments received from collaborative partners will
allow the Company to meet its obligations through December 31, 1999.
(NOTE B) -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(1) Revenue recognition:
Nonrefundable, noncreditable licensing and option fees and milestone
payments are recognized when they are earned in accordance with the performance
requirements and contractual terms. Research and development revenues and grants
are recognized over the period of performance under the terms of the related
agreements.
Licensing revenue represents amounts paid by companies for the use of or
access to the Company's proprietary technology. Option revenue represents
payments for the right to evaluate the Company's proprietary technology which
may or may not result in a licensing or collaborative development agreement.
Research and development revenue represents amounts earned by the Company from
several collaborative partners for sponsored research activities. Certain of the
Company's collaborators are also stockholders of the Company.
(2) Depreciation and amortization:
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. Leasehold improvements are amortized using the
straight-line method over the life of the lease.
(3) Patent and licensing costs:
As a result of research and development efforts conducted by the Company,
it has received and applied for, and is in the process of applying for, a number
of patents to protect proprietary inventions and licenses to use certain
intellectual property. Costs incurred in connection with patent applications and
licenses have been expensed as incurred and are reflected as general and
administrative expenses.
(4) Cash and cash equivalents:
The Company considers all highly liquid investments with maturities of
three months or less, when acquired, to be cash equivalents. Cash equivalents
are recorded at cost, which approximates fair value.
(5) Investments in marketable securities:
In addition to cash equivalents, the Company has investments in corporate
and municipal debt securities that are classified in the balance sheet as
held-to-maturity in accordance with the provisions of Statement of Financial
Accounting Standard No. 115 (SFAS No. 115), "Accounting for Certain Instruments
in Debt and Equity Securities." Held-to-maturity investments are securities the
Company has the positive intent and
29
<PAGE> 31
VIRUS RESEARCH INSTITUTE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
ability to hold to maturity. These securities are accounted for at amortized
cost, which approximates fair value.
(6) Income taxes:
Deferred income taxes are recognized for the tax consequences in future
years for differences between the tax bases of assets and liabilities and their
financial reporting amounts at each year end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.
Income tax expense is the tax payable for the period and the change during the
period in deferred tax assets and liabilities.
(7) Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Estimates
are used when accounting for depreciation and amortization, taxes and
contingencies.
(8) Stock-based compensation:
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 123, "Accounting for Stock-Based
Compensation." The Company adopted this standard in 1996 by making the required
note disclosures only. Therefore, the adoption of this standard has not had an
effect on the Company's financial position or results of operations.
(9) Net loss per share:
During 1997, the Company adopted Statement of Financial Accounting Standard
No. 128, "Earnings per Share" requiring certain changes in the calculation of
per share results. As the Company has reported net losses from operations in the
years presented, the computation for basic and diluted earnings per share is
identical.
Pro forma net loss per common share is based on the pro forma weighted
average number of common shares outstanding during the periods presented as
adjusted to reflect the conversion of all preferred stock on a retroactive basis
as of January 1, 1995 or date of issuance, if later.
(NOTE C) -- RESEARCH, LICENSE AND CONSULTING AGREEMENTS:
The Company has entered into various research, license and consulting
agreements to support its research and development activities. These agreements
generally expire over several future years although some are automatically
renewable on an annual basis unless cancelled by either party. Amounts charged
to operations in connection with these agreements for the years ended December
31, 1997, 1996 and 1995 amounted to approximately $705,000, $650,000 and
$1,255,000, respectively. The Company expects to incur similar expenses in
future years. Some of the above agreements contain provisions for future
royalties to be paid on sales of products developed under the agreements.
During 1997, the Company entered into an agreement pursuant to which the
Company licensed certain patents and technology to a collaborator. Under the
terms of the agreement, the collaborator is required to pay the Company $400,000
for licensing rights and $600,000 for research which was completed as of Decem-
30
<PAGE> 32
VIRUS RESEARCH INSTITUTE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
ber 31, 1997. The total $1,000,000 is recorded as a contract receivable at
December 31, 1997. The agreement also provides for future payments contingent
upon the achievement of certain milestones.
(NOTE D) -- LEASEHOLD IMPROVEMENTS AND EQUIPMENT:
Leasehold improvements and equipment, including approximately $413,000
acquired under capital leases, are stated at cost and are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Laboratory furniture, fixtures and equipment................ $1,537,121 $1,366,074
Office furniture, fixtures and equipment.................... 291,963 246,800
Leasehold improvements...................................... 1,302,718 1,283,972
---------- ----------
Total............................................. 3,131,802 2,896,846
Less accumulated depreciation and amortization.............. 2,416,568 2,015,483
---------- ----------
Balance........................................... $ 715,234 $ 881,363
========== ==========
</TABLE>
(NOTE E) -- INVESTMENTS IN DEBT SECURITIES:
As of December 31, 1997 and 1996, the aggregate fair value of the
held-to-maturity securities was $15,966,179 and $16,866,045, respectively. These
amounts include an unrealized loss of $2,744 at December 31, 1997 and an
unrealized gain of $26,056 at December 31, 1996.
These securities are reflected in the balance sheet as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash equivalents.......................................... $ -- $ 6,000,113
Marketable securities, maturing within one year........... $15,968,923 $10,339,985
Marketable securities, long term.......................... $ -- $ 499,891
</TABLE>
(NOTE F) -- COMMITMENTS:
(1) Operating lease:
The Company has an operating lease for office and research facilities which
expires in December 2001. The Company has the option to renew the lease for an
additional five years. The lease also provides that the Company pay all real
estate taxes levied against the premises. The lease requires minimum annual
rentals in 1998 through 2001 of $294,000.
Rent expense for 1997, 1996 and 1995 amounted to approximately $332,000,
$267,000 and $269,000, respectively.
(2) Capital lease:
The Company has entered into several capital leases for equipment,
including sale and leaseback transactions. Future minimum payments under these
leases at December 31, 1997 amount to $72,352.
31
<PAGE> 33
VIRUS RESEARCH INSTITUTE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(NOTE G) -- CAPITALIZATION:
(1) Warrants:
The Company has issued warrants to purchase common and preferred stock in
connection with the issuance of notes payable and the establishment of capital
leases.
Warrants outstanding at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
EXERCISE
NUMBER OF PRICE
SECURITY SHARES PER SHARE EXPIRATION DATE
- -------- --------- --------- -----------------
<S> <C> <C> <C>
Common stock............................... 23,006 $ .96 February 9, 2004
Common stock............................... 49,578 1.95 December 14, 2005
Common stock............................... 11,000 9.60 April 12, 2001
</TABLE>
The warrant agreements contain antidilution provisions related to future
issuances of stock.
(2) Common stock options:
The Company has adopted an equity incentive plan providing for the issuance
of restricted stock and the granting of options to purchase up to a combined
total of 1,751,176 shares of common stock. The plan provides for the granting of
both incentive stock options and nonstatutory stock options. The exercise price
for any incentive stock options cannot be less than the fair market value on the
date of grant, while the exercise price for nonstatutory options will be
determined by the Board of Directors. The vesting periods for all options are
determined by the Board of Directors. The Company had the following option
activity during 1995, 1996 and 1997:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF OPTION PRICE
SHARES PER SHARE
--------- ----------------
<S> <C> <C>
Balance -- December 31, 1994............................. 750,220 $ .80
Granted................................................ 12,142 $1.85
Exercised.............................................. (2,903) $ .61
Cancelled.............................................. (11,584) $ .96
---------
Balance -- December 31, 1995............................. 747,875 $ .82
Granted................................................ 325,172 $6.36
Exercised.............................................. (66,154) $ .62
Cancelled.............................................. (14,515) $1.45
---------
Balance -- December 31, 1996............................. 992,378 $2.64
Granted................................................ 104,412 $6.97
Exercised.............................................. (62,363) $ .37
Cancelled.............................................. (1,765) $5.09
---------
Balance -- December 31, 1997............................. 1,032,662 $3.23
---------
</TABLE>
Options for 539,569 shares are exercisable at December 31, 1997 at a
weighted average option price of $1.90 per share, with a weighted average
remaining contractual life of approximately 7 years. At December 31, 1997, there
were 585,545 shares available for future grant.
32
<PAGE> 34
VIRUS RESEARCH INSTITUTE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(3) Stock-based compensation:
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation" but applies Accounting Principles
Board Opinion No. 25 and related interpretations in accounting for its plan.
There was no compensation expense recognized in 1997, 1996 or 1995. If the
Company had elected to recognize compensation cost for the plan based on the
fair value at the grant date for awards under the plan, consistent with the
method prescribed by SFAS No. 123, net loss per share would have been changed to
the pro forma amounts indicated below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C> <C>
Net loss...................... As reported $(6,564,354) $(1,581,936) $(6,297,028)
Pro forma (6,776,699) (1,729,019) (6,297,309)
Net loss per share............ As reported $ (.74) $ ( .21) $ (1.03)
Pro forma (.76) (.23) (1.03)
</TABLE>
The fair value of the Company's stock options used to compute pro forma net
loss and net loss per share disclosures is the estimated present value at grant
date using the Black-Scholes option-pricing model with the following weighted
average assumptions for 1997, 1996 and 1995: dividend yield of 2.5%; expected
volatility of 45%; a risk free interest rate of 7.3%; and an expected holding
period of nine years.
The weighted average grant date fair value of options granted was $2.37 per
share, $3.21 per share, and $3.07 per share for the years ended December 31,
1997, 1996 and 1995, respectively.
(NOTE H) -- INCOME TAXES:
Through December 31, 1993, pursuant to provisions of the Internal Revenue
Code, the Company was deferring all start-up costs because operations, as
defined by the Internal Revenue Code, had not commenced. In addition, the
Company elected to defer all research and development costs until revenues were
generated. Effective January 1994, the Company began generating revenues and
commenced operations for tax purposes and is amortizing all costs deferred
through December 31, 1993 over 60 months. From January 1994 forward, the Company
continues to defer internal research and development costs and amortizes such
costs over 60 months for tax purposes.
At December 31, 1997 and 1996, the Company had no current or deferred tax
liability.
The components of the Company's net deferred tax asset and the tax effects
of the primary differences giving rise to the Company's deferred tax asset are
as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1997 1996 1995
------------ ----------- -----------
<S> <C> <C> <C>
Net operating loss carryforwards................... $ 4,900,000 $ 3,100,000 $ 3,000,000
Deferred start-up costs............................ 200,000 380,000 550,000
Deferred research and development costs............ 6,800,000 5,944,000 5,415,000
Depreciation....................................... 315,000 250,000 164,000
Research and development credit.................... 561,000 227,000 110,000
Other.............................................. 47,000 36,000 171,000
------------ ----------- -----------
Deferred tax asset................................. 12,823,000 9,937,000 9,410,000
Valuation allowance................................ (12,823,000) (9,937,000) (9,410,000)
------------ ----------- -----------
Net deferred tax asset............................. $ -- $ -- $ --
============ =========== ===========
</TABLE>
33
<PAGE> 35
VIRUS RESEARCH INSTITUTE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1997, the Company's net operating loss carryovers for
federal income tax purposes amount to approximately $12,480,000 and expire
through 2012. The Company's ability to use these carryforwards is subject to
limitations resulting from an ownership change as defined in Internal Revenue
Code Sections 382 and 383.
34
<PAGE> 1
CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
1.
Exhibit 10.25
LICENSE AGREEMENT
This License Agreement ("Agreement") is made effective as of this first
day of December 1997, between VIRUS RESEARCH INSTITUTE, Inc., having a place of
business at 61 Moulton Street, Cambridge, MA 02138, USA (herein referred to as
"LICENSOR") and SmithKline Beecham P.L.C., having a place of business at New
Horizons Court, Brentford, Middlesex TW8 9EP, United Kingdom (herein referred to
as "LICENSEE"),
WITNESSETH THAT:
WHEREAS, LICENSOR is the owner of and/or controls all right, title and
interest in certain patents, identified in Appendix A hereto, and know-how in
the field of Rotavirus; and
WHEREAS, LICENSEE desires to obtain certain worldwide licenses from
LICENSOR under the aforesaid patents and know-how, and LICENSOR is willing to
grant to LICENSEE such licenses;
NOW, THEREFORE, in consideration of the covenants and obligations
expressed herein and intending to be legally bound, and otherwise to be bound by
proper and reasonable conduct, the parties agree as follows:
1. DEFINITIONS
1.01 "AFFILIATE(S)" shall mean any corporation, firm, partnership
or other entity, whether de jure or de facto, which directly
or indirectly owns, is owned by or is under common ownership
with a party to this Agreement to the extent of at least fifty
percent (50%) of the equity (or such lesser percentage which
is the maximum allowed to be owned by a foreign corporation in
a particular jurisdiction) having the power to vote on or
direct the affairs of the entity and any person, firm,
partnership, corporation or other entity actually controlled
by, controlling or under common control with a party to this
Agreement.
1.02 "BLOCKING PATENTS" shall mean patents owned and/or controlled
by THIRD PARTIES which are needed by LICENSEE for the making,
having made, using, having used, importing, offering for sale,
selling or having sold VACCINES
<PAGE> 2
2.
and/or technology owned and/or controlled by THIRD PARTIES
which is necessary for LICENSEE in order to practice the
license(s) granted by LICENSOR hereunder. For the avoidance of
doubt any patents and/or patent applications and/or technology
owned and/or controlled by DynCorp to which LICENSEE may
acquire a licence will be considered for the purpose of this
Agreement as BLOCKING PATENTS.
1.03 "COMBINATION" shall mean VACCINE wherein (a) Rotavirus
antigen(s) is (are) formulated in combination with one or more
additional therapeutically and/or prophylactically active
antigens.
1.04 "FDA" shall mean the United States Food and Drug
Administration.
1.05 "KNOW-HOW" shall mean all present and future technical
information, materials and know-how which relate to (a)
Rotavirus antigen(s) for use in a live attenuated vaccine
against rotavirus which are now and/or at anytime during the
term of this Agreement developed, owned, proprietary to and/or
controlled by LICENSOR and/or to which LICENSOR has otherwise
the right to grant license, which are both secret and
substantial. KNOW-HOW shall include the Rotavirus 89.12 strain
and any other live attenuated Rotavirus strain(s) useful or
necessary for VACCINE, owned and/or controlled by LICENSOR
and/or to which LICENSOR has otherwise the right to grant
license and, without limitation, all chemical,
pharmacological, toxicological, clinical, assay, control and
manufacturing data and any other information relating thereto.
KNOW-HOW shall not include any information, materials and/or
know-how which are generally ascertainable from publicly
available information or which subsequently become publicly
available. KNOW-HOW existing as of the Effective Date is
listed in Appendix B attached hereto which shall, as
appropriate, be updated from time to time. LICENSOR shall
identify KNOW-HOW in writing at the time of disclosure to
LICENSEE.
1.06 "LICENSEE" shall mean SmithKline Beecham P.L.C.
1.07 "LICENSOR" shall mean Virus Research Institute, Inc.
1.08 "MAJOR MARKETS" shall mean the United States of America,
United Kingdom, France, Germany and Italy.
<PAGE> 3
3.
1.09 "NET SALES" shall mean the gross receipts from sales of
VACCINE in the TERRITORY by LICENSEE, its AFFILIATES and/or
sublicensees to THIRD PARTIES under this Agreement after
deducting:
(i) reasonable transportation charges, including insurance;
and
(ii) LICENSEE's costs for syringes and other administration
devices combined with, or contained in, commercial
packaging; and
(iii) sales and excise taxes and duties paid by a selling
party and any other governmental charges imposed upon
the production, importation, use or sale of VACCINE
including, without limitation, contributions and
payments collected by any governmental authorities as
liability provisions and/or made pursuant to
governmental injury compensation schemes; and
(iv) trade, quantity and cash discounts (other than cash
discounts for early payments), commissions and other
customary rebates; and
(v) allowances or credits to customers or charges back from
customers on account of rejection or return of VACCINE
subject to royalty under this Agreement or on account
of retroactive price reductions affecting such VACCINE;
and
(vi) the difference between fifty percent (50%) of the
royalties paid to THIRD PARTIES as referred to in
Paragraph 4.02 and the amount of royalties actually
deducted under Paragraph 4.02; and
(vii) the royalties payable by LICENSEE to THIRD PARTIES on
the manufacture, use and/or sale of VACCINE for
adjuvants and/or other technology contained in VACCINE
to the extent they are not otherwise deducted pursuant
to the provisions of Section 4 hereof or under
Paragraph 1.09 (vi) above.
Sales between or among LICENSEE and its AFFILIATES or
sublicensees shall be excluded from the computation of NET
SALES except where such AFFILIATES or sublicensees are end
users, but NET SALES shall include the subsequent final sales
to THIRD PARTIES by such AFFILIATES or sublicensees.
<PAGE> 4
4.
If VACCINE is sold as a COMBINATION, NET SALES for purposes of
determining royalties on COMBINATION shall be calculated by
multiplying NET SALES by the fraction A/B, where A is the
invoice price of a monovalent form of VACCINE sold separately
and B is the invoice price of COMBINATION.
If the invoice price of a monovalent form of VACCINE is not
available and the parties are unable to agree on an
alternative arrangement, then royalty on COMBINATION shall be
determined by multiplying NET SALES by a fraction X/Y wherein
X is one (1) and Y is the total number of active antigens
included in COMBINATION with all the Rotavirus antigens being
counted as only one (1) antigen.
1.10 "PATENTS" shall mean all patents and patent applications which
are or become owned and/or controlled, in whole or in part, by
LICENSOR or to which LICENSOR otherwise has, now or in the
future, the right to grant licenses, which generically or
specifically claim VACCINE, a process for manufacturing
VACCINE and intermediates used in such process, or a use of
VACCINE. Included within the definition of PATENTS are any
continuations, continuations-in-part, divisions, patents of
addition, reissues, renewals or extensions (other than SPC)
thereof. Also included within the definition of PATENTS are
any patents and patent applications which generically or
specifically claim any improvements of VACCINE or
intermediates or manufacturing processes required or useful
for production of VACCINE which are developed by LICENSOR
and/or under which LICENSOR otherwise has the right to grant
licenses or sublicenses, now or in the future, during the term
of this Agreement. For the avoidance of doubt PATENTS do not
include patents or patent applications which claim adjuvants,
delivery systems, or other delivery vehicles or vaccines which
include solely antigens other than Rotavirus antigens. The
current list of patent applications and patents encompassed
within PATENTS is set forth in Appendix A attached hereto.
1.11 "SPC" shall mean all Supplementary Protection Certificates for
medicinal products and their equivalents provided under the
Council Regulation (EEC) No. 1768/92 of June 18, 1992 which
are directed to a VACCINE.
1.12 "VACCINE" shall mean any and all live attenuated Rotavirus
vaccines or components thereof licensed hereunder which
contain the Rotavirus 89.12 strain and/or a strain derived
from the Rotavirus 89.12 strain, developed and/or owned by
LICENSOR and/or to which LICENSOR has otherwise, now or in the
<PAGE> 5
5.
future, the right to grant license and/or any and all live
attenuated Rotavirus vaccines or components thereof licensed
hereunder which are developed and/or owned by LICENSOR and/or
to which LICENSOR has otherwise, now or in the future, the
right to grant license.
1.13 "VALID CLAIM" shall mean a claim of a granted PATENT which has
not lapsed or been abandoned and which has not been declared
invalid or unenforceable by a court of competent jurisdiction
or administrative agency from which no appeal is or can be
taken.
1.13 "TERRITORY" shall mean all the countries and territories of
the world.
1.14 "THIRD PARTY(IES)" shall mean any person or party other than a
party to this Agreement or an AFFILIATE.
"Interpretative Rules". For purposes of this Agreement, except as
otherwise expressly provided herein or unless the context otherwise
requires: (a) defined terms include the plural as well as the singular
and the use of any gender shall be deemed to include the other gender;
(b) references to "Articles", "Sections", "Paragraphs" and other
subdivisions and to "Appendices", "Schedules" and "Exhibits" without
reference to a document, are to designated Articles, Sections,
Paragraphs and other subdivisions of, and to Appendices, Schedules and
Exhibits to, this Agreement; (c) the use of the term "including" means
"including but not limited to"; and (d) the words "herein", "hereof",
"hereunder" and other words of similar import refer to this Agreement
as a whole and not to any particular provision.
2. GRANT
2.01 LICENSOR hereby grants to LICENSEE and its AFFILIATES an
exclusive license, with the right subject to Paragraph 2.02 to
grant sublicenses, under PATENTS, KNOW-HOW and any SPC to
make, have made, use, have used, sell, offer for sale, have
sold, keep, import and export VACCINE and COMBINATION, in the
TERRITORY, in any formulation, configuration, combination
and/or delivery system, subject to the terms and conditions of
this Agreement.
2.02 LICENSEE agrees to notify LICENSOR of any sublicense under
PATENTS and/or KNOW-HOW it shall grant to any THIRD PARTY(IES)
and, at
<PAGE> 6
CONFIDENTIAL TREATMENT
6.
LICENSOR's request, agrees to provide LICENSOR with suitably
redacted versions of the sublicense agreements LICENSEE may
enter into with said THIRD PARTY(IES).
2.03 Notwithstanding anything else to the contrary herein, LICENSEE
agrees that PATENTS and KNOW-HOW shall be used by LICENSEE
only in and for VACCINES and in accordance with this Agreement
and can only be used by LICENSEE for so long as and to the
extent this Agreement and the licences and rights granted
hereunder are not terminated pursuant to Paragraph 10.02,
10.03, 10.04 or 10.06.
2.04 To the extent that any rights and licenses granted to LICENSEE
under this Agreement are rights and licenses obtained by
LICENSOR under an agreement with a THIRD PARTY ("Third Party
Agreement"), then any such rights and licenses granted to
LICENSEE will be subject to the terms, conditions and
obligations of such Third Party Agreement. LICENSEE
specifically acknowledges that the obligations contained in
Sections 2.4 (c), 8 and 10 (attached hereto as Appendix E) of
a certain License and Clinical Trials Agreement between
LICENSOR and the James N. Gamble Institute of Medical Research
("the Gamble Agreement") will be binding on LICENSEE.
3. PAYMENTS AND ROYALTIES
3.01 LICENSEE shall make the following license fee payment to
LICENSOR, which payment shall be non-refundable to LICENSEE
for any reason: [*]
3.02 As consideration for the license under PATENTS granted to
LICENSEE under this Agreement, LICENSEE shall pay to LICENSOR
the following royalties ("Patent Royalty(ies)"):
(a) [*]
(b) [*]
(c) [*] ; and
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 7
CONFIDENTIAL TREATMENT
7.
(d) [*]
provided that the VACCINE sold is covered by a VALID CLAIM in
the particular country where sales are made.
3.03 As consideration for the license to KNOW-HOW granted to
LICENSEE under this Agreement, LICENSEE shall pay to LICENSOR
royalties on NET SALES in those countries wherein there is no
granted PATENT or wherein a patent application is pending or
wherein there is no VALID CLAIM ("Know-How Royalty(ies)"),
provided that the making, using or selling of VACCINE actually
use KNOW-HOW which LICENSOR has identified in writing as being
secret and substantial at the time of disclosure to LICENSEE.
The rate of the Know-How Royalties payable under this
Paragraph 3.03 shall, on a country-by-country basis, be [*]
that would be payable under paragraph 3.02 hereto considering
the applicable portion of annual NET SALES. In the event
LICENSEE, in a specific country, faces competition with a
vaccine which represents [*] of NET SALES in such country, the
sale of which vaccine would infringe PATENTS if sold in
patented countries (a "Competitive Vaccine"), the rate of the
Know-How Royalties payable by LICENSEE to LICENSOR on NET
SALES in such country shall only be [*] that, considering the
applicable portion of annual NET SALES, would be payable under
Paragraph 3.02 hereof. LICENSEE acknowledges that the supply
of the Rotavirus 89.12 strain by LICENSOR to LICENSEE shall
constitute supply of KNOW-HOW which is secret, substantial and
identified as being secret and substantial and that Know-How
Royalties due under this Paragraph 3.03, subject to Paragraph
3.05, shall be payable on NET SALES of VACCINE which contains
such strain(s) or any strain derived therefrom.
3.04 LICENSEE's royalty obligations under Paragraph 3.02 shall
become effective in each country in the TERRITORY, on a
country-by-country basis, at such time as there is a VALID
CLAIM in such country covering the VACCINE sold and shall be
applicable until expiry of the last remaining PATENT in such
country. In the event that any THIRD PARTY initiates any legal
or administrative proceedings challenging the validity, scope
or enforceability of a PATENT in any country in the TERRITORY
and a THIRD PARTY sells a Competitive Vaccine in such
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 8
CONFIDENTIAL TREATMENT
8.
country, then the Patent Royalties on NET SALES pursuant to
Paragraph 3.02 in such country shall be suspended during
pendency of the proceedings while such Competitive Vaccine is
sold in such country and a Know-How Royalty calculated
pursuant to Paragraph 3.03 shall be due instead for the period
specified in Paragraph 3.05 with the Know-How Royalty being
[*]. If the validity, scope and enforceability of claims
in the PATENT which cover VACCINE are upheld by a court or
other legal or administrative tribunal from which no appeal is
or can be taken, then the amount of Patent Royalties which
would have been due during the period of suspension, less any
amount of paid Know-How Royalties, shall be promptly paid with
interests, the interest rate being the Interbank Bank of
America base rate. If the claims in the PATENT which cover
VACCINE are held to be invalid or otherwise unenforceable by a
court or other legal or administrative tribunal from which no
appeal is or can be taken then LICENSOR shall retain the
Know-How Royalties paid under this Paragraph 3.04 and no
further royalties under Paragraph 3.02 shall be owed in such
country provided that in the event LICENSEE has paid to
LICENSOR a Know-How royalty pursuant to this Paragraph 3.04
after the expiration of the period specified in Paragraph
3.05, the amount of such Know-How Royalties paid by LICENSEE
shall be promptly reimbursed by LICENSOR to LICENSEE with
interests.
3.05 LICENSEE's Know-How Royalty obligations under Paragraph 3.03
shall be effective, on a country-by-country basis, for a
period of ten (10) years from LICENSEE's first commercial sale
of VACCINE as part of a nationwide introduction of VACCINE in
such country of the TERRITORY.
3.06 In the event the only remaining patent protection afforded to
a PRODUCT in any country of the TERRITORY where it is sold is
a SPC, LICENSEE shall pay to LICENSOR a royalty on NET SALES
in that country at the applicable Patent Royalty rate pursuant
to Paragraph 3.02 if LICENSEE does not face competition from a
Competitive Vaccine with respect to VACCINE in that country
and at the applicable Know-How royalty rate pursuant to
Paragraph 3.03 if LICENSEE does face competition from a
Competitive Vaccine with respect to VACCINE in that country.
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 9
CONFIDENTIAL TREATMENT
9.
3.07 In the event that LICENSOR secures rights to any live
attenuated Rotavirus strain(s) other than the Rotavirus 89.12
strain which LICENSEE considers is(are) useful or necessary
for VACCINE, LICENSOR shall, at LICENSEE's sole option,
transfer such other live attenuated Rotavirus strain(s) to
LICENSEE with unrestricted rights to use such strain(s)
whereupon LICENSEE shall contribute to [*] of the procurement
costs of LICENSOR.
In the event that LICENSOR is offered a license to
improvements on Inventions (as defined in the Gamble
Agreement) under paragraph 2.5 of the Gamble Agreement,
LICENSOR shall notify LICENSEE forthwith and provide all
information with respect thereto received by LICENSOR. If
requested in writing by LICENSEE, LICENSOR shall exercise the
option provided that LICENSEE pays the costs and expenses
thereof. Any licensing rights obtained by LICENSOR as a result
of the exercise of the option upon LICENSEE's request shall
automatically be included in the license granted to LICENSEE
hereunder. Any costs and expenses paid by LICENSEE in relation
to the exercise of the option for licensing rights to
improvements on Inventions shall be fully creditable against
any royalties paid hereunder.
4. COMPULSORY LICENSES, BLOCKING PATENTS AND OTHER ROTAVIRUS ANTIGENS
4.01 In the event that a governmental agency in any country or
territory grants or compels LICENSOR or LICENSEE to grant a
license under PATENTS and/or KNOW-HOW to any THIRD PARTY for
any vaccine(s) that compete(s) with VACCINE sold by LICENSEE,
LICENSEE shall have the benefit in such country or territory
of the terms granted to such THIRD PARTY to the extent that
such terms as a whole are more favourable to the THIRD PARTY
than those granted to LICENSEE under this Agreement.
4.02 The parties recognize that BLOCKING PATENTS may exist. If at
any time during the term of this Agreement LICENSEE, in its
sole discretion, deems it necessary to seek a license under
any BLOCKING PATENT(S) from any THIRD PARTY in order to
practice the rights and licenses granted by LICENSOR to
LICENSEE hereunder in any particular country(ies), [*]
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 10
CONFIDENTIAL TREATMENT
10.
4.03 In the event that Rotavirus antigens (other than Rotavirus
antigens produced from strain 89.12 or derivatives thereof)
are required to provide and/or to increase protection against
any specific Rotavirus serotype, the royalties payable to
LICENSOR pursuant to Paragraph 3.02 or pursuant to Paragraph
3.03, as appropriate, shall be reduced by [*].
4.04 In no event shall the combined royalty reductions and
deductions pursuant to Paragraphs 4.02 and 4.03 cause the
level of royalties otherwise due to LICENSOR pursuant to
Paragraph 3.02 or pursuant to Paragraph 3.03, as appropriate,
to be reduced by [*] with respect to any VACCINE in any
country for any calendar quarter.
5. DEVELOPMENT AND MILESTONES
5.01 Subject to the provisions of Paragraph 5.02 below, LICENSEE
will, in accordance with LICENSEE's reasonable business and
scientific judgement, exercise its reasonable efforts and
diligence in developing VACCINE and in undertaking
investigations and actions required to obtain appropriate
governmental approvals to market VACCINE in at least the MAJOR
MARKETS and in commercialising VACCINE in such MAJOR MARKETS.
All such activity shall be undertaken at LICENSEE's expense.
At LICENSEE's request and expense, LICENSOR shall supply
LICENSEE with reasonable technical assistance in undertaking
such investigations and actions.
5.02 The parties shall institute a development program with the
objective of advancing VACCINE to commercial launch. The
responsibilities of the parties shall be as follows:
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 11
CONFIDENTIAL TREATMENT
11.
(a) FIRST PHASE
LICENSOR has initiated a Phase II clinical trial to
demonstrate proof of concept of VACCINE and shall
complete such trial at LICENSOR's cost and expense.
The parties shall agree on acceptable end points
concerning immunogenicity, safety and efficacy for
proof of concept which end points shall be attached
hereto as Appendix C and the meeting of such end
points shall establish proof of concept.
In parallel with said Phase II trial, LICENSEE
shall at its expense perform feasibility studies to
produce VACCINE with a commercial cell line. The
feasibility studies will have the purpose of (i)
demonstrating that a commercially viable yield is
obtainable from the chosen cell line(s), (as
defined in Appendix D attached hereto) and (ii)
subject to prior successful completion of (i),
optimizing the manufacturing process, and, if
necessary and feasible, producing GMP commercial
products for use in a Phase III clinical study and
in Phase II/III bridging studies.
(b) MILESTONE - PHASE II/MANUFACTURING
Contingent upon (i) LICENSOR establishing proof of
concept under Paragraph 5.02 (a) and (ii) LICENSEE
demonstrating that VACCINE can be produced in
commercially viable yields under Paragraph 5.02 (a)
LICENSEE shall pay LICENSOR a development milestone
fee of [*] unless LICENSEE notifies LICENSOR in
writing that LICENSEE has decided not to pursue the
development of VACCINE within sixty (60) days after
successful completion of first phase by both
parties.
If however LICENSOR is not able to demonstrate
satisfactory proof of concept at the end of Phase
II trial and/or LICENSEE cannot demonstrate in
accordance with Paragraph 5.02 (a) within six (6)
months after proof of concept in the Phase II trial
that a commercially viable yield can be obtained,
then the parties shall negotiate in good faith to
determine whether further joint development is
warranted and, if no agreement can be reached, this
Agreement may be terminated at the option of
LICENSEE if LICENSOR has
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 12
CONFIDENTIAL TREATMENT
12.
been unable to demonstrate satisfactory proof of
concept at the end of Phase II trial and at the
option of LICENSOR if LICENSEE has been unable to
demonstrate that a commercially viable yield can be
obtained.
(c) MILESTONE - PHASE III/TRIAL INITIATION
Contingent upon satisfactory completion of the
Phase II clinical and manufacturing milestone in
accordance with Paragraph 5.02 (b), LICENSEE shall
prepare a clinical development plan and discuss the
suitability of such plan with the FDA and shall
exert reasonable efforts to obtain FDA's approval
of such plan under an IND within a reasonable
timeframe to be agreed upon in good faith between
the parties.
If LICENSEE, after discussion with the FDA, is
satisfied with the economics of such plan and
decides to advance to pivotal Phase III, it shall
at its expense conduct a pivotal Phase III clinical
trial. LICENSOR shall be consulted in the design of
such trial and shall participate in the running of
the trial but LICENSEE shall exercise the ultimate
control and management of the trial.
Upon initiation of the Phase III clinical study
under an IND the design of which has been discussed
with and approved by the FDA, LICENSEE shall pay
LICENSOR a second milestone fee of [*].
If LICENSEE, after discussion with the FDA, is not
satisfied with the economics of such plan and
decides to discontinue the VACCINE development, the
second milestone fee shall not be due.
However, should LICENSEE decide to conduct the
Phase III clinical study with, and pursue the
development of, VACCINE in a MAJOR MARKET of Europe
rather than in the USA, the second milestone fee
shall be reduced to [*].
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 13
CONFIDENTIAL TREATMENT
13.
(d) MILESTONE - PHASE III/COMPLETION
Provided that the pivotal Phase III study on
completion provides satisfactory results that in
LICENSEE's opinion can be used for submission of a
registration file in a MAJOR MARKET, then LICENSEE
shall pay LICENSOR a third milestone fee of [*]. In
the event that the results of the Phase III study
are not acceptable for registration purpose, such
third milestone fee shall be payable only when a
regulatory submission is first made in a MAJOR
MARKET.[*]
(e) REGISTRATION MILESTONE
LICENSEE shall pay a milestone fee of [*]
5.03 LICENSEE shall report to LICENSOR on the status and progress
of LICENSEE's efforts to develop and commercialise VACCINE at
such times and in such manner as LICENSOR may reasonably
request.
5.04 LICENSOR shall provide to LICENSEE, at LICENSEE's request and
expense, technical assistance within its area of expertise
concerning development, production and commercialisation of
VACCINE. Provision of such technical assistance shall include,
but not be limited to, visits by LICENSOR personnel to
LICENSEE and visits by LICENSEE personnel to LICENSOR at times
and for periods of time upon which the parties will agree.
5.05 In the event that LICENSEE's development of VACCINE is
terminated at any time under the provisions of this Section 5
other than for failure by LICENSOR to establish satisfactory
proof of concept, LICENSEE shall, to the extent that it is
allowed and free to do so, grant LICENSOR a license under its
manufacturing
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 14
14.
technology specific for VACCINES in exchange for a reasonable
compensation to be discussed and agreed upon in good faith by
the parties.
In the event LICENSEE, at its sole option, elects not to
market VACCINE itself or through its AFFILIATES in any MAJOR
MARKET(S), LICENSEE shall give LICENSOR a first option for the
grant of marketing sub-licensing rights in any such MAJOR
MARKET upon terms and conditions to be negotiated and agreed
upon in good faith by the parties.
In the event LICENSEE, at its sole option, elects not to
market VACCINE itself or through its AFFILIATES and/or
sublicensees in any MAJOR MARKET(S), the rights and licenses
granted to LICENSEE under this Agreement shall be terminated
with respect to any such MAJOR MARKET(S).
6. EXCHANGE OF INFORMATION AND CONFIDENTIALITY
6.01 During the term of this Agreement, LICENSOR shall promptly
disclose to LICENSEE and/or supply LICENSEE with all
KNOW-HOW. LICENSOR shall not be authorized to make any
publication with respect to the KNOW-HOW nor disclose it to
any THIRD PARTY provided that, LICENSOR shall, upon LICENSEE's
prior consent in writing which consent shall not be
unreasonably withheld, be authorized to publish the data from
the Phase II clinical trial referred to in Paragraph 5.02
hereof and prior studies and, without consent, be authorized
to disclose KNOW-HOW to its licensor as per the Gamble
Agreement.
6.02 During the term of this Agreement, the parties shall promptly
inform each other of any information that a party obtains or
develops regarding the utility and safety of VACCINE and shall
promptly report to the other party any confirmed information
of serious or unexpected reactions or side effects related to
the utilisation or medical administration of VACCINE.
6.03 During the term of this Agreement and for seven (7) years
thereafter, irrespective of any termination earlier than the
expiration of the term of this Agreement, LICENSOR and
LICENSEE shall not reveal or disclose to THIRD PARTIES any
confidential information received from the other party without
first obtaining the written consent of the disclosing party,
except as may be required for purposes of investigating,
developing, manufacturing or marketing VACCINE
<PAGE> 15
15.
or for securing essential or desirable authorisations,
privileges or rights from governmental agencies, or is
required to be disclosed to a governmental agency, or is
necessary to file or prosecute patent applications concerning
VACCINE or to carry out any litigation concerning VACCINE
provided that in each case the disclosing party exerts best
efforts to maintain the confidentiality thereof under such
circumstances and notifies the owner of the confidential
information prior to any such disclosure. This confidentiality
obligation shall not apply to such information which is or
becomes a matter of public knowledge, or is already in the
possession of the receiving party, or is disclosed to the
receiving party by a THIRD PARTY having the right to do so, or
is subsequently and independently developed by employees of
the receiving party or AFFILIATES thereof who had no knowledge
of the confidential information disclosed. The parties shall
take reasonable measures to assure that no unauthorised use or
disclosure is made by others to whom access to such
information is granted.
6.04 Nothing herein shall be construed as preventing a party hereto
from disclosing any information received from the other party
to an AFFILIATE, sublicensee, distributor or to a THIRD PARTY
as may be required for purposes of investigating, developing,
manufacturing or marketing VACCINE, provided such AFFILIATE,
sublicensee, distributor or THIRD PARTY has undertaken a
similar obligation of confidentiality with respect to the
disclosed confidential information.
6.05 All confidential information disclosed by one party to the
other shall remain the intellectual property of the disclosing
party. In the event that a court or other legal or
administrative tribunal, directly or through an appointed
master, trustee or receiver, assumes partial or complete
control over the assets of a party to this Agreement based on
the insolvency or bankruptcy of such party, the bankrupt or
insolvent party shall promptly notify the court or other
tribunal (i) that confidential information received from the
other party under this Agreement remains the property of the
other party and (ii) of the confidentiality obligations under
this Agreement. In addition, the bankrupt or insolvent party
shall, to the extent permitted by law, take all steps
necessary or desirable to maintain the confidentiality of the
other party's confidential information and to insure that the
court, other tribunal or appointee maintains such information
in confidence in accordance with the terms of this Agreement.
6.06 No public announcement or other disclosure to THIRD PARTIES
concerning the existence of or the terms of or the subject
matter covered by this Agreement
<PAGE> 16
16.
shall be made, either directly or indirectly, by any party to
this Agreement, without first obtaining the approval of the
other party and agreement upon the nature and text of such
announcement or disclosure. The party desiring to make any
such public announcement or other disclosure shall inform the
other party of the proposed announcement or disclosure in
reasonable sufficient time prior to public release, and shall
provide the other party with a written copy thereof, in order
to allow such other party to comment upon such announcement or
disclosure. If such public announcement or other disclosure is
required under securities laws or rules or pursuant to a
public or private financing the concerned party needs not
obtain the consent of the other party but shall provide the
other party with a five (5) working days notice allowing the
other party to review and comment upon such proposed
disclosure and/or announcement and such other party shall
cooperate fully with the concerned party with respect to all
disclosures regarding this Agreement to the United States
Securities Exchange Commission and any other governmental or
regulatory agencies, including requests for confidential
treatment of proprietary information of either party included
in any such disclosure.
6.07 Neither LICENSEE nor LICENSOR shall submit for written or oral
publication any manuscript, abstract or the like which
includes data or other information generated and provided by
the other party without first obtaining the prior written
consent of the other party, which consent shall not be
unreasonably withheld. The contribution of each party shall be
noted in all publications or presentations by acknowledgement
or coauthorship, whichever is appropriate.
7. PATENT PROSECUTION AND LITIGATION
7.01 LICENSOR, or any entity having granted or granting rights to
LICENSOR, shall be responsible for the filing, prosecution and
maintenance of PATENTS which, subject to Paragraph 7.02, shall
be at the cost and expense of LICENSOR (or the entity having
granted or granting rights to LICENSOR). LICENSOR shall
disclose to LICENSEE the complete texts of all patent
applications within PATENTS as well as all information
received concerning the institution or possible institution of
any interference, opposition, re-examination, reissue,
revocation, nullification or any official proceedings
involving a PATENT anywhere in the TERRITORY. LICENSEE shall
have the right to review all such pending applications and
other proceedings and to make comments and/or recommendations
to LICENSOR concerning them and their conduct and
<PAGE> 17
17.
LICENSOR shall consider, in good faith, all such LICENSEE's
comments and/or recommendations. LICENSOR agrees to keep
LICENSEE promptly and fully informed of the course of patent
prosecution or other proceedings including by providing
LICENSEE with copies of substantive communications, search
reports and THIRD PARTY observations submitted to or received
from patent offices throughout the TERRITORY. LICENSOR shall
provide such patent consultation to LICENSEE at no cost to
LICENSEE. LICENSEE shall hold all information disclosed to it
under this section as confidential subject to the provisions
of Paragraphs 6.03 and 6.04.
7.02 LICENSOR shall notify LICENSEE in sufficiently reasonable time
in advance of any PATENT or subject matter or claim contained
in PATENT which LICENSOR intends to abandon or otherwise cause
or allow to be forfeited and LICENSEE shall have the right to
assume responsibility for filing, prosecution and maintenance
of any such PATENT or subject matter or claim contained in
PATENT at LICENSEE's expense provided LICENSOR has the right
to permit LICENSEE to assume such responsibility.
7.03 In the event of the institution of any suit by a THIRD PARTY
against LICENSOR, LICENSEE or its AFFILIATES or sublicensees
for patent infringement involving the manufacture, use, sale,
distribution or marketing of VACCINE anywhere in the
TERRITORY, the party sued shall promptly notify the other
party in writing. Subject to Section 21 below, LICENSEE shall
have the right but not the obligation to defend such suit at
its own expense. LICENSOR and LICENSEE shall reasonably assist
one another and cooperate in any such litigation at the
other's request without expense to the requesting party.
7.04 In the event that LICENSOR or LICENSEE becomes aware of actual
or threatened infringement of a PATENT anywhere in the
TERRITORY, that party shall promptly notify the other party in
writing. LICENSEE shall have the first right but not the
obligation to bring, at its own expense, an infringement
action against any THIRD PARTY and to use LICENSOR's name in
connection therewith. If LICENSEE does not commence a
particular infringement action within ninety (90) days,
LICENSOR, after notifying LICENSEE in writing, shall be
entitled, but not obligated, to bring such infringement action
at its own expense. The party conducting such action shall
have full control over its conduct, including settlement
thereof provided that LICENSEE shall not take any steps,
including settlement, which would have an adverse effect on
PATENTS unless LICENSOR's consent is obtained. In any event,
LICENSOR and LICENSEE
<PAGE> 18
18.
shall reasonably assist one another and cooperate in any such
litigation at the other's request without expense to the
requesting party.
7.05 LICENSOR and LICENSEE shall recover their respective actual
out-of-pocket expenses, or equitable proportions thereof,
associated with any litigation or settlement thereof, from any
recovery made by any party. Any excess amount shall before the
party which has conducted the litigation or settlement
thereof.
7.06 The parties shall keep one another informed of the status of
and of their respective activities regarding any litigation or
settlement thereof concerning VACCINE.
7.07 LICENSOR shall authorise LICENSEE to act as LICENSOR's agent
for the purpose of making any application for any extensions
of the term of PATENTS, including SPC, and shall provide
reasonable assistance therefor to LICENSEE, at LICENSEE's
expense. (In the United States of America as permitted under
Title 35 of the United States Code).
7.08 LICENSOR, on behalf of itself, its officers, agents and
successors hereby waives any and all actions and causes of
action, claims and demands whatsoever in law or equity of any
kind against LICENSEE'S and its AFFILIATES' exercize of
LICENSEE's rights under Paragraphs 7.02 and 7.07, and, subject
to LICENSEE's obligations under Paragraph 7.04, against
LICENSEE's and its AFFILIATES' exercize of LICENSEE's rights
under Paragraph 7.04.
8. TRADEMARKS
8.01 LICENSEE, at its expense, shall be responsible for the
selection, registration and maintenance of all trademarks
which it employs in connection with VACCINE and COMBINATION
and shall own and/or control such trademarks. Nothing in this
Agreement shall be construed as a grant of rights, by license
or otherwise, to LICENSOR to use such trademarks for any
purpose.
<PAGE> 19
19.
9. STATEMENTS AND REMITTANCES
9.01 LICENSEE shall keep and require its AFFILIATES and
sublicensees to keep complete and accurate records of all
sales of VACCINE and COMBINATION under the licenses granted
herein. LICENSOR shall have the right, at LICENSOR's expense,
through a certified public accountant or like person
reasonably acceptable to LICENSEE, to examine such records
during regular business hours during the life of this
Agreement and for six (6) months after its termination;
provided, however, that such examination shall not take place
more often than once a year and shall not cover such records
for more than the preceding two (2) years and provided further
that such accountant shall report to LICENSOR only as to the
accuracy of the royalty statements and payments. In the event
that such inspection shall indicate in any calendar year that
the royalties which should have been paid by LICENSEE are at
least five percent (5%) greater than those which were
actually paid by LICENSEE, then LICENSEE shall pay the cost of
such inspection in addition to the underpaid royalties.
9.02 Within sixty (60) days after the close of each calendar
quarter, LICENSEE shall deliver to LICENSOR a true accounting
of all VACCINES and COMBINATION sold by LICENSEE, its
AFFILIATES and its sublicensees during such quarter, and shall
at the same time pay all royalties due. Such accounting shall
show sales, NET SALES and deductions against royalties on NET
SALES on a country-by-country and product-by-product basis.
9.03 Any tax paid or required to be withheld by LICENSEE on behalf
of LICENSOR on account of royalties payable to LICENSOR under
this Agreement shall be deducted from the amount of royalties
otherwise due. LICENSEE shall secure and send to LICENSOR
proof of any such taxes withheld and paid by LICENSEE or its
sublicensees for the benefit of LICENSOR.
9.04 All royalties due under this Agreement shall be payable in
United States Dollars. Monetary conversions from the currency
of a foreign country in which VACCINE is sold into US currency
shall be made at the exchange rate in force on the last
business day of the period for which the royalties are being
paid as published by Banque Generale de Belgique, Brussels,
Belgium, or on another basis mutually agreed to by both
parties in writing.
<PAGE> 20
20.
10. TERM AND TERMINATION
10.01 Unless otherwise terminated, this Agreement shall expire upon
the expiration, lapse or invalidation of the last remaining
PATENT in the TERRITORY. Expiration of this Agreement under
this provision shall not preclude LICENSEE from continuing to
market VACCINE and to use KNOW-HOW without any further royalty
or other payments to LICENSOR.
10.02 If either party fails or neglects to perform covenants or
provisions of this Agreement and if the party in default has
not corrected such default within sixty (60) days (the period
shall be thirty (30) days for a payment default) after
receiving written notice from the other party with respect to
such default, such other party shall have the right to
terminate this Agreement by giving written notice to the party
in default provided the notice of termination is given within
six (6) months of the default and prior to correction of the
default. If the default other than a payment default is not
curable in sixty (60) days and the defaulting party in good
faith notifies the other party in writing prior to the sixty
(60) days that it is initiating cure of the default and
initiates cure of such default within the sixty (60) days and
in good faith continues to attempt to cure the default, and in
fact cures the default within one hundred and twenty (120)
days, then this Agreement shall not be terminable hereunder.
10.03 LICENSEE may terminate this Agreement in its entirety or with
respect to any country by giving LICENSOR at least three (3)
months prior written notice thereof.
10.04 Either party may terminate this Agreement if, at any time, the
other party shall file in any court or agency pursuant to any
statute or regulation of (the United States or of) any
(individual) state or (foreign) country, a petition in
bankruptcy or insolvency or for reorganisation or for an
arrangement or for the appointment of a receiver or trustee of
the party or of its assets, or if the other party proposes a
written agreement of composition or extension of its debts, or
if the other party shall be served with an involuntary
petition against it, filed in any insolvency proceeding, and
such petition shall not be dismissed with sixty (60) days
after the filing thereof, or if the other party shall propose
or be a party to any dissolution or liquidation, or if the
other party shall make an assignment for the benefit of
creditors.
<PAGE> 21
21.
10.05 Notwithstanding the bankruptcy of LICENSOR, or the impairment
of performance by LICENSOR of its obligations under this
Agreement as a result of bankruptcy or insolvency of LICENSOR,
LICENSEE, if it has not then been notified for breach by
LICENSOR, shall be entitled to retain the licenses granted
herein, subject to LICENSOR's right to terminate this
Agreement for reasons other than bankruptcy or insolvency as
expressly provided in this Agreement.
10.06 LICENSEE shall be entitled to terminate this Agreement by
written notice to LICENSOR in the event of change of control
of LICENSOR, provided such notice is given within thirty (30)
days after LICENSOR has notified LICENSEE of such change of
control or after the date which LICENSOR can demonstrate is
the date on which LICENSEE has been otherwise informed of such
change of control.
11. RIGHTS AND DUTIES UPON TERMINATION
11.01 Upon termination of this Agreement, LICENSOR shall have the
right to retain any sums already paid by LICENSEE hereunder,
and LICENSEE shall pay all sums accrued hereunder which are
then due.
11.02 Upon termination of this Agreement in its entirety or with
respect to any country under Paragraph 10.02, 10.03 or 10.04,
LICENSEE shall notify LICENSOR of the amount of VACCINE
LICENSEE and its AFFILIATES, sublicensees and distributors
then have on hand, the sale of which would, but for the
termination, be subject to royalty, and LICENSEE and its
AFFILIATES, sublicensees and distributors shall thereupon be
permitted to sell that amount of VACCINE provided that
LICENSEE shall pay the royalty thereon at the time herein
provided for.
11.03 Termination of this Agreement shall terminate all outstanding
obligations and liabilities between the parties arising from
this Agreement except those described in Paragraphs 2.03,
6.03, 6.04, 6.05, 6.06, 6.07, 7.03, 7.06, 7.08, 8.01, 9.01,
9.02, 9.03, 9.04, 9.05, 11.01, 11.02, 11.03, 14.01, 15.01,
18.01, 20.01 and 21.01.
11.04 Upon termination of this Agreement by LICENSOR pursuant to
Paragraph 10.02 for breach of LICENSEE, LICENSEE agrees not to
use KNOW-HOW and/or
<PAGE> 22
22.
PATENTS for the research, development, making, using or
selling of any product or process, including, but not limited
to, VACCINES.
12. WARRANTIES AND REPRESENTATIONS
12.01 LICENSOR warrants that it has the right to grant the rights
and licences under PATENTS and KNOW-HOW as provided throughout
this Agreement including, but not limited to, the Rotavirus
89.12 strain and that it has the right to enter into this
Agreement.
12.02 Nothing in this Agreement shall be construed as a warranty
that PATENTS are valid or enforceable or that their exercise
does not infringe any patent rights of THIRD PARTIES. Without
having made an investigation or search, LICENSOR hereby
warrants and represents that it has no present knowledge from
which it can be inferred that PATENTS are invalid or that
their exercise would infringe patent rights of THIRD PARTIES
or that the Rotavirus 89.12 strain or the use thereof in
VACCINE infringes any patent rights of THIRD PARTIES. Subject
to other provisions contained herein, a holding of invalidity
or unenforceability of any PATENT, from which no further
appeal is or can be taken, shall not affect any obligation
already accrued hereunder, but shall only eliminate royalties
otherwise due under such PATENT from the date such holding
becomes final.
12.03 LICENSOR acknowledges that, in entering into this Agreement,
LICENSEE has relied upon technical and clinical information
and KNOW-HOW disclosed and/or supplied by or on behalf of
LICENSOR and that LICENSEE has relied upon LICENSOR's
obligation to disclose and/or supply further information
pursuant to Paragraph(s) 6.01 and/or 6.02 hereof. LICENSOR
warrants and represents that LICENSOR has no knowledge that
the technical and/or clinical information and/or KNOW-HOW
disclosed and/or supplied to LICENSEE prior to the date of
this Agreement is inaccurate in any material respect. LICENSOR
warrants and represents that it will use its reasonable
efforts to review the technical and/or clinical information
and/or KNOW-HOW to be disclosed and/or supplied to LICENSEE
under Paragraph(s) 6.01 and/or 6.02 hereof after the date of
this Agreement for any inaccuracies therein and that, to the
extent LICENSOR has any knowledge of any material inaccuracies
in such technical and/or clinical information and/or KNOW-HOW,
it shall inform LICENSEE of such inaccuracies. LICENSOR and
LICENSEE warrant and represent to each other that they have
not, up to the date of this Agreement, omitted to disclose
and/or supply to each
<PAGE> 23
23.
other any information known to them concerning VACCINE or the
transactions contemplated by this Agreement which would, to
the best of their knowledge, be material to the other's
decision to enter into this Agreement and to undertake the
commitments and obligations set forth herein.
12.04 LICENSOR warrants and represents that it has no present
knowledge of the existence of any pre-clinical or clinical
data or information concerning VACCINE which suggests that
there may exist toxicity, safety and/or efficacy concerns
which may materially impair the utility and/or safety of
VACCINE.
13. FORCE MAJEURE
13.01 If the performance of any part of this Agreement by either
party, or of any obligation under this Agreement other than a
payment provision, is prevented, restricted, interfered with
or delayed by reason of any cause beyond the reasonable
control of the party liable to perform, unless conclusive
evidence to the contrary is provided, the party so affected
shall, upon giving written notice to the other party, be
excused from such performance to the extent of such
prevention, restriction, interference or delay, provided that
the affected party shall use its reasonable best efforts to
avoid or remove such causes of non-performance and shall
continue performance with the utmost dispatch whenever such
causes are removed. When such circumstances arise, the parties
shall discuss what, if any, modification of the terms of this
Agreement may be required in order to arrive at an equitable
solution. In the event agreement is not reached or the force
majeure event cannot be cured within six (6) months, the other
party shall have the right to terminate this Agreement by
serving a written notice to the party affected by the force
majeure event.
14. GOVERNING LAW
14.01 This Agreement shall be deemed to have been made in the United
States of America and its form, execution, validity,
construction and effect shall be determined in accordance with
the laws of the Commonwealth of Massachusetts, USA, without
regard to its choice of law principles.
<PAGE> 24
24.
15. RESOLUTION OF DISPUTES
15.01 Prior to initiating legal action, the parties agree to attempt
to settle any dispute by discussions between the parties,
provided, however that this Paragraph 15.01 shall not prevent
either party from seeking injunctive relief where necessary.
If the parties have not resolved the dispute amicably, legal
action may be introduced.
16. SEPARABILITY
16.01 In the event any portion of this Agreement shall be held
illegal, void or ineffective, the remaining portions hereof
shall remain in full force and effect.
16.02 If any of the terms or provisions of this Agreement are in
conflict with any applicable statute or rule of law, then such
terms or provisions shall be deemed inoperative to the extent
that they may conflict therewith and shall be deemed to be
modified to conform with such statute or rule of law.
16.03 In the event that the terms and conditions of this Agreement
are materially altered as a result of Paragraphs 16.01 or
16.02, the parties will renegotiate the terms and conditions
of this Agreement to resolve any inequities.
17. ENTIRE AGREEMENT
17.01 This Agreement, entered into as of the date first written
above, constitutes the entire agreement between the parties
relating to the subject matter hereof and supersedes all
previous writings and understandings. No terms or provisions
of this Agreement shall be varied or modified by any prior or
subsequent statement, conduct or act of either of the parties,
except that the parties may amend this Agreement by written
instruments specifically referring to and executed in the same
manner as this Agreement.
<PAGE> 25
25.
18. NO WAIVER
18.01 The failure of either party at any time to exercise any of
their respective rights under this Agreement shall not be
deemed a waiver thereof, nor shall such failure in any way
prevent either party, as the case may be, from subsequently
asserting or exercising such rights.
19. NOTICES
19.01 Any notice required or permitted under this Agreement shall be
sent by certified mail, return receipt requested, postage
pre-paid to the following addresses of the parties:
if to LICENSOR:
Virus Research Institute, Inc.,
61 Moulton Street
Cambridge, MA 02138,
USA
Attention: President
cc: Elliot M. Olstein, Esq.
Carella, Byrne, Bain, Gilfillan, Cecchi,
Stewart & Olstein
6 Becker Farm Road
Roseland, New Jersey 07068
USA
if to LICENSEE:
SmithKline Beecham P.L.C.
New Horizons Court
Brentford
Middlesex TW8 9EP
United Kingdom
with a copy to :
SmithKline Beecham Biologicals Manufacturing
S.A.
rue de l'Institut 89
<PAGE> 26
26.
1330 Rixensart, Belgium
Attention : Senior Vice President,
General Manager
19.02 Any notice required or permitted to be given concerning this
Agreement shall be effective upon receipt by the party to whom
it is addressed.
20. ASSIGNMENT
20.01 Without prejudice to Paragraph 10.06, this Agreement and the
licenses herein granted shall be binding upon and inure to the
benefit of the successors in interest of the respective
parties. Neither this Agreement nor any interest hereunder
shall be assignable by either party without the written
consent of the other provided, however, that LICENSEE may,
without the consent of LICENSOR, assign this Agreement to any
AFFILIATE or to any corporation with which it may merge or
consolidate or to which it may sell all or substantially all
of its assets, and that LICENSOR may without obtaining the
consent of LICENSEE assign this Agreement to any corporation
with which it may merge or consolidate or to which it may sell
all or substantially all of its assets.
20.02 In the event of a permitted assignment hereunder the assignee
must accept in writing the obligations of this
Agreement, whereupon the assignor shall be relieved of its
obligations under this Agreement.
21. INDEMNIFICATION
21.01(a) LICENSEE agrees to defend, indemnify and hold harmless
LICENSOR, its AFFILIATES and any of their licensors that have
granted a license under which LICENSEE has received a license
under this Agreement as well as each of their respective
directors, officers, employees, shareholders, and agents
(hereinafter individually and collectively referred to as
"Indemnitee") against any and all actions, claims
(specifically including, but not limited to, any damages based
on product liability claims), suits, losses, demands,
judgments, and other liabilities (including attorneys' fees
until LICENSEE assumes the defense as described below)
asserted by THIRD PARTIES, government and non-government,
resulting from or arising out of the manufacture, use or sale
of VACCINES by LICENSEE, its AFFILIATES or sublicensees
provided however that LICENSEE's indemnification to an
<PAGE> 27
27.
Indemnitee hereunder shall not apply to any liability, damage,
loss or expense to the extent that it is directly or
indirectly attributable to the gross negligence or intentional
misconduct of such Indemnitee. If any such claims or actions
are made, Indemnitee shall be defended at LICENSEE's sole
expense by counsel selected by LICENSEE and reasonably
acceptable to LICENSOR; provided that LICENSOR may, at its own
non-refundable expense, also be represented by counsel of its
own choosing.
(b) Any such Indemnitee shall notify LICENSEE promptly of any
claim or threatened claim under this Section 21, shall fully
cooperate with all reasonable requests of LICENSEE with
respect thereto, and shall give LICENSEE the right to control
the defence and settlement of any such claim provided such
Indemnitee shall be fully indemnified under this Section 21.
(c) The provision of this Section 21 shall apply whether or not an
act or claim is rightly brought or asserted.
IN WITNESS WHEREOF, the parties, through their authorised officers, have
executed this Agreement as of the date first written above.
VIRUS RESEARCH INSTITUTE Inc.
/s/ William A. Packer
BY: WILLIAM A. PACKER
TITLE: PRESIDENT
SMITHKLINE BEECHAM P.L.C.
/s/ Jean Stephenne
BY: JEAN STEPHENNE
TITLE: Senior Vice President, General Manager
<PAGE> 28
CONFIDENTIAL TREATMENT
APPENDIX A
PATENT INFORMATION
[*]
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 29
CONFIDENTIAL TREATMENT
APPENDIX B
VRI PROPRIETARY INFORMATION AND KNOW-HOW,
89-12 ROTAVIRUS VACCINE
8 October 1997
[*]
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 30
CONFIDENTIAL TREATMENT
APPENDIX C
PHASE II CLINICAL ENDPOINTS
[*]
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 31
APPENDIX D
MANUFACTURING ENDPOINT
- - Yield a minimum of 1 dose/ml
- - This yield should be achieved in a cell line acceptable for commercial
production and acceptable to regulatory authorities.
<PAGE> 32
APPENDIX E
EXCERPTS OF LICENSE AND CLINICAL TRIALS AGREEMENT
DATED FEBRUARY 27, 1995 BETWEEN VIRUS RESEARCH INSTITUTE, INC AND JAMES N.
GAMBLE INSTITUTE OF MEDICAL RESEARCH
2.4 (a)
(b)
(c) VRI agrees to forward to GAMBLE a copy of any and all fully
executed sublicense agreements within thirty (30) days of execution thereof, and
further agrees to forward to Gamble annually a copy of such reports received by
VRI from its Sublicensee during the preceding twelve (12) month period under the
sublicenses as shall be pertinent to a royalty accounting under said sublicense
agreements. VRI may delete from copies of sublicense agreements provided to
GAMBLE hereunder commercial, research and development, manufacturing, financial
and other provisions unrelated to VRI's or the Sublicensee's obligations to
Gamble.
8. INDEMNIFICATION AND INSURANCE.
8.1 VRI shall defend, indemnify and hold harmless GAMBLE and its trustees,
officers, medical and professional staff, employees, and agents and their
respective successors, heirs and assigns against all losses, damages, expenses,
including attorney's fees and against any claims, suits, actions, demands or
judgments brought against any one or more of them, arising out of any theory of
product liability (including, but not limited to, action in the form of tort,
warranty, or strict liability) or negligence concerning any product, process or
service made, used or sold pursuant to any right or license granted under this
AGREEMENT. VRI shall have the right to control the defense settlement and/or
compromise of any such claims or actions.
8.2 VRl's obligations under Section 8.1 above shall not apply to any
liability, damage, loss or expense to the extent that it is directly
attributable to the negligence or intentional misconduct of GAMBLE or any of its
trustees, officers, medical and professional staff, employees, agents or their
respective successors, heirs or assigns.
8.3 VRI shall add, at VRl's expense, GAMBLE as an additional insured on
VRI's clinical trial insurance policy, which provides limits of liability of
$2,000,000 per incident and aggregate, effective upon the Effective Date of this
AGREEMENT, to provide insurance coverage for GAMBLE for the clinical trials.
8.4 VRI, at VRl's expense, shall maintain policies of comprehensive
general liability insurance and will obtain product liability insurance in
amounts not less than $1,000,000 per incident and $2,000,000 annual aggregate
and shall add GAMBLE as an additional insured on VRI's policy, which provides
such limits of liability. Such insurance shall provide (i) product liability
coverage, (ii) negligence, and (iii) broad form contractual liability coverage,
for VRI's indemnification under Section 8.1 of this AGREEMENT. The minimum
amounts of insurance coverage required under these provisions shall not be
construed to create a limit of VRI's liability with respect to VRI's
indemnification obligation under Section 8.1 of this AGREEMENT. VRI shall
maintain such comprehensive general liability insurance and product liability
insurance beyond the expiration or termination of this AGREEMENT and for a
reasonable period after the termination of the clinical trials, which in no
event shall be less than fifteen (15) years after the clinical trials.
8.5 This Section 8 shall survive expiration or termination of this
AGREEMENT.
<PAGE> 33
10. CONFIDENTIALITY
10.1 CONFIDENTIAL INFORMATION. As used in this AGREEMENT, "Confidential
Information" means all information transmitted by a party hereto or obtained by
a party hereto in connection with the performance of the clinical trials and
other services described in Section 3 hereof or of any such other services to be
provided by the parties as described herein, subject to the exceptions specified
below. "Confidential Information" means information of any type, not generally
known, about the business, processes, services, products, suppliers, customers,
clients or plans of GAMBLE or VRI ("the parties hereto") of any client of the
parties hereto (regardless of whether the parties hereto have executed a
confidentiality agreement with such customer), which is used or useful in the
conduct of business of the parties hereto, or which confers or tends to confer a
competitive advantage over one who does not possess such information. Such
information includes, but is not limited to, information relating to trade
secrets, Technical Information, patent applications, know-how, research,
development, design, engineering, quality control or service techniques,
information about existing, new or envisioned products, processes or services
and their development, performance, scientific, engineering or technical
information, laboratory notebooks, notes, computer programs, source codes,
object codes, software manuals, sketches, drawings, reports, formulae, gels,
slides, sequences, biological materials living or otherwise, photographs,
negatives, prototypes, models, correspondence, and other documents and things,
and information relating to purchasing, sales, marketing, licensing, contracts
with third parties, and pricing, whether or not in writing and whether or not
labeled or identified as confidential or proprietary. Confidential Information
may be disclosed in writing or orally or may be obtained by observation or
inspection. All data, materials, information, and records developed by a party
hereto in the course of performing this AGREEMENT shall be considered
Confidential Information. However, Confidential Information shall not include
information that a party hereto can demonstrate: (i) is in or enters the public
domain through no fault of such party; (ii) is disclosed to a party hereto by a
third party entitled to disclose it; (iii) was known to a party hereto before
the date of this AGREEMENT; OR (iv) is required by law to be disclosed, provided
reasonable advance notice of such requirement is given to a party hereto before
such disclosure.
10.2 CONFIDENTIALITY. Without prior written consent, the parties hereto
will not disclose the other party's Confidential Information to any third party
other than employees, agents or others of the parties hereto who must
necessarily be informed thereof, but only if and to the extent that any such
person has a need for such information. A party hereto will only use
Confidential Information for the purpose of fulfilling its obligations under
this AGREEMENT. The parties hereto agree that they will take such reasonable
steps as may be necessary to prevent the disclosure or use of any such materials
by their officers, employees or agents except as provided herein, including but
not limited to obtaining and enforcing appropriate confidentiality agreements
with such persons. All obligations of confidentiality and nondisclosure set
forth in this AGREEMENT shall survive the termination or expiration of this
AGREEMENT.
10.3 The parties agree that clinical trial data generated by GAMBLE under
the terms of the AGREEMENT will not be published by VRI prior to its publication
by GAMBLE's principal investigators. To the extent not published, the results of
the clinical trials will be held in confidence by GAMBLE. Subject to the
foregoing, VRI will have the unrestricted right to use or disclose such clinical
trial data.
<PAGE> 1
CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
EXHIBIT 10.26
-------------------------------
LICENSE AGREEMENT
-------------------------------
This Agreement is entered this 25th day of March, 1997 (the "EFFECTIVE DATE")
into BY AND AMONG:
VIRUS RESEARCH INSTITUTE, INC., a company organized and existing under the
laws of the State of Delaware, having its principal place of business at
61 Moulton Street, Cambridge, Massachusetts, USA,
(hereinafter referred to as "VRI")
AND
MERIEUX ORAVAX S.N.C., a societe en nom collectif organized and existing
under the laws of the Republic of France, registered at the Registre du
Commerce et des Societes in Lyon under N[degree symbol] RCS Lyon
B 404 337 172, with a capital of 52.000.000 French Francs, whose registered
head-office is located at 58, avenue Leclerc, 69007 Lyon, France,
ORAVAX MERIEUX CO., a general partnership organized and existing under the
laws of the State of Massachusetts, having its principal place of business
at 38 Sidney Street, Cambridge, Massachusetts, USA,
(the parties numbered and above are individually and collectively
hereinafter referred to as "LICENSEE" or "HPC")
WITNESSETH
----------
WHEREAS, VRI has developed certain confidential and/or proprietary information,
patents and patent applications and material relating to the polymer called
polyphosphazene ("PCPP") as an immunoadjuvant which may present an interest in
connection with vaccination against, and immunotherapy of, Helicobacter pylori
infections;
WHEREAS, HPC are joint venture entities created and equally owned and controlled
by OraVax, Inc. of Cambridge, Massachusetts, USA, ("ORAVAX") and Pasteur Merieux
Serums & Vaccins S.A. -a Pasteur Merieux Connaught company- of Lyon, France
("PMC") for the purpose of researching, developing, manufacturing and
distributing products for active immunization against Helicobacter pylori
infections and prevention, treatment and cure of associated diseases and
conditions in humans;
WHEREAS, HPC wishes to acquire from VRI certain licenses in order to have the
right to use PcPP in vaccines against Helicobacter pylori infections, and VRI is
willing to grant such licenses to HPC, subject to the terms of and conditioned
upon this Agreement;
1
<PAGE> 2
NOW, THEREFORE, in consideration of the premises herein and for other good and
valuable consideration, the Parties hereto, intending to be legally bound, agree
as follows:
ARTICLE 1 - DEFINITIONS AND INTERPRETATION
1.1. DEFINITIONS : For the purposes of this Agreement the following words and
phrases shall have the following meanings:
(a) "AFFILIATE" means, with respect to any Person, (i) any other
Person of which the securities or other ownership interests
representing fifty per cent (50%) or more of the equity or fifty
per cent (50%) or more of the ordinary voting power or fifty per
cent (50%) or more of the general partnership interest are, at
the time such determination is being made, owned, Controlled or
held, directly or indirectly, by such Person (a "SUBSIDIARY"), or
(ii) any other Person which, at the time such determination is
being made, is Controlling, or under common Control with, such
Person. As used herein, the term "Control", whether used as a noun
or verb, refers to the possession, directly or indirectly, of the
power to direct, or cause the direction of, the management or
policies of a Person, whether through the ownership of voting
securities, by contract or otherwise. For the avoidance of doubt,
it is hereby recorded that, notwithstanding the definition
contained in this Section 1.1.(a), the two HPC entities are
Affiliates of both OraVax and PMC and of each other, and that
OraVax and PMC are each Affiliates of the two HPC entities.
(b) "AGREEMENT" means this agreement, all amendments and supplements
to this Agreement and all schedules to this Agreement, including
the following:
SCHEDULE A - LICENSED PATENTS,
SCHEDULE B - List of HPC Antigens.
APPENDIX A - Terms and conditions applicable to research contract.
APPENDIX B - Terms and conditions applicable to COMPOUND supply.
(c) "CALENDAR QUARTER" means any of the three-month periods beginning
January 1, April 1, July 1 and October 1 in any year.
(d) "COMPOUND" means a polymer that is a synthetic polyphosphazene
derivative, including but not limited to the polyphosphazene known
as Adjumer(TM);
(e) "COMPOUND IMPROVEMENTS" means all patentable or non-patentable
inventions, discoveries, technology and information of any type
whatsoever, which add to the knowledge of the COMPOUND or its
properties in general as a delivery system or an immunoadjuvant,
as the case may be, for use in the Field of Use, including without
limitation compositions, molecules derived from COMPOUND, methods,
processes, technical information, knowledge, experience and
know-how.
(f) "CONFIDENTIAL INFORMATION" has the meaning ascribed to it in
Section 8.1. of this Agreement.
2
<PAGE> 3
(g) "EVENT OF FORCE MAJEURE" has the meaning ascribed to it in Article
12 of this Agreement.
(h) "FIELD OF USE" means the use of VRI Technology for the formulation
of products for active immunization against Helicobacter pylori
infections in humans and, by such immunization, the prevention,
treatment and cure of associated diseases and conditions.
(i) "FIRST COMMERCIAL SALE" means, in each country of the Territory,
the first sale of a PRODUCT in commercial quantities by LICENSEE,
its Affiliates or Sublicensees, to Third-Parties, in each case for
use or consumption of such PRODUCT in such country by the general
public.
(ii) "JOINT INVENTIONS" has the meaning ascribed to it in Section 9.1
hereof.
(j) "LICENSE" has the meaning ascribed to it in Section 2.1.1. of this
Agreement.
(k) "LICENSED KNOW-HOW" means any and all technical information,
discoveries, improvements, processes, formulae, data, engineering,
technical and shop drawings, inventions, Materials, shop-rights,
know-how and trade secrets, in each case which is Confidential
Information at the time of disclosure according to Article 8, is
identified in accordance with Section 2.3.3. of this Agreement as
related to COMPOUND and which is useful or necessary to make, have
made, use or sell PRODUCTS or to practice under the LICENSED
PATENTS in the Field of Use, which have been, or hereafter are,
either developed by VRI or its Affiliates, or the rights to which
in the Field of Use have been acquired by VRI or its Affiliates
and to which VRI or its Affiliates have a transferable interest.
Without prejudice to the generality of the foregoing, LICENSED
KNOW-HOW shall include, with respect to COMPOUND, chemical and
analytical methods and data, COMPOUND specifications, and
pharmacological and toxicological methods and data.
(l) "LICENSED PATENTS" means:
(i) any existing patents and patent applications listed in
SCHEDULE A to this Agreement;
(ii) any future patents issued from any patent applications
referred to in Paragraph 1.1.(l).(i) above and any future
patents issued from a patent application filed in any
country in the Territory which corresponds to a patent or
patent application identified in Paragraph 1.1.(l).(i)
above;
(iii) any reissues, confirmations, renewals, extensions,
counterparts, divisions or continuations issued, assigned
or licensed to VRI or its Affiliates of or relating to the
patents or patent applications identified in Paragraph
1.1.(l).(i) and (ii) above;
3
<PAGE> 4
(iv) any future patents and patent applications covering VRI
COMPOUND Improvements SOLELY OR JOINTLY owned or licensed
by VRI or its Affiliates with the right to sublicense.
(m) "LICENSEE COMPOUND IMPROVEMENTS" means COMPOUND Improvements which
are conceived, developed or reduced to practice during the term of
this Agreement solely or jointly by employees or contractors
acting on behalf of LICENSEE, its Affiliates or Sublicensees, to
the extent and only to the extent that LICENSEE now has or
hereafter shall have the right to grant licenses, immunities or
other rights thereon. For avoidance of doubt, any technology
developed by LICENSEE during the term and pursuant to this
Agreement which relates to any HPC Antigen or Other Hp Antigen
(rather than antigens in general), or to the combination of such
specific antigen with COMPOUND, or to the manufacturing of
PRODUCTS shall not be included in LICENSEE COMPOUND Improvements.
LICENSEE COMPOUND Improvements shall be deemed to include
LICENSEE's interest in any Joint Inventions.
(mm) "LPS" means Helicobacter pylori antigens which are
lipopolysaccharides.
(n) "MANUFACTURING KNOW-HOW" means any and all technical information,
discoveries, improvements, processes, formulae, data, engineering,
technical and shop drawings, inventions, shop-rights, know-how and
trade secrets, in each case which is Confidential Information at
the time of disclosure in the meaning of Article 8 hereof, is
identified in accordance with Section 2.3.3., which is owned or
otherwise possessed by VRI or VRI's Affiliates and to which VRI or
its Affiliates have a transferable interest, and which is useful
or necessary to make and have made COMPOUND or to use COMPOUND for
the formulation of PRODUCTS or to practice under the LICENSED
PATENTS to the extent such Patents relates to the manufacturing of
COMPOUND; in particular, but without limiting the generality of
the foregoing, Manufacturing Know-How shall include any and all
information regarding the synthesis, manufacture, up-scaling and
handling of COMPOUND, any and all analytical procedures,
procedures for and specifications of quality-assurance and
quality-control.
(o) "MATERIALS" shall mean any biological materials and chemical
compound including but not limited to structural genes, genetic
sequences, promoters, enhancers, probes, linkage probes, vectors,
hosts, plasmids, peptides, polypeptides, transformed cell lines,
transgenic animals, proteins, biological modifiers, antigens,
reagents, hybridomas, antibodies, toxins, lectins, enzymes,
lipids, hormones, viruses, cells or parts of cells, cell lines,
fragments of any of the foregoing and any other biologically
active material or compound, whether or not occurring naturally or
howsoever derived, modified, conjugated, cross-linked,
immobilized, reduced, purified or produced, whether by recombinant
DNA techniques and/or otherwise.
(p) "NET SALES" shall mean gross sales of PRODUCTS sold by LICENSEE,
its Affiliates and Sublicensees to Third-Parties (including
unaffiliated Third-Party distributors, except in the circumstances
referred to in Section 6.3 hereof, and provided further that where
a distributor is an Affiliate, but neither a
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Subsidiary of LICENSEE nor a Subsidiary of OraVax or PMC (other
than HPC), such distributor shall be deemed a Third-Party for the
purpose of calculating Net Sales hereunder) less, to the extent
actually incurred or allowed:
(i) customary trade discounts, credits, rebates, returns
(including, but not limited to, wholesaler and retailer
returns);
(ii) excise taxes, other consumption taxes, customs duties and
compulsory payments made to governmental authorities;
(iii) transportation, transit and insurance for transportation
each to the extent separately invoiced and paid by
LICENSEE.
(q) "NOTICE OF DISPUTE" has the meaning ascribed to it in Section
17.4.(a) of this Agreement.
(r) "OTHER HP ANTIGENS" means any antigens of Helicobacter pylori and
genes encoding such antigens other than HPC Antigens and LPS.
(s) "PARTIES" means LICENSEE and VRI, and "Party" means any one of
them.
(t) "PERSON" means an individual, corporation, partnership, trust,
business trust, association, joint stock company, pool, syndicate,
sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed
herein.
(u) "PHASE III" means the first large scale safety and efficacy
clinical trial relating to a PRODUCT.
(v) "PLA" means a product license application filed with the European
Medicines Evaluation Agency or its successor in the European
Union, or any analogous or corresponding application filed with
the governing health authority of any country or region (such as
the Food and Drug Administration in the United States of America
or the Agence du Medicament in France), for approval to market any
PRODUCT for use or consumption in such country or region.
(vv) "HPC ANTIGENS" means antigens of Helicobacter pylori (other than
LPS), and genes encoding such antigens, which are listed in
SCHEDULE B as being included in LICENSEE's research & development
program, which list may be amended from time to time by written
notice by LICENSEE to VRI (i) to add antigens which are included
in LICENSEE's research & development program, in which case such
antigens shall then become HPC Antigens and be treated as such for
the purpose of this Agreement, PROVIDED, HOWEVER, that VRI has not
previously granted a non-exclusive license to a Third-Party with
respect to the use of COMPOUND in combination with such antigens,
or (ii) to delete antigens which are excluded from such program,
in which case such antigens shall become Other Hp Antigens and be
treated as such for the purpose of this Agreement;
(w) "PRODUCTS" means any and all vaccines for active immunization
intended for use in the Field of Use which contain HPC Antigens
(either alone,
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combined with each other or combined with Other Hp Antigens) or
Other Hp Antigens (either alone or combined with each other), in
each case formulated in combination with COMPOUND.
(ww) "RESEARCH INVENTIONS" has the meaning ascribed to it in Section
9.1 hereof which refers to Section 9 of APPENDIX A to this
Agreement.
(x) "ROYALTY TERM" means, with respect to each PRODUCT in each country
in the Territory, the period of time equal to the longer of (a)
ten (10) years from the date of First Commercial Sale of such
PRODUCT in such country or (b) the term for which a Valid Patent
Claim in such country remains in effect and, but for a license
granted by this Agreement, would be infringed by the manufacture,
use or sale of such PRODUCT in the Field of Use in such country.
(xx) "SUBLICENSEE" means any Person acting pursuant to a sublicense
granted to it by LICENSEE under the terms of this Agreement.
(xxx) "TERRITORY" means all countries in the world.
(y) "THIRD-PARTY" means any Person other than LICENSEE, VRI and their
respective Affiliates.
(yy) "VALID PATENT CLAIM" means a claim of an issued and unexpired
patent or patent application included in LICENSED PATENTS which
has not been held permanently revoked, unenforceable or invalid by
a decision of a court or other governmental agency of competent
jurisdiction, unappealable or unappealed within the time allowed
for appeal, and which has not been admitted to be invalid or
unenforceable through reissue or disclaimer or otherwise.
(z) "VRI COMPOUND IMPROVEMENTS" means COMPOUND Improvements which are
conceived, developed or reduced to practice during the term of
this Agreement solely or jointly by employees or contractors
acting on behalf of VRI or its Affiliates, to the extent that VRI
has now or hereafter shall have the right to grant licenses,
immunities or other rights thereon. VRI COMPOUND Improvements
shall be deemed to include VRI's interest in any Joint Inventions.
(zz) "VRI TECHNOLOGY" means the LICENSED PATENTS, the COMPOUND, the
Manufacturing Know-How, the LICENSED KNOW-HOW and the VRI COMPOUND
Improvements.
ARTICLE 2 - LICENSES
2.1. GRANT OF LICENSES TO LICENSEE
2.1.1. GRANT:
Subject to and conditioned upon the provisions of this Agreement, VRI
hereby grants to LICENSEE, and LICENSEE hereby accepts, the following
licenses (collectively, the "LICENSE"):
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(i) a license in the Territory to make, have made, use and sell
PRODUCTS under the LICENSED PATENTS and by using LICENSED KNOW-HOW
and VRI COMPOUND Improvements; and
(ii) a license in the Territory to make, have made and use the COMPOUND
under the LICENSED PATENTS, and by using the Manufacturing
Know-How and VRI COMPOUND Improvements, in each case solely for
the purpose of formulating PRODUCTS in the Field of Use.
2.1.2. EXCLUSIVITY
(i) HPC ANTIGENS. Subject to and conditioned upon the provisions of
this Agreement, the LICENSE granted pursuant to this Article II
shall be exclusive (exclusive even as to VRI) to LICENSEE in the
Field of Use with respect to PRODUCTS combining any COMPOUND with
any HPC Antigens (either alone, combined with each other or
combined with Other Hp Antigens). Without limiting the generality
of the foregoing, VRI covenants that during the term of this
Agreement, neither VRI nor its Affiliates shall grant to any other
Person any right , license or privilege to make, have made, use or
sell PRODUCTS containing HPC Antigens (alone, or in combination
with each other, or in combination with Other Hp Antigens), or to
make, have made or use COMPOUND, or to otherwise use or exploit
VRI Technology, in connection with such PRODUCTS containing HPC
Antigens (alone, or in combination with each other, or in
combination with Other Hp Antigens).
(ii) OTHER HP ANTIGENS. Subject to and conditioned upon the provisions
of this Agreement, the LICENSE granted pursuant to this Article II
shall be non-exclusive to LICENSEE in the Field of Use with
respect to PRODUCTS combining any COMPOUND with any Other Hp
Antigens (alone or combined with each other), but only with such
Other Hp Antigens. Such license shall be non-transferable and
non-sub-licensable.
(iii) For greater certainty, VRI has and retains all rights in and to
the VRI Technology outside the Field of Use and LICENSEE has no
rights in the VRI Technology outside the Field of Use. Further,
the LICENSE shall not apply to nor cover any combination of an
Helicobacter pylori vaccine with any other vaccine, or any
Helicobacter pylori vaccine containing LPS.
2.1.3. LICENSEE'S RIGHTS TO SUBLICENSE
(i) LICENSEE shall have the right, with VRI's prior written consent
(which consent shall not be unreasonably withheld), to sublicense
in the Field of Use to Third-Parties all or any portion of the
rights to LICENSED PATENTS and LICENSED KNOW-HOW and VRI COMPOUND
Improvements granted to it pursuant to this Agreement under the
exclusive LICENSE.
(ii) LICENSEE shall have the right, without obtaining the further
consent of VRI, to sublicense in the Field of Use all or any
portion of the rights to the LICENSED PATENTS, the LICENSED
KNOW-HOW, VRI COMPOUND Improvements and/or the Manufacturing
Know-How granted to it pursuant to this Agreement under both the
exclusive and the non-exclusive LICENSE (i) to any or all of its
Affiliates, and (ii) to any Person in any country of the
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Territory if required to do so by any governmental authority
having jurisdiction in such country.
(iii) LICENSEE agrees that all sublicenses granted by LICENSEE hereunder
shall expressly bind Sublicensees to the terms of Article 8,
"Confidentiality" and to all other relevant provisions of this
Agreement. In the event LICENSEE grants sublicenses, LICENSEE
shall pay royalties to VRI as if Net Sales of the Sublicensees
were Net Sales of LICENSEE and VRI shall be expressly made a
third-party beneficiary thereof. LICENSEE shall be responsible for
the performance by any Sub-licensee of all such terms, conditions
and obligations.
(iv) Any sublicenses granted by LICENSEE shall include a requirement
that the Sublicensee maintains records and permits inspection on
terms essentially identical to Section 5.2 hereof. At VRI's
request, LICENSEE shall arrange for an independent certified
public accountant selected by VRI to inspect the records of
Sublicensees, at VRI's expense, for the purpose of verifying
royalties due to VRI and shall cause such accountant to report the
results thereof to VRI.
(v) Any sublicenses granted by LICENSEE shall provide for the
termination of the sublicense, or, if the Sublicensee is a
Third-Party, at the option of such Sublicensee, the conversion to
a license directly between such Sublicensee and VRI, upon
termination of this Agreement under Article 10 (other than
expiration under Section 10.1). Such conversion shall be subject
to VRI's approval and contingent upon acceptance by the
Sublicensee of the remaining provisions of this Agreement.
(vi) LICENSEE shall notify VRI of each sublicense granted to
Third-Parties and shall provide VRI with the name and address of
each Sublicensee and a description of the PRODUCTS and territory
covered by each sublicenses.
2.1.4. SUBLICENSES TO LICENSEE.
To the extent LICENSED PATENTS have been, or shall be, licensed by VRI
from a Third-Party under an agreement with such Third-Party (a
"Third-Party In-license"), HPC understands and agrees as follows:
(i)- The rights sub-licensed to HPC by VRI are subject to the terms and
conditions, restrictions, limitations and obligations of the
relevant Third-Party In-license;
(ii)- HPC shall comply with the terms and conditions, restrictions,
limitations and obligations of such Third-Party In-license(s) to
the extent HPC has been permitted to review such terms,
conditions, restrictions, limitations and obligations. VRI shall
give HPC, upon request, a reasonable opportunity to review the
same except to the extent that confidentiality obligations towards
Third-Parties may prevent VRI from doing so. In any event, VRI
shall act reasonably in advising HPC of the scope of HPC's
obligations pursuant to any relevant Third-Party In-license.
2.1.5 SUBCONTRACTING.
Notwithstanding anything herein provided for to the contrary, LICENSEE
shall be allowed to (i) sub-contract in whole or in part PRODUCTS
development to Third-Parties such as, without limitation, clinical
research organizations, (ii) appoint sales agents and distributors to
promote, market and distribute PRODUCTS and (iii) sub-
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contract manufacturing of PRODUCTS and/or COMPOUND with Affiliates,
Third-Parties or with VRI, or VRI's Affiliates.
2.2. LICENSES TO VRI.
Subject to and conditional upon the provisions of this Agreement,
LICENSEE shall grant to VRI a non-exclusive, sublicenseable,
royalty-free, worldwide license to LICENSEE COMPOUND Improvements for
commercial use outside the Field of Use.
2.3. PROCEDURES FOR PROVISION OF KNOW-HOW.
2.3.1. DISCLOSURE OF TECHNOLOGY.
(a) BY VRI.
From time to time during the term of this Agreement, VRI shall
disclose or cause its Affiliates to disclose to LICENSEE such VRI
Technology as reasonably necessary to enable LICENSEE to develop,
manufacture and commercialize PRODUCTS and to manufacture, have
manufactured or use COMPOUND for the formulation of PRODUCTS in
the Field of Use on the terms and subject to the conditions of
this Agreement. In addition, during the term of this Agreement,
VRI shall, upon LICENSEE's reasonable request and with adequate
notice to VRI, make available to LICENSEE at LICENSEE's or its
Affiliates' manufacturing facilities or the facility of a
Third-Party manufacturer who shall have contracted with LICENSEE
to manufacture PRODUCTS or COMPOUND, VRI's or VRI Affiliate's
personnel to provide technical assistance to LICENSEE's personnel,
or LICENSEE Affiliates' personnel or Third-Party manufacturer's
personnel.
LICENSEE shall pay or have paid by its concerned Affiliates all
expenses incurred by VRI or its Affiliates in connection with such
technical assistance.
The technical assistance to be rendered by VRI and its Affiliates
hereunder may include, upon reasonable request by LICENSEE,
demonstration of Manufacturing Know-How at a VRI's or a VRI
Affiliate's facility and disclosure of any and all sources of raw
material and list and specifications of equipment and machinery
used in the production of COMPOUND according to the Manufacturing
Know-How.
(b) BY LICENSEE.
From time to time during the term of this Agreement, LICENSEE
shall disclose to VRI all LICENSEE COMPOUND Improvements on the
terms and subject to the conditions of the Agreement and in
particular in accordance with Section 2.2. hereof.
2.3.2. COMMUNICATION AMONG PARTIES.
Each of LICENSEE and VRI shall appoint (a) specific individual(s) who
shall be available and shall act as (a) liaison person(s) to facilitate
the day-to-day
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communications among the Parties. The names and addresses of the liaison
persons who shall act on behalf of each of the Parties shall be provided
by each of the Parties to the other immediately following the execution
of this Agreement. Each of LICENSEE and VRI agrees to notify the other in
accordance with the terms of Section 17.1. of this Agreement in the event
of a change in liaison person.
2.3.3. IDENTIFICATION OF KNOW-HOW.
The Parties agree that all information, COMPOUNDS and Materials comprised
in the Licensed Know-How to be transferred to LICENSEE pursuant to this
Agreement shall be so transferred in the case of written information, by
memoranda bearing the mention "Confidential", and, in the case of
Materials, by clearly marked and numbered containers. LICENSEE shall
designate an individual who shall be responsible for receiving
information and Materials from VRI and/or its Affiliates and the Parties
agree that such information and Materials shall in all cases (except
where the Parties agree otherwise) be sent solely to the attention of
such individual. Upon receipt of information and/or Materials, the
designated individual shall, on behalf of LICENSEE, send an
acknowledgement to VRI and/or its Affiliates confirming receipt of
information and/or Materials. The Parties agree that they shall in good
faith work together to establish and maintain a system to record the
transmission of information and/or Materials under this Agreement and
make all commercially reasonable efforts to ensure such system is
followed.
2.3.4. CONFIDENTIALITY.
All information transferred pursuant to this Agreement shall be deemed to
be "Confidential Information" in accordance with Section 8.1.
2.3.5. SUPPLY OF COMPOUND.
VRI hereby represents and warrants that any and all quantities of
COMPOUND which may be supplied hereunder by VRI or its Affiliates to
LICENSEE for use in clinical trials in humans shall be manufactured in
accordance with current Good Manufacturing Practices (cGMP) as in force
in the country where such COMPOUND shall be manufactured and shall meet
COMPOUND specifications as shall be agreed otherwise by the Parties. The
sole and exclusive remedy for LICENSEE under this paragraph shall be for
VRI to provide replacement COMPOUND complying with agreed-upon
specifications, free of any charge, in quantity equal to LICENSEE's
original order, except where VRI liability is established to be gross
negligence or willful misconduct (and LICENSEE did not use COMPOUND with
knowledge of the non-compliance hereunder), in which case VRI shall
indemnify LICENSEE as provided herein.
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ARTICLE 3 - DEVELOPMENT AND COMMERCIALIZATION.
3.1. DEVELOPMENT AND COMMERCIALIZATION EFFORTS.
LICENSEE (i) shall use commercially reasonable efforts to diligently
conduct such preclinical and clinical trials that are necessary or
desirable to obtain all regulatory approvals to develop and commercialize
such PRODUCTS, (ii) shall diligently develop and obtain necessary
approval to market such PRODUCTS (including, as the case may be, pricing
approval), and (iii) shall commence marketing and market such PRODUCTS in
each country in which LICENSEE has received all applicable regulatory
approvals therefor. LICENSEE shall comply with all applicable good
laboratory, clinical and manufacturing practices in the development and
commercialization of such PRODUCTS, and shall cause its Affiliates and
subcontractors to do the same. LICENSEE shall be solely responsible for
funding all costs of the development and commercialization of each such
PRODUCTS.
3.2. SUB-CONTRACTS TO VRI.
LICENSEE and VRI may agree to have part of the research and development
work with respect to PRODUCTS sub-contracted to VRI, in which case such
research contract shall be subject to the terms and conditions set forth
in APPENDIX A.
LICENSEE and VRI may agree to have COMPOUND manufacturing sub-contracted
to VRI, in which case such contract manufacturing shall be subject to
terms and conditions set forth in APPENDIX B.
3.3. DEVELOPMENT AND COMMERCIALIZATION REPORTS.
During the term of this Agreement, LICENSEE shall keep VRI reasonably
informed as to the progress of the development of PRODUCTS by notifying
VRI of completion of each significant step.
In addition, LICENSEE agrees to update the list of HPC Antigens which
constitute the SCHEDULE B to this Agreement, on a quarterly basis, by
indicating in writing which Other Hp Antigens, if any, are included in
such list and which HPC Antigens, if any, are excluded therefrom and then
become Other Hp Antigens.
All information disclosed by LICENSEE pursuant to this Section 3.3 shall
be subject to Article 8 hereof.
ARTICLE 4 - ROYALTIES AND MILESTONES.
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CONFIDENTIAL TREATMENT
4.1. EARNED ROYALTIES.
During the Royalty Term, LICENSEE shall pay to VRI a royalty of [*]
4.2. THIRD-PARTY ROYALTIES.
If LICENSEE, its Affiliates or Sublicensees is required to pay royalties
to any Third-Party in order to make, have made, use or sell a PRODUCT in
a country or to make, have made or use COMPOUND for use in such PRODUCT
in such country, then the royalty set-forth in Section 4.1 hereof for
such PRODUCT in such country shall be reduced by [*].
4.3. SINGLE ROYALTY: NON-ROYALTY SALES.
In no event shall more than one royalty be payable under Section 4.1.
hereof with respect to a particular unit of PRODUCTS. No royalty shall be
payable under this Article 4 with respect to sales of PRODUCTS among
LICENSEE and its Affiliates (provided that where a distributor is an
Affiliate, but neither a Subsidiary of LICENSEE nor a Subsidiary of
OraVax or PMC -other than HPC-, such distributor shall be deemed a
Third-Party), or among Sublicensees and their Affiliates, or among
LICENSEE and its Affiliates, but a royalty shall be due upon the
subsequent sale of the PRODUCTS to a Third-Party. No royalty shall be
payable for (i) PRODUCTS used by LICENSEE, its Affiliates or
Sublicensees, for research including, without limitation, in clinical
trials, or (ii) customary quantities of PRODUCTS distributed as free
samples.
4.4. MILESTONE PAYMENTS.
As additional consideration for the LICENSE, rights and privileges
granted to it hereunder, LICENSEE shall pay to VRI the following
milestone payments within thirty (30) days of the occurrence of each
event set forth below (unless otherwise specified below), whether such
events are achieved by LICENSEE, its Affiliates or Sublicensees:
(a) [*]
(b) [*]
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT
(c) [*]
(d) [*]
(e) [*]
(f) [*]
The above-mentioned milestone payments shall be payable only once each.
ARTICLE 5 - ROYALTY REPORTS AND ACCOUNTING.
5.1. REPORTS, EXCHANGE RATES.
During the term of this Agreement following the First Commercial Sale,
LICENSEE shall furnish to VRI, with respect to each Calendar Quarter, a
written report showing in reasonably specific detail, on a
country-by-country basis, (a) the gross sales of PRODUCTS sold by
LICENSEE, its Subsidiaries and its Sublicensees in the Territory during
the corresponding Calendar Quarter and the calculation of Net Sales from
such gross sales; (b) the royalties payable in United States dollars, if
any, which shall have accrued hereunder based upon Net Sales of PRODUCTS;
(c) the withholding taxes, if any, required by law to be deducted in
respect of such royalties; (d) the date of the First Commercial Sale of
PRODUCTS having occurred in each country in the Territory during the
corresponding Calendar Quarter; and (e) the exchange rates used in
determining the royalty amount expressed in United States dollars.
With respect to sales (if any) of PRODUCTS invoiced in United States
dollars, the gross sales, Net Sales, and royalties payable shall be
expressed in United Sates dollars. With respect to sales of PRODUCTS
invoiced in a currency other than United Sates dollars, the gross sales,
Net Sales and royalties payable shall be expressed in the currency of the
invoice issued by the Party making the sale together with the United
States dollars equivalent of the royalty payable, calculated using the
rate of exchange published in the WALL STREET JOURNAL for such currency
on the last business day of the concerned Calendar Quarter.
Reports and payments shall be due on the forty fifth (45th) day following
the close of each Calendar Quarter. LICENSEE shall keep complete and
accurate records in sufficient detail to properly reflect all gross sales
and Net Sales and to enable the royalties payable hereunder to be
determined.
5.2. AUDITS.
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
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5.2.1. Upon the written request of VRI and not more than once in each calendar
year, LICENSEE shall permit an independent certified public accounting
firm of internationally recognized standing, selected by VRI and
reasonably acceptable to LICENSEE, at VRI's expense, to have access
during normal business hours to such of the records of LICENSEE as may be
reasonably necessary to verify the accuracy of the royalty reports
hereunder for any year ending not more than three (3) years prior to the
date of such request. The accounting firm shall disclose to VRI only
whether the records are correct or not and the specific details
concerning any discrepancies. No other information shall be shared.
5.2.2. If such accounting firm concludes that additional royalties were owed
during such period, LICENSEE shall pay the additional royalties within
thirty (30) days of the date VRI delivers to LICENSEE such accounting
firm's written report so concluding. The fees charged by such accounting
firm shall be paid by VRI ; PROVIDED, HOWEVER, if the audit discloses
that the royalties payable by LICENSEE for the audited period are more
than one hundred and two percent (102%) of the royalties actually paid
for such period, then LICENSEE shall pay the reasonable fees and expenses
charged by such accounting firm.
5.2.3. LICENSEE shall include in each permitted sublicense granted by it
pursuant to the Agreement a provision requiring the Sublicensee to make
reports to LICENSEE, to keep and maintain records of sales made pursuant
to such sublicense and to grant access to such records by VRI's
independent accountant to the same extent required with respect to
LICENSEE's records under this Agreement.
5.2.4. Except in the case of circumstances which would have prevented an error
or anomaly from being disclosed during the audit hereabove mentioned,
such as fraud or other failure to provide accurate information, upon the
expiration of three (3) years following the end of any calendar year, the
calculation of royalties payable with respect to such year shall be
binding and conclusive upon VRI, and LICENSEE, its Affiliates and
Sublicensees shall be released from any liability or accountability with
respect to royalties for such year.
5.3. CONFIDENTIAL FINANCIAL INFORMATION.
VRI shall treat all financial information subject to review under this
Article 5 or under any sublicense as confidential, and shall cause its
accounting firm to retain all such financial information in confidence.
ARTICLE 6 - PAYMENTS.
6.1. PAYMENT TERMS.
Royalties shown to have accrued by each royalty report provided for under
Article 5 of this Agreement shall be due on the date such royalty report
is due. Payment of royalties in whole or in part may be made in advance
of such due date.
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CONFIDENTIAL TREATMENT
6.2. PAYMENT METHOD.
Except as provided in this Section 6.2., all payments by LICENSEE to VRI
under this Agreement shall be paid in United States dollars, and all such
payments shall be made without deduction of bank transfer fees by bank
wire transfer in immediately available funds to the following bank
account :
-------------------------------------------------------
Bank : [*]
Account N[degree symbol]: [*]
Account name: [*]
-------------------------------------------------------
or to any other bank account designated in writing from time to time by
VRI to LICENSEE.
6.3. EXCHANGE CONTROL.
If at any time legal restrictions prevent the prompt remittance of part
or all royalties with respect to any country in the Territory where
PRODUCTS are sold, payment shall be made through such lawful means or
method as the Parties reasonably shall determine or, at VRI's discretion,
royalties shall be based on HPC sales (if any) to HPC's Subsidiary or
Sublicensee in such country.
6.4. WITHHOLDING TAXES.
Royalties and milestone payments shall be paid by LICENSEE to VRI, after
deduction of any applicable withholding taxes. Prior to any payment by
LICENSEE to VRI, LICENSEE shall provide to VRI any forms required to
attest VRI's fiscal domiciliation in order to allow LICENSEE to claim
application of the reduced rate of withholding tax provided for in any
applicable bilateral fiscal convention. VRI shall promptly return such
forms to LICENSEE. In the event VRI fails to promptly return such forms
duly filled and signed, LICENSEE shall declare and pay withholding tax at
the common law rate of the applicable corporate income tax, and such tax
shall then be deducted from the corresponding payment by LICENSEE to VRI.
LICENSEE shall pay withholding tax to the proper taxing authority and
proof of payment of such tax shall be secured and sent to VRI as evidence
of such payment.
ARTICLE 7 - INFRINGEMENT ACTIONS BY THIRD-PARTIES.
If LICENSEE, VRI or their respective Affiliates, or LICENSEE's Sublicensees, is
sued by a Third-Party for infringement of a Third-Party's patent because of the
manufacture, use or sale of PRODUCTS or manufacture or use of COMPOUND, the
Party which has been sued shall promptly notify the other Party in writing of
the institution of such suit, in which event the other Party shall have the
right to be represented by advisory counsel of its own selection, at its own
expense, and shall cooperate fully in the defense of such suit and furnish to
the Party(ies) that is (are) sued all evidences and assistance in its control.
The Party controlling the suit may not settle the suit or otherwise consent to
an adverse judgment in such suit that diminishes the rights or interests of the
non-controlling Party without the express written consent of the non-controlling
Party. Any judgments, awards,
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
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settlements or damages payable with respect to legal proceedings covered by
this Article 7 shall be paid by the Party against whom the award has been made.
ARTICLE 8 - CONFIDENTIALITY.
8.1. NON-DISCLOSURE AND RESTRICTION-OF-USE OBLIGATIONS.
Except as otherwise provided in this Article 8, during the term of this
Agreement and for a period of ten (10) years after termination of this
Agreement under Sections 10.3. or 10.4., each Party shall maintain in
confidence, and use only for purposes as expressly authorized and
contemplated by this Agreement, all information and data supplied by the
other Party under this Agreement, including but not limited to LICENSED
KNOW-HOW, Manufacturing Know-How and COMPOUND Improvements. For purposes
of this Article 8, information and data described above shall be
hereinafter referred to as "CONFIDENTIAL INFORMATION".
8.2. PERMITTED DISCLOSURES.
To the extent it is reasonably necessary or appropriate to fulfill its
obligations or exercise its rights under this Agreement, (i) a Party may
disclose Confidential Information it is otherwise obligated under this
Article 8 not to disclose, to its Affiliates, Sublicensees, consultants,
outside contractors and clinical investigators, on a need-to-know basis,
provided that such Persons agree to keep the Confidential Information
confidential and not use the Information for the same time period and to
the same extent as such Party is required; and (ii) a Party may disclose
such Confidential Information to governmental or other regulatory
authorities to the extent that such disclosure is required by applicable
law, regulation or court order, or is reasonably necessary to obtain
patents, copyrights or authorizations to conduct clinical trials with, or
to commercially market PRODUCTS, provided that the disclosing Party shall
provide written notice to the other Party and sufficient opportunity to
object to such disclosure or to request confidential treatment thereof.
The obligation not to disclose or use Confidential Information shall not
apply to any part of such Information (including LICENSED KNOW-HOW,
Manufacturing Know-How and COMPOUND Improvements) that (i) is or becomes
patented, published or otherwise part of the public domain or publicly
available other than by acts of the Party obligated not to disclose such
Information, or of its Affiliates or Sublicensees, in contravention of
this Agreement; (ii) is disclosed to the receiving Party or its
Affiliates or Sublicensees by a Third Party, provided such Information
was not obtained by such Third-Party directly or indirectly from the
other Party, its Affiliates or Sublicensees, under or pursuant to this
Agrement on a confidential basis and otherwise had a lawful right to
disclose the information; (iii) prior to disclosure under the Agreement,
was already in the possession of the receiving Party or its Affiliates or
Sublicensees, provided such Information was not obtained directly or
indirectly from the other Party under this Agreement; (iv) is
independently developed by the receiving Party without reliance on the
Confidential Information disclosed by the other Party hereunder, (v) is
disclosed in a press release agreed to by both Parties hereto in
accordance with Section 8.4. hereinafter or (vi) both Parties have agreed
to publish.
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8.3. TERMS OF THE AGREEMENT.
LICENSEE and VRI shall not disclose any terms or conditions of this
Agreement to any Third-Party without the prior consent of the other
Party, except (a) to Persons with whom LICENSEE or VRI has entered into
or proposes to enter into a business relationship to which this Agreement
is relevant and substantial, provided that such Persons shall enter into
the required confidentiality agreement, or (b) as required by applicable
laws, regulations or a court order, provided that the disclosing Party
shall provide written notice to the other Party and sufficient
opportunity to object to such disclosure or to request confidential
treatment thereof.
8.4. PRESS RELEASES AND OTHER DISCLOSURES TO THIRD-PARTIES
Neither VRI nor HPC shall, without the prior written consent of the
other, issue any press release or make any other public announcement or
furnish any statement to any Person (other than either Parties'
respective Affiliates) concerning the existence of this Agreement and the
transactions contemplated by this Agreement, except for (i) general
statement referring to the existence of this Agreement, specifying the
Field of Use and identity of the Parties but no other details, (ii)
disclosures made in compliance with sections 8.2. and 8.3. hereof, (iii)
attorneys, consultants, and accountants retained to represent them in
connection with the transactions contemplated hereby or as may be
reasonably necessary to either Party's bankers, investors, attorneys or
other professional advisors in connection with a merger or acquisition,
provided such advisors are bound by confidentiality obligations
essentially identical to those provided for herein, and (iv) occasional,
brief comments by the respective officers of HPC, OraVax, PMC and VRI
consistent with such guidelines for public statements as may be mutually
agreed by HPC and VRI made in connection with routine interviews with
analysts or members of the financial press. In addition, either Party
(after consultation with counsel) in its own right may make such further
announcements and disclosures, if any, as may be required by applicable
laws and regulations, in which case the Party making the announcement or
disclosure shall use its best efforts to give advance notice to, and
discuss such announcement or disclosure with, the other Party.
8.5. Notwithstanding anything else to the contrary, LICENSEE agrees that
VRI Technology shall be used only for the research, development,
manufacture, use and sale of PRODUCTS and that in the event that the
LICENSE is terminated, LICENSEE agrees not to use VRI Technology and
LICENSEE COMPOUND Improvements for the research, development,
manufacture, use or sale of any product or process including but not
limited to PRODUCTS.
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ARTICLE 9 - INVENTIONS AND PATENTS.
9.1. OWNERSHIP OF INVENTIONS.
The entire right and title to technology, whether or not patentable, and
any patent applications or patents based thereon, made or conceived
during the term of this Agreement (other than Research Inventions as
defined in APPENDIX A attached hereto, if any), (a) by employees or
others acting solely on behalf of VRI or its Affiliates, shall be owned
solely by VRI, (b) by employees or others acting solely on behalf of
LICENSEE or its Affiliates, shall be owned solely by LICENSEE, and (c) by
both employees or others acting on behalf of LICENSEE or its Affiliates
and on behalf of VRI or its Affiliates shall be jointly owned by LICENSEE
and VRI (the "JOINT INVENTIONS"). Each Party promptly shall disclose to
the other Party the making, conception or reduction to practice of
COMPOUND Improvements by employees or others acting on behalf of such
Party. VRI and LICENSEE each hereby represents that all employees and
other Persons acting on its behalf in performing its obligations under
this Agreement shall be obligated under a binding written agreement to
assign to it, or as it shall direct, all COMPOUND Improvements conceived
or reduced to practice by such employees or other Persons. The provisions
of this Section 9.1 are subject to Section 2.2 hereof.
9.2. PATENT PROSECUTION AND MAINTENANCE.
VRI shall be responsible for and shall control the preparation, filing,
prosecution, grant and maintenance of all LICENSED PATENTS. VRI shall
prepare, file, prosecute and maintain such LICENSED PATENTS in good faith
consistent with its customary patent policy and its reasonable business
judgement, and shall consider in good faith the interests of LICENSEE in
so doing. LICENSEE shall re-imburse VRI a share of reasonable costs of
prosecution and maintenance of all LICENSED PATENTS as far as such costs
are borne by VRI in the normal course of business after the Effective
Date and for so long as the LICENSE to the relevant LICENSED PATENTS
continues in effect. Such share shall be an amount equal to the total of
the costs mentioned hereinabove multiplied by a fraction having as a
numerator one (1), and as a denominator the total number of licences
granted by VRI to Third-Parties with respect to LICENSED PATENTS. VRI
shall furnish to HPC an estimated yearly budget for such costs.
9.3. ENFORCEMENT OF LICENSED PATENTS.
In the event that LICENSED PATENTS are infringed by any Third-Party in
the Field of Use, LICENSEE shall have the right, but not the obligation,
to institute and prosecute any action or proceeding under LICENSED
PATENTS with respect to such infringement, by counsel of its choice,
including any declaratory judgement action arising from such
infringement. Any amounts recovered from Third-Parties
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with respect to the LICENSED PATENTS in such action shall be retained by
LICENSEE. LICENSEE shall not have the right to settle, compromise or take
any action in such litigation which diminishes, limits or inhibits the
scope, validity or enforceability of LICENSED PATENTS without the express
permission of VRI. LICENSEE shall keep VRI advised of the progress of
such proceedings.
In the event that a Third-Party is infringing any LICENSED PATENTS in the
Field of Use and LICENSEE does not elect to institute an action, VRI
shall have the right, but not the obligation, to commence an infringement
suit under the LICENSED PATENTS against such infringer and shall retain
any recovery ; provided that it so notifies LICENSEE.
ARTICLE 10 - TERM AND TERMINATION.
10.1. EXPIRATION.
Unless terminated earlier pursuant to this Article 10 or Article 12, the
Agreement shall expire on the expiration of LICENSEE's obligations to pay
royalties under the Agreement in accordance with the Royalty Term.
Thereafter, LICENSEE and Sublicensees shall have a perpetual, fully
paid-up, royalty-free, non-cancellable, worldwide license or sub-license
(whichever is applicable) to the VRI Technology.
10.2. After First Commercial Sale of a PRODUCT or PRODUCTS in a country,
royalties for any other PRODUCT or PRODUCTS introduced into such country
will only be payable if a Valid Patent Claim is in effect in the United
States or Europe at the time such PRODUCT or PRODUCTS are first offered
for sale in such country, provided that if LICENSEE has ceased to sell a
PRODUCT in a country prior to the payment of royalties in such country
for ten (10) years, any additional PRODUCT or PRODUCTS sold in such
country thereafter will be subject to royalties without regard to the
existence of a Valid Patent Claim until VRI has received at least ten
(10) years of Royalty payments in such country.
10.3. TERMINATION BY LICENSEE.
LICENSEE shall have the right at any time as from January 1, 1998, in its
sole discretion, to terminate this Agreement, by giving not less than
three (3) months' prior written notice to VRI of such termination.
10.4. TERMINATION FOR CAUSE.
(i) Either Party may terminate this Agreement, at its option, upon or
after the breach of any material provision of the Agreement, if
the breaching Party has not cured such breach within ninety (90)
days after written notice thereof from the other Party.
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(ii) LICENSEE or VRI may terminate this Agreement upon written notice
to the other party if the other party makes a general assignment
for the benefit of creditors, is the subject of proceedings in
voluntary or involuntary bankruptcy or has a receiver or trustee
appointed for substantially all of its property; PROVIDED that in
the case of an involuntary bankruptcy proceeding such right to
terminate shall only become effective if the other party consents
thereto or such proceeding is not dismissed within ninety (90)
days after the filing thereof.
Each of the parties hereto acknowledges and agrees that this
Agreement (i) constitutes a license of Intellectual Property (as
such term is defined in the United States Bankruptcy code, as
amended (the "Code"), and (ii) is an executory contract, with
significant obligations to be performed by each party hereto. The
parties agree that LICENSEE may fully exercise all of its rights
and elections under the Code, including, without limitation, those
set forth in Section 365(n) of the Code. The parties further agree
that, in the event that LICENSEE elects to retain its rights as a
licensee under the Code, LICENSEE shall be entitled to complete
access to any technology licensed to it hereunder and all
embodiments of such technology. Such embodiments of the technology
shall be delivered to LICENSEE not later than (a) the commencement
of bankruptcy proceedings against VRI, unless VRI elects to
perform its obligations under this Agreement, or (b) if not
delivered under (a) above, upon the rejection of this Agreement by
or on behalf of VRI.
10.5. EFFECT OF EXPIRATION AND TERMINATION.
Expiration or termination of the Agreement shall not relieve the Parties
of any obligation accruing prior to such expiration or termination. The
provisions of Sections 2.1.3.(v) and 9.1. and Articles 8 and 11 shall
survive the expiration or termination of the Agreement.
ARTICLE 11 - INDEMNITY.
11.1. DIRECT INDEMNITY.
11.1.1. Each Party shall indemnify and hold harmless the other Party, its
Affiliates, and their respective directors, officers, shareholders,
agents, consultants and employees from and against all Third-Party
claims, demands, liabilities, damages and expenses, including attorneys'
fees and costs (collectively, the "LIABILITIES") arising out of the
breach of any material provision of this Agreement by, or an act or an
omission of, the indemnifying Party, except to the extent such
Liabilities resulted from the gross negligence, recklessness or
intentional acts or omissions of the other Party.
11.1.2. LICENSEE shall defend, indemnify and hold harmless VRI, its Affiliates,
licensors, their respective directors, officers, shareholders, agents,
consultants and employees, from and against all Liabilities suffered or
incurred arising out of any Third-Party claims in connection with the
manufacture, design, testing, possession, distribution, use, sale or
other disposition by or through LICENSEE, its Affiliates or Sublicensees
of any PRODUCTS or COMPOUND, except in each case to the
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extent such Liabilities resulted from the gross negligence, recklessness
or intentional acts or omissions of VRI, and except where VRI's
liability is established in accordance with EXHIBIT 1 to APPENDIX B
attached hereto as far as supply of COMPOUND is concerned.
11.2. PROCEDURE.
A Party (the "INDEMNITEE") that intends to claim indemnification under
this Article 11 shall promptly notify the other Party (the "INDEMNITOR")
of any Liability or action in respect of which the Indemnitee intends to
claim such indemnification, and the Indemnitor shall have the right to
participate in, and, to the extent the Indemnitor so desires, jointly
with any other Indemnitor similarly noticed, to assume the defense
thereof with counsel selected by the Indemnitor; PROVIDED, HOWEVER, that
the Indemnitee shall have the right to retain its own counsel, with the
fees and expenses to be paid by the Indemnitor, if representation of
such Indemnitee by the counsel retained by the Indemnitor would be
inappropriate due to actual or potential differing interests between
such Indemnitee and any other Party represented by such counsel in such
proceedings.
The indemnity obligations under this Article 11 shall not apply to
amounts paid in settlement of any loss, claim, damage, liability or
action if such settlement is effected without the consent of the
Indemnitor, which consent shall not be withheld unreasonably. The
failure to deliver notice to the Indemnitor within a reasonable time
after the commencement of any such action, if prejudicial to its ability
to defend such action, shall relieve such Indemnitor of any liability to
the Indemnitee under this Article 11. The Indemnitee, its Affiliates,
employees and agents, shall cooperate fully with the Indemnitor and its
legal representatives in the investigation of any action, claim or
liability covered by this indemnification.
ARTICLE 12 - FORCE MAJEURE.
No Party (or any of its Affiliates) shall be held liable or responsible to the
other Party (or any of its Affiliates) nor be deemed to have defaulted under or
breached the Agreement for failure or delay in fulfilling or performing any term
of the Agreement when such failure or delay is caused by or results from causes
beyond the reasonable control of the affected Party (or any of its Affiliates)
including but not limited to fire, floods, embargoes, war, acts of war (whether
war be declared or not), insurrections, riots, civil commotions, strikes,
lockouts or other labor disturbances, acts of God or acts, omissions or delays
in acting by any governmental authority or the other Party (collectively,
"EVENTS OF FORCE MAJEURE"); PROVIDED, HOWEVER, that the affected Party (i)
shall immediately notify the other Party of the occurrence of any such Event of
Force Majeure and (ii) shall exert all reasonable efforts to eliminate, cure or
overcome any such Event of Force Majeure and to resume performance of its
covenants with all possible speed; and PROVIDED, FURTHER, that nothing
contained herein shall require any Party to settle on terms unsatisfactory to
such Party any strike, lockout or other labor difficulty, any investigation or
proceeding by any governmental authority or any litigation by any Third-Party.
Notwithstanding the foregoing, to the extent that an Event of Force Majeure
continues for a period in excess of six (6) months, the affected Party shall
promptly notify in writing the other Party of such Event of Force Majeure and
within four (4) months of the other Party's receipt of such notice, the Parties
agree to negotiate in good faith either (i) to resolve the Event of Force
Majeure, if possible, (ii) to extend by mutual agreement the time period to
resolve, eliminate, cure or overcome such Event of Force Majeure, (iii) to amend
this Agreement to the extent reasonably possible, or (iv) to terminate this
Agreement.
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ARTICLE 13 - ASSIGNMENT.
This Agreement may not be assigned or otherwise transferred, nor, except as
expressly provided hereunder, may any right or obligations hereunder be assigned
or transferred to any Third-Party by either Party without the consent of the
other Party; PROVIDED, HOWEVER, that either Party may, without such consent,
assign this Agreement and its rights and obligations hereunder to any of its
Affiliates or in connection with the transfer or sale of all or substantially
all of its business, or in the event of its merger or consolidation or change in
control or similar transaction. Any permitted assignee shall assume all
obligations of its assignor under this Agreement.
Without limiting the generality of the foregoing, without the prior written
consent of LICENSEE, VRI shall not under any circumstances assign or transfer
any VRI Technology in the Field of Use unless the assignee expressly agrees in
writing that the LICENSE shall remain in full force and effect pursuant to its
terms and such assignment shall not relieve the assignor of any of its
obligations under this Agreement. Each Party acknowledges that the other Party
would suffer irreparable injury in the event of any breach of this Article 13
and that therefore the remedy at law for any breach or threatened breach hereof
by any Party shall be inadequate. Accordingly, upon a breach or threatened
breach hereof by any Party, the other Party shall, in addition and without
prejudice to any other rights and remedies it may have, be entitled as a matter
of right, without proof of actual damages, to seek specific performance hereof
and to such other injunctive or equitable relief to enforce or prevent any
violations (whether anticipatory, continuing or future) hereof.
ARTICLE 14 - NOTIFICATION OF PATENT TERM RESTORATION - PATENT EXTENSIONS.
VRI shall notify LICENSEE of (a) the issuance of each U.S. patent included
within the LICENSED PATENTS, giving the date of issue and patent number for each
such patent, and (b) each notice pertaining to any patent included within the
LICENSED PATENTS which it receives as patent owner pursuant to the United Sates
Drug Price Competition and Patent Term Restoration Act of 1984 (hereinafter
called the "Act"), including notices pursuant to secs. 101 and 103 of the
Act from Persons who have filed an abbreviated new drug application ("ANDA").
Such notices shall be given promptly, but in any event within five (5) calendar
days of each such patent's date of issue or receipt of each such notice pursuant
to the Act, whichever is applicable. VRI shall notify LICENSEE of each filing
for patent term restoration under the Act, any allegations of failure to show
due diligence and all awards of patent term restoration (extensions) with
respect to the LICENSED PATENTS.
Likewise, VRI or LICENSEE, as the case may be, shall inform the other Party of
patent extensions and periods of data exclusivity in the rest of the world
regarding any PRODUCTS and more generally the Parties shall diligently cooperate
with respect to any procedures for patent and period of data exclusivity
extensions, such as but not limited to Supplementary Protection Certificates,
the above-mentioned Patent Term Restoration and corresponding GATT regulations.
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ARTICLE 15 - ADVERSE EXPERIENCE REPORTING.
During the term of the Agreement, each Party shall notify the other immediately
of any information (howsoever obtained and from whatever source) concerning any
unexpected side effect, injury, toxicity or sensitivity reaction, or any
unexpected incidence, and the severity thereof, associated with the clinical
uses, studies, investigations, tests and marketing of PRODUCTS and, to the
extent feasible, any other product containing COMPOUND (hereinafter, a
"PRODUCT"), or COMPOUND. For purposes of this Article 15, "UNEXPECTED" shall
mean (x) for a non-marketed Product, an experience that is not identified in
nature, severity or frequency in the current clinical investigator's
confidential information brochure, and (y) for a marketed Product, an experience
which is not listed in the current labeling for such Product, and includes an
event that may be symptomatically and pathophysiologically related to an event
listed in the labelling but differs from the event because of increased
frequency or greater severity or specificity.
Each Party further shall immediately notify the other of any information
received regarding any threatened or pending action by an agency which may
affect the safety and efficacy claims of a Product. Upon receipt of any such
information, the Parties shall consult with each other in an effort to arrive at
a mutually acceptable procedure for taking appropriate action ; provided,
however, that nothing contained herein shall be construed as restricting either
Party's right to make a timely report of such matter to any government agency or
take other action that it deems to be appropriate or required by applicable law
or regulation.
ARTICLE 16 - SEVERABILITY.
Each Party hereby agrees that it does not intend to violate any public policy,
statutory or common laws, rules, regulations, treaty or decision of any
government agency or executive body thereof of any country or community or
association of countries. Should one or more provisions of this Agreement be or
become invalid, the Parties hereto shall substitute, by mutual consent, valid
provisions for such invalid provisions which valid provisions in their economic
effect are sufficiently similar to the invalid provisions that it can be
reasonably assumed that the Parties would have entered into this Agreement with
such provisions. In case such provisions cannot be agreed upon, the invalidity
of one or several provisions of this Agreement shall not affect the validity of
this Agreement as a whole, unless the invalid provisions are of such essential
importance to this Agreement that it is to be reasonably assumed that the
Parties would not have entered into this Agreement without the invalid
provisions.
ARTICLE 17 - MISCELLANEOUS.
17.1. NOTICES.
Any consent, notice or report required or permitted to be given or made
under this Agreement by one of the Parties hereto to the other shall be
in writing, delivered personally or by facsimile and promptly confirmed
by personal delivery, first class air mail or courier, postage prepaid
(where applicable), addressed to such other Party at its address
indicated below, or to such other address as the addressee
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shall have last furnished in writing to the addressor and (except as
otherwise provided in this Agreement) shall be effective upon receipt by
the addressee.
- IF TO VRI:
VIRUS RESEARCH INSTITUTE, INC.
61 Moulton Street
Cambridge MA 02138 USA
Attention: President
Telefax: (617) 864-6334
Telephone: (617) 864-6232
- IF TO LICENSEE:
MERIEUX ORAVAX S.N.C. c/o
PASTEUR MERIEUX Serums & Vaccins S.A.
58, avenue Leclerc
69007 Lyon, France
Attention: Corporate Vice-President, Secretary and General Counsel,
Legal Department
Telefax: 33.4.72.73.70.61
Telephone: 33.4.72.73.77.84
ORAVAX MERIEUX CO. c/o
ORAVAX, INC.
38 Sidney Street
Cambridge, MA 02139, USA;
Attention: President & Chief Executive Officer
Telefax: (617) 494-1741
Telephone: (617) 494-1339
17.2. APPLICABLE LAW.
The Agreement shall be governed by and construed in accordance with the
laws of the State of Massachusetts, without regard to the conflict of
law principles thereof.
17.3. REPRESENTATIONS, WARRANTIES AND COVENANTS.
17.3.1. REPRESENTATIONS AND WARRANTIES OF MERIEUX ORAVAX S.N.C.
(a) Merieux OraVax S.N.C. is a Societe en Nom Collectif duly
organized and existing under the laws of France, with the
corporate power to own, lease and operate its properties and to
carry on its business as now conducted.
(b) Merieux OraVax S.N.C. has all necessary corporate power and
authority to enter into this Agreement and to consummate the
transactions contemplated hereby.
(c) The execution, delivery and performance of this Agreement by
Merieux OraVax S.N.C. does not conflict with or contravene the
statuts of Merieux OraVax
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S.N.C., nor will the execution, delivery or performance of this
Agreement conflict with or result in a breach of, or entitle any
party thereto to terminate, any material agreement or instrument
to which Merieux OraVax S.N.C. is a party, or by which any of
its assets or properties are bound.
(d) This Agreement has been duly authorized, executed and delivered
by Merieux OraVax S.N.C. and constitutes a legal, valid and
binding agreement of Merieux OraVax S.N.C., enforceable against
Merieux OraVax S.N.C. in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency,
moratorium, reorganization or other similar laws affecting
creditors' rights generally.
17.3.2. REPRESENTATIONS AND WARRANTIES OF ORAVAX MERIEUX CO.
(a) OraVax Merieux Co. is a General Partnership duly organized and
existing under the laws of the State of Massachusetts, with the
corporate power to own, lease and operate its properties and to
carry on its business as now conducted.
(b) OraVax Merieux Co. has all necessary corporate power and
authority to enter into this Agreement and to consummate the
transactions contemplated hereby.
(c) The execution, delivery and performance of this Agreement by
OraVax Merieux Co. does not conflict with or contravene the
by-laws of OraVax Merieux Co., nor will the execution, delivery
or performance of this Agreement conflict with or result in a
breach of, or entitle any party thereto to terminate, any
material agreement or instrument to which OraVax Merieux Co. is
a party, or by which any of its assets or properties are bound.
(d) This Agreement has been duly authorized, executed and delivered
by OraVax Merieux Co. and constitutes a legal, valid and binding
agreement of OraVax Merieux Co., enforceable against OraVax
Merieux Co. in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency,
moratorium, reorganization or other similar laws affecting
creditors' rights generally.
17.3.3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF VRI.
(a) VRI is a corporation duly incorporated and validly existing as a
corporation in good standing under the laws of the State of
Delaware, with the corporate power to own, lease and operate its
properties and to carry on its business as now conducted.
(b) VRI has all necessary corporate power and authority to enter
into this Agreement and to consummate the transactions
contemplated hereby.
(c) The execution, delivery and performance of this Agreement by VRI
does not conflict with or contravene its certificate of
incorporation or by-laws, nor will the execution, delivery or
performance of this Agreement conflict with or result in a
breach of, or entitle any party thereto to terminate, any
material agreement or instrument to which VRI is a party, or by
which any of its assets or properties are bound.
(d) This Agreement has been duly authorized, executed and delivered
by VRI and constitutes a legal, valid and binding agreement of
VRI, enforceable against
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VRI in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, moratorium, reorganization
or other similar laws affecting creditors' rights generally.
(e) All LICENSED PATENTS listed on SCHEDULE A have been registered
in, filed in or issued by the appropriate patent offices of each
jurisdiction as indicated on such SCHEDULE A, and in each case
is currently in effect and all maintenance fees and renewals
thereof have been duly made with respect thereto. VRI owns or
has full and exclusive rights to use and exploit under licenses
(and to license or sublicense) all its rights under such
LICENSED PATENTS and the LICENSED KNOW-HOW. There have been no
material claims made against VRI asserting the invalidity or
unenforceability of, or with respect to such LICENSED PATENTS,
the misuse of such LICENSED PATENTS or the LICENSED KNOW-HOW,
nor is VRI aware that any such claims exist. VRI has not
received a notice of conflict of such LICENSED PATENTS or the
LICENSED KNOW-HOW with the asserted rights of others, or
otherwise challenging its rights to use any of such LICENSED
PATENTS, or the LICENSED KNOW-HOW. EXCEPT AS OTHERWISE EXPRESSLY
SET FORTH IN THIS SECTION, NEITHER PARTY MAKES ANY
REPRESENTATION OR EXTENDS ANY WARRANTIES OF ANY KIND EITHER
EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NON-INFRINGEMENT, OR VALIDITY OF ANY PATENT RIGHTS ISSUED OR
PENDING.
17.4. DISPUTE RESOLUTION.
The Parties agree that if any dispute or disagreement arises between
LICENSEE on the one hand and VRI on the other in respect of this
Agreement, they shall follow the following procedure in an attempt to
resolve the dispute or disagreement.
(a) The Party claiming that such a dispute exists shall give notice
in writing ("NOTICE OF DISPUTE") to the other Party of the
nature of the dispute ;
(b) Within twenty eight (28) business days of receipt of a Notice of
Dispute, a nominee or nominees of LICENSEE and a nominee or
nominees of VRI shall meet in person and exchange written
summaries reflecting, in reasonable detail, the nature and
extent of the dispute, and at this meeting they shall use their
reasonable endeavours to resolve the dispute ;
(c) If, within a further period of twenty eight (28) business days,
the dispute has not been - resolved or if, for any reason, the
required meeting has not been held, then the Parties agree that
any dispute shall be referred to an arbitrator appointed by
agreement of VRI and LICENSEE or, if no such agreement is
reached within sixty (60) business days after a Party commences
the arbitration, then by a panel of three arbitrators, with each
of LICENSEE and VRI to select one arbitrator and those two
arbitrators to select the third. If all three arbitrators have
not been selected within sixty (60) business days after a Party
commences the arbitration, then the Parties agree to abide by
the selection of the remaining arbitrator to be named by a
representative of the International Chamber of Commerce.
The Parties agree that the Rules of the International Chamber of
Commerce shall govern such arbitration and that any decision of
the arbitrators shall be final and binding and shall be
enforceable in any court of competent jurisdiction worldwide
(regardless of whether one of the Parties fails or
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refuses to participate in the arbitration) and shall be enforced
pursuant to the New-York Convention on the Recognition and
Enforcement of Arbitral Awards. The Parties agree that all
arbitrations shall be conducted in the English language and that
the exclusive venue of all arbitrations shall be in London,
England. The Party determined by the arbitrators to be the Party
substantially prevailing in the arbitration shall be entitled to
recover its legal and consultants' fees and other costs
reasonably incurred in connection with the arbitration (as
determined by the arbitrators) ; and
(d) in the event of a dispute regarding any payments owing under
this Agreement, all undisputed amounts shall be paid promptly
when due and the balance, if any, promptly after resolution of
the dispute.
17.5. ENTIRE AGREEMENT.
This Agreement contains the entire understanding of the Parties with
respect to the subject matter hereof. All express or implied agreements
and understandings, either oral or written, heretofore made [-] are
expressly superseded by this Agreement. This Agreement may be amended,
or any term hereof modified, only by a written instrument duly executed
by both Parties hereto.
17.6. INDEPENDENT CONTRACTORS.
VRI and LICENSEE each acknowledge that they shall be independent
contractors and that the relationship between the two Parties shall not
constitute a partnership, joint venture or agency. Neither VRI nor
LICENSEE shall have the authority to make any statements,
representations or commitments of any kind, or to take any action, which
shall be binding on the other Party, without the prior consent of the
other Party to do so.
17.7. AFFILIATES.
Each Party shall cause its respective Affiliates to comply fully with
the provisions of this Agreement to the extent such provisions
specifically relate to, or are intended to specifically relate to, such
Affiliates, as though such Affiliates were expressly named as joint
obligors hereunder.
17.8. WAIVER.
The waiver by either Party hereto of any right hereunder or the failure
to perform or of a breach by the other Party shall not be deemed a
waiver of any other right hereunder or of any other breach or failure by
said other Party whether of a similar nature or otherwise.
17.9. NO IMPLIED LICENCE.
Nothing in this Agreement shall be deemed to constitute, by implication
or otherwise, the grant by LICENSEE to VRI, or by VRI to LICENSEE, of
any license to, or interest in, or other rights under any patent, patent
application, proprietary know-how, trade secrets or other intellectual
property rights owned or possessed by LICENSEE or VRI, whichever is
applicable, except as expressly provided for herein.
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<PAGE> 28
17.10. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first set forth above.
For VIRUS RESEARCH INSTITUTE, INC.
By: /s/ J. Barrie Ward
------------------------------------------------------------
Name: J. Barrie WARD
Title: Chairman & Chief Executive Officer.
For MERIEUX ORAVAX S.N.C.
By: /s/ Jean-Jacques Bertrand
------------------------------------------------------------
Name: PASTEUR MERIEUX Serums & Vaccins S.A.
Associe Gerant, represented by Jean-Jacques BERTRAND,
Chairman, President & Chief Executive Officer
By: /s/ Lance K. Gordon
------------------------------------------------------------
Name: ORAVAX JVM, Inc., Associe,
represented by Lance K. GORDON,
President and Chief Executive Officer
For ORAVAX MERIEUX, CO.
By: /s/ Herve Tainturier
------------------------------------------------------------
Name: MERIEUX AMERICA HOLDINGS, Inc.
General Partner, represented by Herve TAINTURIER,
President
28
<PAGE> 29
By: /s/ Lance K. Gordon
------------------------------------------------------------
Name: ORAVAX JVM, Inc., general partner,
represented by Lance K. GORDON,
President
OraVax and PMC each hereby guarantee that their respective Affiliates, including
but not limited to Merieux OraVax S.N.C. and OraVax Merieux Co., shall perform
all obligations which are expressly imposed upon them pursuant to and in
accordance with this Agreement, and that OraVax and PMC shall each be bound by
the terms and conditions of this Agreement imposed on LICENSEE as if OraVax and
PMC were parties to this Agreement.
For ORAVAX INCORPORATED
By: /s/ Lance K. Gordon
------------------------------------------------------------
Name: Lance K. GORDON
Title: President & Chief Executive Officer
For PASTEUR MERIEUX SERUMS & VACCINS S.A.
By: /s/ Jean-Jacques Bertrand
------------------------------------------------------------
Name: Jean-Jacques BERTRAND
Title: Chairman, President & Chief Executive Officer.
29
<PAGE> 30
CONFIDENTIAL TREATMENT
----------------------------------
SCHEDULE A
----------
LICENSED PATENTS
----------------------------------
[*]
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
30
<PAGE> 31
CONFIDENTIAL TREATMENT
----------------------------------
SCHEDULE B
----------
LIST OF HPC ANTIGENS
----------------------------------
[*]
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
31
<PAGE> 32
-------------------------------
APPENDIX A
----------
TERMS AND CONDITIONS APPLICABLE
TO RESEARCH CONTRACT
-------------------------------
1. OBJECT.
Pursuant to a mutually agreed upon research program which shall be
definitely established by the Research Committee referred to in Section
2. hereinafter on terms substantially in accordance with the draft
research program attached hereto as EXHIBIT 1 (the "RESEARCH PROGRAM"),
VRI agrees to conduct research works described therein and LICENSEE
agrees to support and fund such Research Program in accordance with the
terms and conditions set forth here below.
2. OVERSIGHT OF THE RESEARCH PROGRAM.
2.1. OVERSIGHT. The Research Program shall be overseen and monitored by the
Research Committee as described herein (the "COMMITTEE").
2.2. MEMBERSHIP. VRI and LICENSEE shall each appoint two (2) persons (or such
other number of persons as the Parties may determine) to serve on the
Committee. Such representatives shall be qualified, by reason of
background and experience, to assess the scientific progress of the
Research Program. Each Party shall have the right to change its
representation on the Committee upon written notice sent to the other.
2.3. CHAIR. The Committee shall be chaired by one representative of LICENSEE.
2.4. RESPONSIBILITIES. The Committee shall have authority to:
(i) review and approve the draft Research Program and establish the
definitive Research Program;
(ii) make recommendations regarding the performance of the Research
Program and the conduct of research works pursuant thereto, and
monitor performance thereunder;
(iii) modify the Research Program as it determines, for each twelve
(12) month period during the term thereof;
(iv) review any and all proposed publication or communication
relating to the Research Program and the results therefrom;
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<PAGE> 33
(v) review any and all proposed filings of patent applications in
connection with the Research Program.
2.5. MEETINGS. The Committee shall meet not less than two (2) times a year
during the term of the Research Program, at such dates and times as
agreed to by the Parties. Meetings in person shall normally take place
at VRI's premises or such other place as may be mutually agreed upon.
Meetings may be held by telecommunication means. At such meetings, the
Committee shall discuss the Research Program and the status of
performance by VRI under the Program, evaluate the results thereof and
set priorities therefor. The Committee shall prepare written minutes of
each meeting and a written record of all decisions whether made at a
formal meeting or not. Such minutes shall incorporate semi-annual
research reports prepared by VRI.
3. THE PRINCIPAL INVESTIGATOR.
3.1. PRINCIPAL INVESTIGATOR. The Principal Investigator of the Research
Program shall be Dr. Kevin KILLEEN, an employee of VRI ("Principal
Investigator"). VRI shall consult with LICENSEE regarding any
replacement of the Principal Investigator, PROVIDED, however, that VRI
shall have the right to make, and shall make, the final determination
regarding any such replacement. The Principal Investigator shall be
appointed as a member of the Committee and may be designated by VRI to
act on behalf of VRI as co-chair on such Committee.
3.2. DUTIES. The Principal Investigator shall direct the Research Program and
coordinate the efforts of other researchers involved in the performance
of such Program. The Principal Investigator shall sit with the Committee
as provided in Section 2. hereof, shall contribute to the performance of
the duties set forth hereunder and shall be afforded the opportunity to
actively participate in all Committee deliberations. The Principal
Investigator shall provide reasonably detailed status reports of the
Research Program to the Committee at six-month intervals, as well as at
the earliest practicable time whenever, in the Principal Investigator's
judgment, an invention is created or reduced to practice. The Principal
Investigator shall devote such time and efforts as may be required to
fulfill his duties hereunder and to ensure the successful administration
and coordination of the Research Program.
3.3. REPLACEMENT. The Principal Investigator may be replaced at any time upon
the written request of either Party. In such event, or if the then
existing Principal Investigator is no longer able or is unwilling so to
serve, the Parties shall endeavour to find a mutually acceptable
substitute. If no mutually acceptable substitute can be agreed upon
within a reasonable time, then HPC shall have the right to terminate
forthwith the Research Program, and effect of such termination shall be
as provided for in Section 6.2 hereof, it being understood that
termination of the Research Program shall not entail termination of, and
shall be without any prejudice whatsoever to, the License Agreement.
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<PAGE> 34
4. CONDUCT OF RESEARCH PROGRAM.
4.1. GOOD LABORATORY PRACTICES. The Research Program shall be conducted by
VRI at VRI's laboratories. VRI shall use all reasonable efforts to
complete research works in accordance with the said Program. Any
research work performed by VRI pursuant hereto shall be in compliance
with current Good Laboratory Practices (cGLP) as applicable in the
United States of America.
4.2. LABORATORY NOTEBOOKS. VRI shall cause its employees to maintain
laboratory notebooks. Such laboratory notebooks shall set forth such
work in detail, including a clear description of the purposes for which
the work has been undertaken and the results expected; sufficient
details, diagrams, plans, sketches and identification of materials used,
formulations and operating conditions under which the work was conducted
as may be necessary to understand and reproduce the work conducted;
identification of any intermediate or final results achieved; and if
such laboratory notebooks contain any interpretations of data, they
shall also describe the rough data upon which such interpretations have
been based. VRI shall further cause its employees, agents and permitted
subcontractors maintaining such laboratory notebooks to have their work
corroborated periodically, which corroboration shall include at least
personal witnessing of the notebooks indicating that the witness has
read and understood the material on the page witnessed on the date that
he or she signed it.
5. FINANCIAL CONDITIONS.
5.1. SUPPORT COMMITMENT. In consideration of the work performed by VRI
pursuant to and accordance with the Research Program, LICENSEE shall
make available to VRI during the Research Program a maximum of ________
United States dollars (the "Commitment"). The Commitment shall be
inclusive of all costs incurred by VRI implementing the Research
Program.
5.2. PAYMENTS SCHEDULE. Support payments shall be made by LICENSEE to VRI in
............ quarterly payments of ....................... in advance
with the first payment to be made within fifteen (15) days of the
Effective Date of this Agreement, and the other payments payable on the
first day of each of the .......... subsequent Calendar Quarters.
5.3. REPORTING. VRI shall report and reconcile budgeted versus actual
expenditures on a semi-annual basis. Two copies of the semi-annual
report shall be sent to HPC. Upon reasonable advance request and at
reasonable times (but not on more than two occasions), HPC shall have
the right on demand to receive full and true financial information
regarding any and all matters affecting compliance with Research Program
and any amounts funded hereunder and to inspect the relevant books and
records of VRI relating thereto, at HPC expenses, using representatives
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<PAGE> 35
of its choice. VRI's books of account and all necessary supporting data
shall be kept for at least three (3) years following the end of the
fiscal year to which each will pertain. In the event that amounts funded
pursuant hereto exceeds actual expenditures incurred by VRI, VRI shall
promptly reimburse such excess to HPC, unless the Parties mutually agree
on an extension of the Research Program which would require consummation
of such excess.
5.4. NO CONFLICT WITH RESEARCH PROGRAM. VRI agrees that the Commitment
provided by LICENSEE shall be applied to the Research Program and may
not, without LICENSEE prior written approval, be used in support of any
other research at VRI.
5.5. TITLE TO EQUIPMENT. VRI shall retain title to any equipment purchased
with funds provided by LICENSEE under this Agreement, if such purchase
is mutually agreed upon as part of the Research Program budget.
6. TERM OF THE RESEARCH PROGRAM.
6.1. The term of the Research Program shall be twelve (12) months as from
[January 1], 1997, unless terminated earlier upon termination of this
Agreement in accordance with Article 10 of the License Agreement.
6.2. HPC shall be entitled to forthwith terminate the Research Program and
cease funding thereof (i) in the event of disagreement between the
Parties as to the replacement of the Principal Investigator under
Section 3.3 hereinabove, and (ii) in the event of a material breach by
VRI of any VRI's obligations and covenants hereunder. In the event of
any such termination, VRI shall reimburse HPC of any amounts paid by HPC
and found in excess of VRI's actual expenditures (reasonable termination
costs excluded) further to an accounting audit conducted in accordance
with Section 5.3 above. VRI's right to receive any unpaid balance
otherwise committed by HPC as support commitment to the Research Program
pursuant to Section 5.1 hereof shall become forfeited and no further
payments with respect to Research Program shall be due to VRI by HPC.
Termination of the Research Program pursuant to this Section 6.2. shall
not entail termination of, and shall be without any prejudice whatsoever
to the License Agreement.
7. CONFIDENTIALITY.
In order to facilitate the Research Program, either Party may disclose
confidential or proprietary information owned or controlled by it to the
other. It is hereby understood and agreed that such information shall be
deemed "CONFIDENTIAL INFORMATION" as defined in Article 8 of the License
Agreement and treated as such.
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<PAGE> 36
8. PUBLICATIONS.
Each Party shall have the right to publish or present the Results of the
Research Program and announce scientific progress of the Research
Program, provided such publication, presentation or announcement (and
any revisions thereof, a "Publication") is submitted to the other Party
through the Committee at least sixty (60) days prior to submitting it to
any Third-Party (including any editing person). The other Party shall
have sixty (60) days after receipt of the draft Publication to review
and comment on such draft. Upon notice within such sixty (60) day period
by the other Party that such Party reasonably believes the Publication
would amount to the public disclosure of a patentable invention upon
which a patent application should be filed prior to any such disclosure,
submission of the concerned Publication to Third-Parties shall be
delayed for a ninety (90) day period from the date of said notice, or
for such longer period which may appear necessary for appropriately
drafting and filing a patent application covering such invention. If the
other Party reasonably believes that the Publication would amount to the
public disclosure of such other Party's Confidential Information, said
other Party may request deletion of such information from the proposed
Publication. In addition, each Party shall duly take into account
comments made by the other Party on any Publication and shall accept to
have employees or others acting on behalf of the other Party be
mentioned as co-authors on any Publication describing results to which
such persons will have contributed.
9. INVENTIONS.
Ownership of inventions, whether or not patentable, and of any patent
applications and patents based thereon, which may result from the
Research Program (the "RESEARCH INVENTIONS") shall be established in
accordance with the following:
(i) Any Research Invention which is solely directed to the VRI
Technology and/or COMPOUND, per se, shall be owned by VRI and
automatically licensed by VRI to HPC subject to and in
accordance with the LICENSE, except that if any such invention
is patented, the term of the corresponding patent shall not be
taken into account to determine the Royalty Term;
(ii) Any Research Invention solely directed to an HPC Antigen or an
Other Hp Antigen, shall be owned by HPC;
(iii) Any Research Invention which is directed to the combination of
the VRI Technology and an antigen or antigens or another piece
of technology controlled by HPC rather than antigens in general,
shall be jointly owned by VRI and HPC and be considered a Joint
Invention. VRI's interest in such Joint Invention shall be
deemed automatically licensed by VRI to HPC subject to and in
accordance with the LICENSE, except that if any such invention
is patented, the term of the corresponding patent shall not be
taken into account to determine the Royalty Term. Except for the
rights granted to HPC in the Field of Use under the LICENSE,
neither Party shall exploit a Joint Invention without the prior
agreement in writing of the other Party, provided VRI may
request HPC to enter into good faith negotiations if VRI wishes
to exploit any such Joint
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<PAGE> 37
Invention outside the Field of Use or within the scope of the
non-exclusive LICENSE.
(iv) Any Research Invention which is directed to the combination of
VRI Technology and to antigens in general shall be owned by VRI
and automatically licensed by VRI to HPC, subject to and in
accordance with the LICENSE, except that if any such invention
is patented, the term of the corresponding patent shall not be
taken into account to determine the Royalty Term.
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<PAGE> 38
CONFIDENTIAL TREATMENT
-------------------------------
APPENDIX B
----------
TERMS AND CONDITIONS APPLICABLE
TO
COMPOUND SUPPLY
-------------------------------
1. THE SUPPLY AGREEMENT. VRI has stated to LICENSEE its current intention
to establish itself as a manufacturer of the COMPOUND. Provided VRI can
reasonably demonstrate that it shall be able to timely manufacture
COMPOUND under current Good Manufacturing Practice at competitive cost
in sufficient quantities, LICENSEE shall purchase from VRI LICENSEE's
requirements for COMPOUND for use in the manufacture of PRODUCTS under
the terms and conditions of a supply agreement (the "SUPPLY AGREEMENT"),
which agreement shall be negotiated in good faith in a timely fashion by
the Parties hereto so as to become effective at least six months before
LICENSEE's expected First Commercial Sale of PRODUCTS. The Parties agree
to negotiate in good faith in a timely fashion the detailed terms and
conditions of the Supply Agreement which shall include at a minimum the
following terms and conditions set forth in this Article 1, as well as
such other terms and conditions as may be agreed upon by the Parties.
2. COMPOUND REQUIREMENTS. The Supply Agreement shall provide that VRI shall
manufacture or have manufactured and LICENSEE shall purchase from VRI,
LICENSEE's entire requirements of COMPOUND (clinical lots as well as
commercial lots) for PRODUCTS and that LICENSEE shall purchase such
COMPOUND for its own use in manufacturing PRODUCTS only and shall not be
permitted to sell or re-sell COMPOUND to any Third-Party.
3. SPECIFICATIONS. The Supply Agreement shall provide for (i)
specifications that VRI shall be obligated to comply with; (ii) quality
control criteria and procedures; and (iii) LICENSEE's reasonable
acceptance criteria for the COMPOUND.
4. FORECASTS AND ORDERS. The Supply Agreement shall provide for the
establishment of reasonable rolling forecasts and placement of orders
which shall take into account VRI's need to rationally plan its
manufacturing of COMPOUND consistent with its other manufacturing
obligations.
5. PRICE. The price of COMPOUND shall be negotiated in good faith by the
Parties and set forth in the Supply Agreement, but in no event shall
such price be [*].
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
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<PAGE> 39
6. BACK-UP INVENTORIES. Pursuant to the Supply Agreement, VRI shall agree
to supply, and LICENSEE shall agree to maintain inventory of COMPOUND in
its own facility sufficient to meet its forecasted needs.
7. WARRANTIES. Pursuant to the Supply Agreement, VRI shall warrant that (i)
COMPOUND at the time of delivery shall meet the specifications referred
to in Section 3. hereinabove; (ii) COMPOUND shall be manufactured in
accordance with current Good Manufacturing Practices in effect in the
country where it is manufactured or in compliance in all material
respects with the principles of the current Good Manufacturing Practices
in effect in any other country where PRODUCTS are manufactured and/or
sold (if more stringent than cGMP first referred above) and any relevant
establishment and product licenses issued by any public health authority
having jurisdiction. LICENSEE shall inform VRI of the countries in which
PRODUCT is to be licensed to be sold and of any and all Agency(ies)
responsible in such countries. Upon request, LICENSEE shall provide VRI
with information regarding the regulatory requirements in each such
country. VRI SHALL DISCLAIM ANY OTHER WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS.
8. QUALITY AUDIT. Pursuant to the Supply Agreement, VRI shall permit
LICENSEE, upon reasonable notice and at reasonable times, at LICENSEE's
expense, to audit in cooperation with VRI's personnel production,
packaging, quality control and forwarding facilities of VRI and any of
its significant suppliers as they relate to VRI's manufacturing
responsibilities under the Supply Agreement.
9. ADVERSE EVENTS REPORTING. Under the Supply Agreement, the Parties shall
establish a procedure for monitoring and reporting adverse drug
experiences, consistent with Article 15 of the License Agreement.
10. ASSURANCE OF SUPPLY. Under the terms of the Supply Agreement, LICENSEE
and VRI shall cooperate to anticipate LICENSEE's reasonable long-term
requirements for COMPOUND, and VRI shall take reasonable measures to
assure that LICENSEE's reasonable requirements can be met, which
measures may include the qualification of more than one manufacturing
facility (including one such facility that may be operated by LICENSEE
or an Affiliate of LICENSEE, in which case VRI shall transfer
manufacturing Know-how in accordance with Section 11 hereinafter) and/or
maintenance of safety stocks of COMPOUND as provided for in Section 6
hereof.
11. TRANSFER OF MANUFACTURING TECHNOLOGY.
The Supply Agreement shall contain provisions for the compulsory
transfer of Manufacturing Know-How from VRI to HPC under certain
circumstances such as, but not necessarily limited to, durable failure
to supply by VRI, VRI's Affiliates or contractors, VRI's material breach
of the Supply Agreement or VRI's bankruptcy.
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12. NO ASSIGNMENT; NO SUB-CONTRACT. VRI shall neither assign nor
sub-contract any part of its rights and obligations under this APPENDIX
B, or any part of its manufacturing responsibility under the Supply
Agreement, to any third Party without the prior written agreement of
LICENSEE which shall not unreasonably withheld.
13. LIABILITIES, INDEMNIFICATION AND INSURANCE. The Supply Agreement shall
include provisions relating to liabilities, indemnification and
insurance substantially similar to the provisions of the Indemnity
Agreement herewith attached as EXHIBIT 1.
-----------------------------
EXHIBIT 1
---------
INDEMNITY AGREEMENT
-----------------------------
WHEREAS, HPC (hereinafter called "Purchaser") and VRI (hereinafter called
"Supplier") have entered into a License Agreement (the "License") relating to
the use of a certain compound (the "Compound") known as polyphosphazene for use
as an adjuvant and/or a delivery system in vaccines against Helicobacter pylori
infections, dated March ....., 1997;
WHEREAS, pursuant to the License, Supplier has agreed to sell, and Purchaser has
agreed to purchase, certain quantities of Compound, under terms and conditions
set forth in short form in the relevant provisions contained in APPENDIX B of
the License and to be finally established in a Supply Agreement to be negotiated
in good faith in a timely manner by the parties hereto;
WHEREAS, Purchaser is planning to enter into human clinical trials using
Compound;
WHEREAS, Supplier has already obtained clinical trial supplies of Compound under
a development agreement with a third-party and is planning to set-up a
sub-contract for having Compound manufactured by a third-party manufacturer,
AeroJet General Corporation of Akron, Ohio, United States of America (the
"SUBCONTRACTOR");
WHEREAS, in order to allow these actions to be timely undertaken, the parties
have agreed to set-up terms and conditions applicable to liabilities and
indemnification in connection with the early supply of clinical lots of Compound
which have previously been supplied to Purchaser, in advance of entering into
the definitive Supply Agreement.
NOW, THEREFORE, in consideration of the premises herein and for other good and
valuable consideration, the parties hereto agree as follows:
1. PURPOSE.
This Agreement shall set forth the terms and conditions under which
Purchaser shall provide and maintain insurance coverage and indemnify
Supplier in certain circumstances in connection with the use of Compound
by Purchaser in human clinical trials.
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<PAGE> 41
2. INSURANCE.
Each party, at its own expense, will maintain, with insurers which are
rated A or better by A.M. BEST, a General Product Liability,
Environmental and, in the case of Purchaser, Clinical Trial insurance
program(s) in an amount commensurate with the risks incurred. Purchaser
will cause (a) Supplier and Sub-contractor to be named as an additional
insured under Purchaser's General & Product Liability and Environmental
Liability insurance policies (but under those policies only and with
coverage limited to Claims as defined in Section 4 hereof), (b) such
insurance to be designated as primary to any insurance which may be
carried by Supplier, and (e) such insurance to provide that it can only
be cancelled or materially altered upon not less than thirty (30) days
notice to Supplier. Purchaser shall not assert against Supplier or
Sub-contractor and hereby waives any and all claims against Supplier for
losses, damages, liability, judgments, costs and expenses (including
attorney's fees) imposed upon or incurred by Purchaser as a result of or
arising out of any claim covered by such insurance to the extent of such
coverage and to the extent Purchaser will have agreed to indemnify
Supplier pursuant to Section 4 hereinafter.
3. INSURANCE CERTIFICATES.
Prior to issuing the first purchase order to Supplier and from time to
time thereafter as reasonably required by Supplier, Purchaser shall
furnish Supplier with (an) insurance certificate(s) evidencing
compliance with Insurance Section above, and reciprocally.
4. INDEMNITY.
Notwithstanding the existence or lack of insurance, Purchaser shall, at
its sole cost and expense, defend Supplier from any and all claims,
demands, actions or causes of action, at law or in equity (including but
not limited to claims by Purchaser's employees and customers and
including an environmental liability) (a "Claim") and indemnify and hold
Supplier harmless from all damages, liabilities, losses, costs,
judgments, orders, assessments, interest, penalties, fines, settlement
payments, costs and expenses (including, without limitation, reasonable
attorneys fees and other investigation and defense costs and expenses)
incurred by Supplier which arise out of or result in any way from bodily
injury (including death) or property damage, however arising out of, or
related in any way, to Purchaser's possession, use, sale, distribution,
processing, shipment, storage or disposal of the Compound or any
derivative thereof sold or otherwise transferred by Supplier to
Purchaser for the purpose described in the preamble to this Agreement.
Purchaser shall have the duty to defend, indemnify and hold Supplier
harmless against any actual or alleged negligence by Supplier. In the
event that Purchaser fails to promptly and diligently investigate and
defend or settle any Claim then Supplier shall have the right, at
Purchaser's cost, expense and risk, from that time forward to have sole
control of the defense of the Claim and all negotiations for its
settlement or compromise.
Notwithstanding the foregoing, the INDEMNITY provided for hereinabove
shall not apply to the extent that the Claim arises out of, is based
upon or results from the gross negligence or willfull misconduct (which
shall include misrepresentation or concealment of data relating to
toxicity of Compound) of Supplier, or an event having occurred before
the time that title to Compound (or to any shipment or unit thereof)
passes to Purchaser, in which cases Supplier shall defend, indemnify and
hold Purchaser harmless in the
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same manner and to the same extent than provided for hereinabove where
Purchaser is the indemnifying party, and PROVIDED further that, in any
event, the INDEMNITY provided for hereinabove shall not apply to the
extent the Claim is a claim for environmental liability arising out of,
based upon or resulting from an event occurring at a Supplier's
facility, or at a Sub-contractor's facility, or a facility of another
Supplier's sub-contractor, or at any other place (including during
transportation) prior to the time title to Compound (or to any shipment
or unit thereof) passes to Purchaser.
The Indemnity provided for herein shall be limited to Claims relating to
units of Compound sold or otherwise transferred by Supplier to Purchaser
for the purpose described in the preamble to this Agreement, as
identified in the invoices and/or control certificates and other
commercial and pharmaceutical documentation issued by Supplier to
Purchaser along with the delivery of such units of Compound.
5. COSTS & EXPENSES.
The indemnities in INDEMNITY Paragraph of this Agreement include all
costs and expenses reasonably required to investigate and to defend any
such claim or action, any amount paid or required to be paid to settle
such claim or action, or any amount paid or required to be paid to
settle such claim or action, or any amount finally awarded by a court as
damages or otherwise in any such action, provided that neither party
will have an obligation to pay or to reimburse the other party for the
amount of any internal expenses (including, but not limited to,
compensation paid to its employees) that it may incur in connection with
its cooperation in the investigation and/or defense of such claim or
action.
6. LIMITATION OF LIABILITY.
IN NO EVENT SHALL ANY PARTY HAVE ANY LIABILITY TO THE OTHER PARTY
HEREUNDER OR OTHERWISE FOR ANY LOSS OF PROFITS, COST OR COVER OR ANY
SPECIAL, CONSEQUENTIAL, INCIDENTAL, INDIRECT OR PUNITIVE DAMAGES,
HOWEVER CAUSED, WHETHER BY THE OTHER PARTY'S BREACH OF ANY EXPRESS OR
IMPLIED WARRANTY, NEGLIGENCE, STRICT LIABILITY UNDER LAW OR OTHERWISE.
7. SURVIVAL.
The provisions of this Agreement shall survive the expiration and/or
termination of this Agreement, unless this Agreement is superseded by
the Supply Agreement, in which case the provisions relating to
Liabilities and Indemnification contained in said Supply Agreement will
supersede this Agreement.
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CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
EXHIBIT 10.27
LICENSE AGREEMENT
This Agreement is made and entered into between President and Fellows of
Harvard College (hereinafter HARVARD) having offices at the Office for
Technology and Trademark Licensing, 124 Mt. Auburn Street, Suite 410 South,
Cambridge, MA 02138 and Virus Research Institute (hereinafter LICENSEE), a
corporation of Massachusetts, having offices at 61 Moulton Street, Cambridge,
MA 02139.
Whereas HARVARD is the owner by assignment of the entire right, title and
interest in a patent application [*] in the foreign patent applications
corresponding, thereto, and in the inventions described and claimed therein and
any patents issuing thereon:
Whereas HARVARD is committed to a policy that ideas or creative works produced
at HARVARD should be used for the greatest possible public benefit; and
Whereas HARVARD accordingly believes that every reasonable incentive should be
provided for the prompt introduction of such ideas into public use, all in a
manner consistent with the public interest; and
Whereas LICENSEE is desirous of obtaining, an exclusive worldwide license in
order to practice the above-referenced invention covered by PATENT RIGHTS in
the United States and in certain foreign countries, and to manufacture, use and
sell in the commercial market the products made in accordance therewith; and
Whereas HARVARD is desirous of granting a license to LICENSEE in accordance
with the terms of this Agreement.
Now therefore, in consideration of the foregoing premises, the parties agree as
follows:
ARTICLE I
DEFINITIONS
1.1 PATENT RIGHTS shall mean any and all patents or patent applications
attached hereto in Appendix A, the inventions described and claimed
therein, and any divisions, continuations, continuations-in-part
directed to subject matter specifically described in the applications
and patents listed in Appendix A, patents issuing thereon, foreign
counterparts thereof or reissues or reexaminations thereof, which will
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be automatically incorporated in and added to this Agreement and shall
periodically be added to Appendix A and made a part thereof.
1.2 LICENSED PRODUCTS shall mean products which in the country where sold
or manufactured are covered by (i) an issued, unexpired claim contained
in PATENT RIGHTS which has not been declared invalid or unenforceable
by a court of competent jurisdiction or administrative agency or (ii) a
claim of a pending patent application of PATENT RIGHTS which
application has been pending for a period of no more than five years
including the pendency of any parent application in which the claim is
supported. The period of pendency of a United States provisional
application shall not be considered in determining such five (5) year
period.
1.3 LICENSED PROCESSES shall mean processes which in the country where used
are covered by (i) an issued, unexpired claim contained in PATENT
RIGHTS which has not been declared invalid or unenforceable by a court
of competent JURISDICTION OR administrative agency or (ii) a claim of a
pending patent application of PATENT RIGHTS which application has been
pending for a period of no more THAN FIVE YEARS including the pendency
of any parent application in which the claim is supported. The period
of pendency of a United States provisional application shall not be
CONSIDERED IN determining such five (5) year period.
1.4 NET SALES means the total received by LICENSEE from sale of LICENSED
PRODUCTS less transportation charges and insurance, sales taxes, use
TAXES, EXCISE taxes, value added taxes, customs duties or other
imports, to the extent itemized on invoice, normal and customary
quantity and cash discounts (to THE EXTENT ALLOWED), allowances and
credits on account of rejection or return of LICENSED PRODUCTS and
rebates including but not limited to those REQUIRED BY A GOVERNMENT OR
AGENCY THEREOF. In the event that a LICENSED PRODUCT includes, a
component which has therapeutic and/or prophylactic activity ("Active
Component(s)") covered by a PATENT RIGHT (Patented Component(s)) and
Active Components not covered by a PATENT RIGHT (Unpatented
Component(s)) (such PRODUCT being a Combined Product), then NET SALES
shall be the amount which is normally received by LICENSEE FROM A SALE
OF THE PATENTED Component(s) when sold separately in an arm's length
transaction with an unaffiliated third party. If the Patented
Component(s) are not sold SEPARATELY, THEN NET SALES upon which royalty
is paid shall be the NET SALES of the Combined Produce multiplied by a
fraction, the numerator of which is the cost for producing the Patented
Components and the denominator of which is the cost for PRODUCING THE
COMBINED Product.
1.5 AFFILIATES shall mean any company, corporation, or business (i) in
which LICENSEE directly or indirectly owns or controls at least fifty
percent (50%) of the VOTING STOCK, or (ii) which directly or indirectly
owns or controls at least fifty percent (50%) of the voting stock of
LICENSEE or (iii) the majority ownership of which is DIRECTLY or
indirectly under common control with LICENSEE.
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1.6 BIOLOGICAL MATERIAL shall mean the materials supplied by HARVARD
(identified in Appendix B).
1.7 TECHNOLOGY shall mean any and all information or PATENT RIGHTS, or
BIOLOGICAL MATERIAL supplied by HARVARD to LICENSEE.
1.8 The term "SUBLICENSEE" shall mean any non-AFFILIATE third party
licensed by LICENSEE to make, have made, use or sell any product or use
any process under PATENT RIGHTS.
1.9 NON-ROYALTY SUBLICENSE INCOME shall mean sublicense issue fees,
sublicense maintenance fees, sublicense milestone payments other than
those listed in Article 3.6, and similar lump-sum royalty payments
made by SUBLICENSEES to LICENSEE on account of sublicenses pursuant to
this Agreement but excluding any payments by SUBLICENSEES constituting
(i) bona fide product research and development expenses and (ii) loans.
1.10 IMPROVEMENT INVENTIONS shall mean any inventions or discoveries that
ENHANCE, substitute for, or are useful with the products, procedures or
processes described in PATENT RIGHTS (and which are not included in
PATENT RIGHTS) to the extent they are (i) dominated by any claims of a
pending and/or issued patent or patent application which is then
included in the PATENT RIGHTS, and HARVARD'S OWNERSHIP INTEREST in any
United States or foreign patents and patent application thereon, and
(ii) made (i.e., conceived and reduced to practice) by Dr. John Collier
and/or Michael Starnbach solely or jointly with others directly
supervised in their laboratories at Harvard Medical School.
ARTICLE II
GRANT
2.1 For the term of this Agreement, HARVARD hereby grants to LICENSEE and
LICENSEE accepts, subject to the terms and conditions hereof, a
worldwide license under PATENT RIGHTS and a worldwide license to use
the BIOLOGICAL MATERIAL, to make and have made, to use and have used,
to sell and have sold the LICENSED PRODUCTS, and to practice the
LICENSED PROCESSES. SUCH LICENSE shall include the right to grant
sublicenses. HARVARD agrees it will not grant licenses to others except
as required or as permitted in paragraph 2.2 (b). To the extent
required by an agreement with a government agency that funded research
which LED TO PATENT RIGHTS, LICENSEE agrees during the period of
exclusivity of this license in the United States that any LICENSED
PRODUCT produced for sale in the United States will be manufactured
substantially in the United States.
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2.2 The granting and acceptance of this license is subject to the following
conditions:
(a) HARVARD's "Statement of Policy in Regard to Inventions, Patents and
Copyrights" dated March 17, 1986, Public Law 96-517, Public Law 98-620.
Any right granted in this Agreement greater than that permitted under
Public Law 96-517 or Public Law 98-620 shall be subject to modification
as may be required to conform to the provisions of that statute.
(b) HARVARD's right to make and to use and to grant non-exclusive
licenses to make and to use, for academic research purposes only and
not for any commercial purpose, the subject matter described and
claimed in PATENT RIGHTS, or the BIOLOGICAL MATERIAL.
2.3 HARVARD hereby grants to LICENSEE the right to extend the licenses
granted or to be granted in paragraph 2.1 to an AFFILIATE subject to
the terms and conditions hereof.
2.4 All rights reserved to the United States Government and others under
Public Law 96-517 and 98-620 shall remain and shall in no way be
affected by this Agreement.
2.5 LICENSEE has provided HARVARD with a development plan for developing
and obtaining regulatory approval of the LICENSED PRODUCT selected BY
LICENSEE, which development plan includes milestones.
LICENSEE shall exert reasonable efforts under THE CIRCUMSTANCES TO
ACHIEVE SUCH milestones. In the event LICENSEE subsequently indicates
in writing to HARVARD that such milestones cannot be met or fails to
meet such milestones, LICENSEE shall promptly notify HARVARD, and
LICENSEE and HARVARD shall promptly ENTER INTO good faith negotiations
to reconsider such milestones. In the event that the parties cannot
agree to the milestones within sixty (60) days after beginning good
FAITH NEGOTIATIONS, THE matter shall be submitted to arbitration to
determine the milestones and the time period therefor which should be
met pursuant to this Section. THE ARBITRATOR IN SETTING AND determining
milestones shall consider the state of technology; the efforts exerted
by LICENSEE, the business circumstances of LICENSEE and the public
INTEREST OBJECTIVES to HARVARD'S licensing program; and technical and
regulatory problems. Thereafter, LICENSEE shall exert reasonable
efforts to achieve such milestones.
In the event that LICENSEE cannot meet the milestones set by
arbitration because of technological or regulatory problems, HARVARD
shall not unreasonably deny an extension of time to meet the
milestones, upon a showing by LICENSEE that it has made good faith
reasonable efforts to meet the milestones.
If LICENSEE (i) fails to meet the milestones established by agreement
of the parties and (ii) fails to obtain extensions of such milestones
established by arbitration and (iii)
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LICENSEE has not exerted good faith reasonable efforts to meet such
milestones, as its sole and exclusive remedy HARVARD shall have the
right to terminate or convert the licenses to non exclusive licenses by
providing to LICENSEE sixty (60) days prior written notice.
LICENSEE shall ensure that for any PRODUCT being developed or
commercialized by a SUBLICENSEE, such SUBLICENSEE shall assume the
obligations imposed on LICENSEE under this paragraph.
The efforts of an AFFILIATE, SUBLICENSEE or collaborator of LICENSEE
shall be considered as efforts of LICENSEE.
2.6 The above licenses to sell any LICENSED PRODUCT include the right of
LICENSEE, its AFFILIATES, and SUBLICENSEES to grant to the purchaser
thereof the right to use or resell such purchased LICENSED PRODUCT
without payment of a further royalty.
2.7 HARVARD hereby grants to LICENSEE an exclusive option to negotiate an
exclusive license to IMPROVEMENT INVENTIONS. It is the intent of the
parties that such license shall be under substantially the same terms
and conditions as this LICENSE AND THAT LICENSEE shall only be required
to pay one royalty for each LICENSED PRODUCT. HARVARD shall notify
LICENSEE promptly, in writing, of any IMPROVEMENT INVENTION, and
LICENSEE shall notify HARVARD, in writing, within thirty (30) days
after receipt of the written notification from HARVARD as to whether or
not LICENSEE is exercising the option. If the option is not exercised
within such thirty (30) day period, LICENSEE shall no longer have ANY
RIGHTS TO THE IMPROVEMENT INVENTION as to which notice was received. If
the option is exercised, the parties shall negotiate a license in
accordance with this PARAGRAPH 2.7, in good faith, and if an agreement
is not reached within six (6) months thereafter, the rights granted
under this paragraph 2.7 with respect to SUCH IMPROVEMENT INVENTION
shall terminate. If during such thirty (30) days or six month period,
HARVARD desires to file a patent application with respect TO THE
IMPROVEMENT INVENTION, LICENSEE shall bear the cost of filing thereof
if LICENSEE still desires a license thereunder, provided that the
filing of such patent APPLICATION IS NECESSITATED BY A BAR DATE or the
parties have reached final agreement as to the financial terms of the
license or LICENSEE has requested such filing.
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CONFIDENTIAL TREATMENT
ARTICLE III
ROYALTIES
3.1 LICENSEE shall pay to HARVARD a non-refundable license fee as follows:
[*]
3.2 (a) LICENSEE shall pay HARVARD, during the term of the license granted
in Section 2.1, (i) a running royalty of [*], and (ii) [*] of running
royalties [*] received by LICENSEE or its AFFILIATES from a SUBLICENSEE
for LICENSED PRODUCTS sold by a SUBLICENSEE.
(b) In the event that a sublicense agreement does not require a
SUBLICENSEE to pay running royalties, LICENSEE shall pay HARVARD [*].
3.3 Beginning in calendar year 2005 and each calendar year thereafter,
HARVARD shall have the right to terminate or render non-exclusive this
license IN THE EVENT that LICENSEE does not pay to HARVARD at least
[*] in ROYALTIES.
In the event that actual royalties are not at least equal to the above
amounts for a specified calendar year, LICENSEE shall have the right to
pay any DIFFERENCE BETWEEN such minimum amounts and the actual
royalties paid in satisfaction of its obligations under this Agreement,
which shall be due and payable within sixty (60) days of the end of the
applicable calendar year.
3.4 In the event that LICENSEE is required to pay royalties to one or more
third parties under patents other than PATENT RIGHTS COVERING LICENSED
PRODUCTS OR LICENSED PROCESSES, LICENSEE shall be entitled to a credit
against royalties due HARVARD in an amount equal to [*].
3.5 LICENSEE shall pay HARVARD the following amounts within sixty (60) DAYS
AFTER THE following milestone is achieved by LICENSEE or its
SUBLICENSEE for each LICENSED PRODUCT:
(i) [*]
(ii) [*]
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT
(iii) [*]
3.6 Only one royalty shall be due and payable for a LICENSED PRODUCT and
use thereof irrespective of the number of patents included within
PATENT RIGHTS which are applicable to such LICENSED PRODUCT and use.
3.7 Unless this agreement is earlier terminated, the initial payment under
paragraph 3.1 and the payments due under paragraph 6.1 shall be due and
payable on the earlier of (i) six (6) months after the effective date
of this agreement or (ii) the date on which LICENSEE is granted a
license under U.S. Patent No. [*] by the UNITED STATES Government.
ARTICLE IV
REPORTING
4.1 LICENSEE shall provide written annual reports within sixty (60) days
after JUNE 30 of each calendar year which shall include but not be
limited to: reports of PROGRESS on research and development, regulatory
approvals, manufacturing, sublicensing, marketing and sales during the
preceding twelve (12) months.
4.2 LICENSEE shall report to HARVARD the date of first sale of LICENSED
PRODUCTS in each country within thirty (30) days of occurrence.
4.3 Commencing with the calendar year half in which NET SALES first occur,
LICENSEE agrees to submit to HARVARD within sixty (60) days after the
calendar half years ending June 30 and December 31, reports setting
forth for the preceding six (6) month period the amount of the LICENSED
PRODUCTS sold by LICENSEE, its AFFILIATES and SUBLICENSEES in each
country, the NET SALES thereof, and the amount of royalty due thereon
and with each such report pay the amount of royalty due. Such report
shall be certified as correct by an officer of LICENSEE and SHALL
INCLUDE a detailed listing of all deductions from NET SALES, or from
royalties as specified herein. Such report shall also specify which
PATENT RIGHTS are used in or by each LICENSED PRODUCT generating
royalty income. If no royalties ARE DUE to HARVARD for any reporting
period, the written report shall so state. If ROYALTIES FOR any
calendar year do not equal or exceed the minimum royalties established
in paragraph 3.3, LICENSEE shall include the balance of the minimum
royalty with the PAYMENT for the half year ending December 31. All
royalties due hereunder shall be PAYABLE in United States dollars and
shall be made payable to President and Fellows of Harvard College.
Conversion of foreign currency to U.S. dollars shall be made at the
CONVERSION rate existing in the United States on the last business day
in the reporting period as reported in the Wall Street Journal. All
such reports shall be maintained in CONFIDENCE by HARVARD, except as
required by law, including Public Law 96-517 and 98-620.
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
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4.4 If by law, regulation, or fiscal policy of a particular country,
conversion into United States dollars or transfer of funds of a
convertible currency to the United States is restricted or forbidden,
LICENSEE shall give HARVARD prompt notice in writing and shall pay the
royalty and other amounts due through such means or methods as are
lawful in such country as HARVARD may reasonably designate. Failing the
designation by HARVARD of such lawful means or methods within thirty
(30) days after such notice is given to HARVARD, LICENSEE shall deposit
such royalty payment in local currency to the credit of HARVARD in a
recognized banking institution designated by HARVARD, or if none is
designated by HARVARD within the thirty (30) day period described
above, in a recognized banking institution selected by LICENSEE and
identified in a written notice to HARVARD by LICENSEE, and such deposit
shall fulfill all obligations of LICENSEE to HARVARD with respect to
such royalties.
4.5 Any tax required to be withheld by LICENSEE under the laws of any
FOREIGN COUNTRY for the account of HARVARD, shall be promptly paid by
LICENSEE for and on behalf of HARVARD to the appropriate governmental
authority, and LICENSEE shall use its best efforts to furnish HARVARD
with proof of payment of such tax. Payments to HARVARD shall be net of
any such payments of taxes.
ARTICLE V
RECORD KEEPING
5.1 LICENSEE shall keep, and shall require its AFFILIATES AND SUBLICENSEES
TO KEEP accurate and correct records of LICENSED PRODUCTS made, used or
sold under this Agreement, appropriate to determine the AMOUNT OF
ROYALTIES DUE HEREUNDER to HARVARD. Such records shall be retained for
at least three (3) years following a given reporting period. They shall
be available during normal business hours FOR INSPECTION at the expense
of HARVARD by HARVARD's Internal Audit Department or by a Certified
Public Accountant selected by HARVARD and approved by LICENSEE for the
sole purpose of verifying reports and payments hereunder. Such
accountant shall not disclose to HARVARD any information other than
information relating to accuracy of reports and payments made under
this Agreement. In THE EVENT THAT ANY SUCH INSPECTION shows an under
reporting and underpayment in excess of five percent (5%) for any
twelve (12) month period, then LICENSEE shall pay the cost of such
EXAMINATION.
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ARTICLE VI
DOMESTIC AND FOREIGN PATENT FILING
AND MAINTENANCE
6.1 LICENSEE shall reimburse HARVARD for all reasonable expenses HARVARD
has incurred and shall incur for the preparation, filing, prosecution
and maintenance of PATENT RIGHTS for which HARVARD has not been, and is
not eligible to be reimbursed by any third party. HARVARD shall take
responsibility for the preparation, filing, prosecution and maintenance
of any and all patent applications and patents included in PATENT
RIGHTS using patent counsel reasonably acceptable to LICENSEE, provided
however that HARVARD shall first consult with LICENSEE as to the
preparation, filing, prosecution and maintenance of such patent
applications and patents and shall furnish to LICENSEE copies of
documents relevant to any such preparation, filing, prosecution or
maintenance.
6.2 HARVARD and LICENSEE shall cooperate fully in the preparation, filing,
prosecution and maintenance of PATENT RIGHTS and of all patents and
patent applications licensed to LICENSEE hereunder, executing all
papers and instruments or requiring members of HARVARD to execute such
papers and instruments so as to enable HARVARD to apply for, to
prosecute and to maintain patent applications and patents in HARVARD's
name in any country. Each party shall provide to the other prompt
notice as to all matters which come to its attention and which may
affect the preparation filing, prosecution or maintenance of any such
patent applications or patents.
6.3 If LICENSEE elects not to pay the expenses OF A PATENT APPLICATION OR
PATENT INCLUDED within PATENT RIGHTS in a particular country, LICENSEE
shall notify HARVARD not less than sixty (60) days prior to such action
and shall thereby surrender its rights under such patent or patent
application in such country.
6.4 HARVARD agrees not to allow any PATENT RIGHT to become abandoned or to
lapse without the written permission of LICENSEE.
ARTICLE VII
INFRINGEMENT
7.1 With respect to any PATENT RIGHTS under which LICENSEE is exclusively
licensed pursuant to this Agreement, LICENSEE or its SUBLICENSEE shall
have the right to prosecute in its own name and at its own expense any
infringement of such patent, so long as such license is exclusive at
the time of the commencement of such action. HARVARD agrees to notify
LICENSEE promptly of each infringement of such patents of which HARVARD
is or becomes aware. Before LICENSEE or its SUBLICENSEES
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CONFIDENTIAL TREATMENT
commences an action with respect to any infringement of such patents,
LICENSEE shall give careful consideration to the views of HARVARD and
to potential effects on the public interest in making its decision
whether or not to sue and in the case of a SUBLICENSE, shall report
such views to the SUBLICENSEE.
7.2 (a) If LICENSEE or its SUBLICENSEE elects to commence an action
described above and HARVARD is a legally indispensable party to such
action, HARVARD shall join the action as a co-plaintiff. Upon doing so,
LICENSEE shall reimburse HARVARD for reasonable legal expenses and
other out-of-pocket costs incurred by HARVARD for its participation in
such action as a nominal plaintiff.
(b) To the extent permitted by law, HARVARD shall have the right to
intervene in any such action, and if HARVARD elects to do so, HARVARD
shall jointly control such action with LICENSEE.
7.3 If LICENSEE or its SUBLICENSEE elects to commence an action as
described above, LICENSEE may reduce, by [*], the royalty due to
HARVARD EARNED UNDER THE patent subject to suit by the amount of the
expenses and costs of such action, including reasonable attorney fees.
In the event that such expenses and costs exceed the amount of
royalties withheld by LICENSEE for any calendar YEAR, LICENSEE MAY TO
THAT extent reduce the royalties due to HARVARD from LICENSEE in
succeeding calendar years, but never by [*].
7.4 Recoveries or reimbursements from such action shall first be APPLIED TO
REIMBURSE LICENSEE and HARVARD for litigation costs not paid from
royalties (if any) and then to reimburse HARVARD for royalties
withheld. Any REMAINING RECOVERIES or reimbursements shall be
distributed as follows:
(i) If the amount is lost profits, LICENSEE shall RECEIVE AN AMOUNT
EQUAL TO THE damages the court determines LICENSEE has suffered as a
result OF THE INFRINGEMENT less the amount of any royalties that would
have been due HARVARD ON SALES of LICENSED PRODUCTS lost by LICENSEE as
a result of THE INFRINGEMENT HAD LICENSEE made such sales and HARVARD
shall receive an amount equal to the royalties they would have received
if such sales had been made by LICENSEE; OR
(ii) As to awards other than lost profits, 80% to LICENSEE and 20% to
HARVARD.
7.5 In the event that LICENSEE and its SUBLICENSEE, if any, elect not to
exercise their right to prosecute an infringement of the PATENT RIGHTS
pursuant to the above paragraphs, or does not do so within sixty (60)
days after written NOTICE FROM HARVARD, HARVARD may do so at its own
expense, controlling such action and retaining all recoveries
therefrom, and LICENSEE shall cooperate with HARVARD with respect
thereto.
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
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ARTICLE VIII
TERMINATION OF AGREEMENT
8.1 This Agreement, unless extended or terminated as provided herein, shall
remain in effect for the life of the last to expire of PATENT RIGHTS
licensed hereunder, at which time LICENSEE shall have a fully paid up
license.
8.2 In the event that one party to this Agreement shall be in default in
the performance of any obligations under this Agreement, and if the
default has not been remedied within ninety (90) days after the date of
notice in writing of such default, the party giving such notice may
terminate this Agreement by written notice.
8.3 In the event that LICENSEE shall cease to carry on its business,
HARVARD SHALL HAVE the right to terminate this entire Agreement by
giving LICENSEE written notice of such termination.
8.4 In the event that the licenses granted to LICENSEE under this Agreement
are terminated, any granted sub-licenses shall remain in full force and
effect as a direct license from HARVARD to the SUBLICENSEE, provided
that the SUBLICENSEE is not then in breach of its sub-license agreement
and the SUBLICENSEE agrees to be BOUND (as a licensee) to HARVARD (as a
licensor) under the terms and conditions of THE SUB-LICENSE agreement.
8.5 LICENSEE shall have the right to terminate this Agreement or its
LICENSE UNDER ANY PATENT RIGHT in any country by giving thirty (30)
days advance written notice to HARVARD to that effect. Upon
termination, a formal report shall be submitted and any royalty
payments and unreimbursed patent expenses due to HARVARD become
immediately payable.
8.6 Sections 8.4, 8.6, 9.2, 9.3 and 9.4 of this Agreement shall survive
termination.
8.7 In the event that LICENSEE disputes the termination of this Agreement
or any license granted hereunder and initiates legal proceedings in
this respect, then this Agreement or any such license shall not be
terminated until there is a final decision from WHICH no appeal has
been or can be taken.
ARTICLE IX
GENERAL
9.1 HARVARD represents and warrants that the entire right, title, and
interest in the patent applications or patents comprising the PATENT
RIGHTS have been or will be assigned
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to it and that HARVARD has the authority to issue the licenses under
said PATENT RIGHTS set forth herein and that there are and will be no
rights and/or licenses inconsistent with the rights and licenses
granted to LICENSEE under this Agreement. HARVARD does not warrant the
validity of the PATENT RIGHTS licensed hereunder and makes no
representations whatsoever with regard to the scope of the licensed
PATENT RIGHTS or that such PATENT RIGHTS may be exploited by LICENSEE,
an AFFILIATE, or sublicensee without infringing other patents.
9.2 EXCEPT AS PROVIDED IN SECTION 9.1, HARVARD EXPRESSLY DISCLAIMS ANY AND
ALL IMPLIED OR EXPRESS WARRANTIES AND MAKES NO EXPRESS OR IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS OF THE TECHNOLOGY, LICENSED
PROCESSES OR LICENSED PRODUCTS CONTEMPLATED BY THIS AGREEMENT.
9.3 (a) LICENSEE shall indemnify, defend and hold harmless HARVARD and its
directors, governing board members, trustees, officers, faculty,
medical and professional staff, employees, students, and agents and
their respective successors, heirs and assigns (the "Indemnitees"),
against any liability, damage, loss or expenses (including REASONABLE
attorneys' fees and expenses of litigation) incurred by or imposed upon
the Indemnitees or any one of them in connection with any claims,
suits, actions, demands or judgments arising out of any theory of
product liability (including, but not limited to, ACTIONS IN THE form
of tort, warranty, or strict liability) concerning any product, process
or service used or sold pursuant to any right or license granted UNDER
THIS AGREEMENT.
(b) LICENSEE'S indemnification under (a) above shall not apply to any
liability, damage, loss or expense t the extent to apply to any
liability, damage, loss OR EXPENSE to the extent that it is
attributable to the negligent activities or willful misconduct of the
Indemnitees.
(c) HARVARD shall notify LICENSEE promptly of any claim OR THREATENED
CLAIM under this Paragraph 9.3 and shall fully cooperate with all
REASONABLE REQUESTS OF LICENSEE with respect thereto.
(d) LICENSEE agrees, at its own expense, to provide attorneys
reasonably acceptable to HARVARD to defend against any actions brought
or filed against any party indemnified hereunder with respect to the
indemnity contained HEREIN, WHETHER OR NOT such actions are rightfully
brought and LICENSEE shall have the right to control the defense,
settlement or compromise of any such claim or action.
(e) At such time as any LICENSED PRODUCT is being commercially
DISTRIBUTED or sold (other than for research purposes or for the
purpose of obtaining regulatory approvals) by LICENSEE, or by an
AFFILIATE, SUBLICENSEE or agent of LICENSEE (hereunder "Other Seller"),
LICENSEE shall itself or in the ALTERNATIVE SHALL ensure that Other
Seller either (i) at its sole cost and expense, procure(s) and
maintain(s)
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comprehensive general liability insurance in amounts not less than
$2,000,000 per incident and $2,000,000 annual aggregate and naming the
Indemnitees as additional insureds or (ii) pay(s) for the procurement
and maintenance by HARVARD of insurance in the amounts and in the form
set forth in this paragraph. Such comprehensive general liability
insurance shall provide (i) product liability coverage and (ii) broad
form contractual liability coverage for LICENSEE'S indemnification
under Paragraph 9.3(a) of this Agreement. LICENSEE shall ensure that if
LICENSEE or the Other Seller elects to self-insure all or part of the
limits described above (including deductibles or retentions which are
in excess of $250,000 annual aggregate) such self-insurance program
must be acceptable to HARVARD and the Risk Management Foundation. The
minimum amounts of insurance coverage required under this Paragraph
9.3(c) shall not be construed to create a limit of LICENSEE'S liability
with respect to its indemnification under Paragraph 9.3(a) of this
Agreement. At such time, or at any time, LICENSEE can request that
HARVARD ascertain whether Risk Management Foundation has in effect
Uniform Indemnification and Insurance Provisions more favorable than
those of this Agreement, in which event LICENSEE and HARVARD shall
amend this AGREEMENT TO include such more favorable provisions.
(f) LICENSEE shall provide HARVARD with written evidence of such
INSURANCE upon request of HARVARD. LICENSEE shall provide HARVARD with
written notice of at least thirty (30) days prior to the cancellation,
non-renewal or MATERIAL CHANGE IN such insurance; if LICENSEE does not
obtain replacement insurance providing comparable coverage within such
thirty (30) days period, HARVARD SHALL HAVE THE RIGHT to terminate this
Agreement effective at the end of such thirty (30) day period by
written notice to LICENSEE.
(g) LICENSEE shall itself maintain, or shall ENSURE THAT OTHER SELLER
MAINTAINS OR that payments are made for the maintenance by HARVARD of,
as the case may be, such comprehensive general liability insurance
beyond the expiration or termination of this Agreement during (i) the
period that any LICENSED PRODUCT is being COMMERCIALLY distributed or
sold (other than for research purposes or the purpose of obtaining
regulatory approvals) by Other Seller and (ii) a reasonable period
after period referred to in (g) (i) above which shall in no event be
less than ten (10) years. The obligations of (g) (ii) above can be
satisfied by the purchase of insurance by LICENSEE or a third party
which covers claims resulting from occurrences during such period of
(g)(ii) above for LICENSED PRODUCT commercially distributed or sold by
LICENSEE or Other Seller during the period referred to in (g) (i)
above.
9.4 LICENSEE shall not use HARVARD's name or any adaptation of it in any
ADVERTISING, promotional or sales literature without the prior written
assent of HARVARD.
9.5 Without the prior written approval of HARVARD, the entire license
GRANTED PURSUANT to this Agreement shall not be transferred by LICENSEE
to any party other than to a successor to the business interest of
LICENSEE relating to the PATENT RIGHTS with
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such transfer including but not being limited to mergers,
consolidations, and transfer or sale of assets. This Agreement shall be
binding upon the successors, legal representatives and assignees of
HARVARD and LICENSEE.
9.6 The interpretation and application of the provisions of this Agreement
shall be governed by the laws of the Commonwealth of Massachusetts.
9.7 LICENSEE agrees to comply with all applicable laws and regulations. In
particular, it is understood and acknowledged that the transfer of
certain commodities and technical data is subject to United States laws
and regulations controlling the export of such commodities and
technical data, including all Export Administration Regulations of the
United States Department of Commerce. These laws and regulations, among
other things, prohibit or require a license for the export of certain
types of technical data to certain specified countries. LICENSEE hereby
agrees and gives written assurance that it will comply with all United
States laws and regulations controlling the export of commodities and
technical data, that it will be solely responsible for any violation of
such by LICENSEE or its AFFILIATES or sublicensees, and that it will
defend and hold HARVARD harmless in the event of any legal action of
any nature occasioned by such violation.
9.8 Written notices required to be given under this Agreement shall be
addressed as follows:
If to HARVARD: Office of Technology and
Trademark Licensing
Harvard University
124 Mt. Auburn Street
Suite 410 South
Cambridge, MA 02138
CC: Office of Technology Licensing
and Industry Sponsored Research
Harvard Medical School
333 Longwood Ave.
Boston, MA 02115
If to LICENSEE: Virus Research Institute
61 Moulton Street
Cambridge, MA 02139
Attn: President
or such other address as either party may request in writing.
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9.9 Should a court of competent jurisdiction later consider any provision
of this Agreement to be invalid, illegal, or unenforceable, it shall be
considered severed from this Agreement. All other provisions, rights
and obligations shall continue without regard to the severed provision,
provided that the remaining provisions of this Agreement are in
accordance with the intention of the parties.
9.10 Any matter under Section 2.3 of this Agreement which is to be resolved
by arbitration shall be submitted to a mutually-selected single
arbitrator to so decide any such matter or disagreement. The arbitrator
shall conduct the arbitration in accordance with the then applicable
Rules of the American Arbitration Association, unless the parties agree
otherwise. If the parties are unable to mutually select an arbitrator,
the arbitrator shall be selected in accordance with the procedures of
the American Arbitration Association. The decision and award rendered
by the arbitrator shall be final and binding. Judgment upon the award
may be entered pursuant to this section and arbitration shall be held
in Boston, MA, or such other place as may be mutually agreed upon in
writing by the PARTIES.
9.11 This Agreement constitutes the entire understanding between the parties
and neither party shall be obligated by any condition or representation
other than those expressly stated herein or as may be subsequently
agreed to by the parties hereto in writing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement TO BE
EXECUTED BY their duly authorized representatives.
The effective date of this Agreement is March 28, 1997.
PRESIDENT AND FELLOWS OF HARVARD COLLEGE
By: /s/ JOYCE BRINTON
----------------------
Name and Title: Joyce Brinton, Director
Virus Research Institute:
By: /s/ WILLIAM A. PACKER
----------------------------
Name and Title: William A. Packer, President
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CONFIDENTIAL TREATMENT
Appendix A
The following comprise PATENT RIGHTS:
[*]
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 1
CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
EXHIBIT 10.28
----------------------------------------------
VIBRIOVEC LICENSE AGREEMENT
----------------------------------------------
This Agreement is entered as of this 1st day of December, 1997 (the "EFFECTIVE
DATE") into BY AND AMONG:
VIRUS RESEARCH INSTITUTE, INC., a company organized and existing under
the laws of the State of Delaware, having its principal place of
business at 61, Moulton Street, Cambridge, Massachusetts, USA,
(hereinafter referred to as "VRI")
AND
MERIEUX ORAVAX S.N.C., a societe en nom collectif organized and
existing under the laws of the Republic of France, registered at the
Registre du Commerce et des Societes in Lyon under No. RCS Lyon B 404
337 172, with a capital of 52.000.000 French Francs, whose registered
head-office is located at 58, avenue Leclerc, 69007 Lyon, France,
ORAVAX MERIEUX CO., a general partnership organized and existing under
the laws of the State of Massachussetts, having its principal place of
business at 38, Sidney Street, Cambridge, Massachussetts, USA,
(the parties numbered and above are individually and collectively
hereinafter referred to as "LICENSEE" or "HPC")
WITNESSETH
WHEREAS, VRI has developed certain confidential and/or proprietary information,
patents and patent applications and material relating to a vaccine delivery
system that uses an attenuated form of Vibrio cholerae as a vector for the oral
delivery of antigens ("VIBRIOVEC") which may present an interest in connection
with vaccination against, and immunotherapy of, Helicobacter pylori infections;
WHEREAS, HPC are joint venture entities created and equally owned and controlled
by OraVax, Inc. of Cambridge, Massachussetts, USA, ("ORAVAX") and Pasteur
Merieux Serums & Vaccins S.A. -a Pasteur Merieux Connaught company- of Lyon,
France ("PMC") for the purpose of researching, developing, manufacturing and
distributing products for active immunization against Helicobacter pylori
infections and prevention, treatment and cure of associated diseases and
conditions in humans;
WHEREAS, HPC wishes to acquire from VRI certain licenses in order to have the
right to use VibrioVec in connection with vaccines against Helicobacter pylori
infections, and VRI is willing to grant such licenses to HPC, subject to the
terms of and conditioned upon this Agreement;
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NOW, THEREFORE, in consideration of the premises herein and for other good and
valuable consideration, the Parties hereto, intending to be legally bound, agree
as follows:
ARTICLE 1 - DEFINITIONS AND INTERPRETATION
1.1. DEFINITIONS: For the purposes of this Agreement the following words
and phrases shall have the following meanings:
(a) "AFFILIATE" means, with respect to any Person, (i) any other
Person of which the securities or other ownership interests
representing fifty per cent (50 %) or more of the equity or
fifty per cent (50%) or more of the ordinary voting power or
fifty per cent (50%) or more of the general partnership
interest are, at the time such determination is being made,
owned, Controlled or held, directly or indirectly, by such
Person (a "SUBSIDIARY"), or (ii) any other Person which, at
the time such determination is being made, is Controlling, or
under common Control with, such Person. As used herein, the
term "Control", whether used as a noun or verb, refers to the
possession, directly or indirectly, of the power to direct, or
cause the direction of, the management or policies of a
Person, whether through the ownership of voting securities, by
contract or otherwise. For the avoidance of doubt, it is
hereby recorded that, notwithstanding the definition contained
in this Section 1.1.(a), the two HPC entities are Affiliates
of both OraVax and PMC and of each other, and that OraVax and
PMC are each Affiliates of the two HPC entities.
(b) "AGREEMENT" means this agreement, all amendments and
supplements to this Agreement and all schedules to this
Agreement, including the following:
SCHEDULE A - LICENSED PATENTS,
SCHEDULE B - List of HPC Antigens.
APPENDIX A - Terms and conditions applicable to research
contract.
APPENDIX B - Terms and conditions applicable to VECTOR supply.
(c) "CALENDAR QUARTER" means any of the three-month periods
beginning January 1, April 1, July 1 and October 1 in any
year.
(d) "VECTOR" means a vaccine delivery system that uses an
attenuated form of the bacterium Vibrio cholerae as a vector
for the oral delivery of antigens, known as VibrioVec;
(e) "VECTOR IMPROVEMENTS" means all patentable or non-patentable
inventions, discoveries, technology and information of any
type whatsoever, which add to the knowledge of the VECTOR or
its properties in general as a delivery system or an
immunoadjuvant, as the case may be, for use in the Field of
Use, including without limitation compositions, molecules
derived from VECTOR, methods, processes, technical
information, knowledge, experience and know-how.
(f) "CONFIDENTIAL INFORMATION" has the meaning ascribed to it in
Section 8.1. of this Agreement.
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<PAGE> 3
(g) "EVENT OF FORCE MAJEURE" has the meaning ascribed to it in
Article 12 of this Agreement.
(h) "FIELD OF USE" means the use of VRI Technology for the
formulation of products for active immunization against
Helicobacter pylori infections in humans and, by such
immunization, the prevention, treatment and cure of associated
diseases and conditions.
(i) "FIRST COMMERCIAL SALE" means, in each country of the
Territory, the first sale of a PRODUCT in commercial
quantities by LICENSEE, its Affiliates or Sublicensees, to
Third-Parties, in each case for use or consumption of such
PRODUCT in such country by the general public.
(ii) "JOINT INVENTIONS" has the meaning ascribed to it in Section
9.1 hereof.
(j) "LICENSE" has the meaning ascribed to it in Section 2.1.1. of
this Agreement.
(k) "LICENSED KNOW-HOW" means any and all technical information,
discoveries, improvements, processes, formulae, data,
engineering, technical and shop drawings, inventions,
Materials, shop-rights, know-how and trade secrets, in each
case which is Confidential Information at the time of
disclosure according to Article 8, is identified in accordance
with Section 2.3.3. of this Agreement as related to VECTOR and
which is useful or necessary to make, have made, use or sell
PRODUCTS or to practice under the LICENSED PATENTS in the
Field of Use, which have been, or hereafter are, either
developed by VRI or its Affiliates, or the rights to which in
the Field of Use have been acquired by VRI or its Affiliates
and to which VRI or its Affiliates have a transferable
interest. Without prejudice to the generality of the
foregoing, LICENSED KNOW-HOW shall include, with respect to
VECTOR, chemical and analytical methods and data, VECTOR
specifications, and pharmacological and toxicological methods
and data.
(l) "LICENSED PATENTS" means:
(i) any existing patents and patent applications listed
in SCHEDULE A to this Agreement;
(ii) any future patents issued from any patent
applications referred to in Paragraph 1.1.(l).(i)
above and any future patents issued from a patent
application filed in any country in the Territory
which corresponds to a patent or patent application
identified in Paragraph 1.1.(l).(i) above;
(iii) any reissues, confirmations, renewals, extensions,
counterparts, divisions or continuations issued,
assigned or licensed to VRI or its Affiliates of or
relating to the patents or patent applications
identified in Paragraph 1.1.(l).(i) and (ii) above;
(iv) any future patents and patent applications covering
VRI VECTOR Improvements solely or jointly owned or
licensed by VRI or its Affiliates with the right to
sublicense.
(m) "LICENSEE VECTOR IMPROVEMENTS" means VECTOR Improvements which
are conceived, developed or reduced to practice during the
term of this Agreement solely or jointly by employees or
contractors acting on behalf of LICENSEE, its Affiliates or
Sublicensees, to the extent and only to the extent that
LICENSEE now has or hereafter shall have the right to grant
licenses,
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<PAGE> 4
immunities or other rights thereon. For avoidance of doubt,
any technology developed by LICENSEE during the term and
pursuant to this Agreement which relates to any HPC Antigen or
Other Hp Antigen (rather than antigens in general), or to the
combination of such specific antigen with VECTOR, or to the
manufacturing of PRODUCTS shall not be included in LICENSEE
VECTOR Improvements. LICENSEE VECTOR Improvements shall be
deemed to include LICENSEE's interest in any Joint Inventions.
(mm) "LPS" means Helicobacter pylori antigens which are
lipopolysaccharides.
(n) "MANUFACTURING KNOW-HOW" means any and all technical
information, discoveries, improvements, processes, formulae,
data, engineering, technical and shop drawings, inventions,
shop-rights, know-how and trade secrets, in each case which is
Confidential Information at the time of disclosure in the
meaning of Article 8 hereof, is identified in accordance with
Section 2.3.3., which is owned or otherwise possessed by VRI
or VRI's Affiliates and to which VRI or its Affiliates have a
transferable interest, and which is useful or necessary to
make and have made VECTOR or to use VECTOR for the formulation
of PRODUCTS or to practice under the LICENSED PATENTS to the
extent such Patents relates to the manufacturing of VECTOR ;
in particular, but without limiting the generality of the
foregoing, Manufacturing Know-How shall include any and all
information regarding the synthesis, manufacture, up-scaling
and handling of VECTOR, any and all analytical procedures,
procedures for and specifications of quality-assurance and
quality-control.
(o) "MATERIALS" shall mean any biological materials and chemical
VECTOR including but not limited to structural genes, genetic
sequences, promoters, enhancers, probes, linkage probes,
vectors, hosts, plasmids, peptides, polypeptides, transformed
cell lines, transgenic animals, proteins, biological
modifiers, antigens, reagents, hybridomas, antibodies, toxins,
lectins, enzymes, lipids, hormones, viruses, cells or parts of
cells, cell lines, fragments of any of the foregoing and any
other biologically active material or VECTOR, whether or not
occurring naturally or howsoever derived, modified,
conjugated, cross-linked, immobilized, reduced, purified or
produced, whether by recombinant DNA techniques and/or
otherwise.
(p) "NET SALES" shall mean gross sales of PRODUCTS sold by
LICENSEE, its Affiliates and Sublicensees to Third-Parties
(including unaffiliated Third-Party distributors, except in
the circumstances referred to in Section 6.3 hereof, and
provided further that where a distributor is an Affiliate, but
neither a Subsidiary of LICENSEE nor a Subsidiary of OraVax or
PMC (other than HPC), such distributor shall be deemed a
Third-Party for the purpose of calculating Net Sales
hereunder) less, to the extent actually incurred or allowed:
(i) customary trade discounts, credits, rebates, returns
(including, but not limited to, wholesaler and
retailer returns);
(ii) excise taxes, other consumption taxes, customs duties
and compulsory payments made to governmental
authorities;
(iii) transportation, transit and insurance for
transportation each to the extent separately invoiced
and paid by LICENSEE.
(q) "NOTICE OF DISPUTE" has the meaning ascribed to it in Section
17.4.(a) of this Agreement.
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<PAGE> 5
(r) "OTHER HP ANTIGENS" means any antigens of Helicobacter pylori
and genes encoding such antigens other than HPC Antigens and
LPS.
(s) "PARTIES" means LICENSEE and VRI, and "Party" means any one of
them.
(t) "PERSON" means an individual, corporation, partnership, trust,
business trust, association, joint stock company, pool,
syndicate, sole proprietorship, unincorporated organization,
governmental authority or any other form of entity not
specifically listed herein.
(u) "PHASE III" means the first large scale safety and efficacy
clinical trial relating to a PRODUCT.
(v) "PLA" means a product license application filed with the
European Medicines Evaluation Agency or its successor in the
European Union, or any analogous or corresponding application
filed with the governing health authority of any country or
region (such as the Food and Drug Administration in the United
States of America or the Agence du Medicament in France), for
approval to market any PRODUCT for use or consumption in such
country or region.
(vv) "HPC ANTIGENS" means antigens of Helicobacter pylori (other
than LPS), and genes encoding such antigens, which are listed
in SCHEDULE B as being included in LICENSEE's research &
development program, which list may be amended from time to
time by written notice by LICENSEE to VRI (i) to add antigens
which are included in LICENSEE's research & development
program, in which case such antigens shall then become HPC
Antigens and be treated as such for the purpose of this
Agreement, PROVIDED, HOWEVER, that VRI has not previously
granted a non-exclusive license to a Third-Party with respect
to the use of VECTOR in combination with such antigens, or
(ii) to delete antigens which are excluded from such program,
in which case such antigens shall become Other Hp Antigens and
be treated as such for the purpose of this Agreement;
(w) "PRODUCTS" means any and all vaccines for active immunization
intended for use in the Field of Use which contain HPC
Antigens (either alone, combined with each other or combined
with Other Hp Antigens) or Other Hp Antigens (either alone or
combined with each other), in each case formulated in
combination with VECTOR.
(ww) "RESEARCH INVENTIONS" has the meaning ascribed to it in
Section 9.1 hereof which refers to Section 9 of APPENDIX A to
this Agreement.
(x) "ROYALTY TERM" means, with respect to each PRODUCT in each
country in the Territory, the period of time equal to the
longer of (a) ten (10) years from the date of First Commercial
Sale of such PRODUCT in such country or (b) the term for which
a Valid Patent Claim in such country remains in effect and,
but for a license granted by this Agreement, would be
infringed by the manufacture, use or sale of such PRODUCT in
the Field of Use in such country.
(xx) "SUBLICENSEE" means any Person acting pursuant to a sublicense
granted to it by LICENSEE under the terms of this Agreement.
(xxx) "TERRITORY" means all countries in the world.
(y) "THIRD-PARTY" means any Person other than LICENSEE, VRI and
their respective Affiliates.
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<PAGE> 6
(yy) "VALID PATENT CLAIM" means a claim of an issued and unexpired
patent or patent application included in LICENSED PATENTS
which has not been held permanently revoked, unenforceable or
invalid by a decision of a court or other governmental agency
of competent jurisdiction, unappealable or unappealed within
the time allowed for appeal, and which has not been admitted
to be invalid or unenforceable through reissue or disclaimer
or otherwise.
(z) "VRI VECTOR IMPROVEMENTS" means VECTOR Improvements which are
conceived, developed or reduced to practice during the term of
this Agreement solely or jointly by employees or contractors
acting on behalf of VRI or its Affiliates, to the extent that
VRI has now or hereafter shall have the right to grant
licenses, immunities or other rights thereon. VRI VECTOR
Improvements shall be deemed to include VRI's interest in any
Joint Inventions.
(zz) "VRI TECHNOLOGY" means the LICENSED PATENTS, the VECTOR, the
Manufacturing Know-How, the LICENSED KNOW-HOW and the VRI
VECTOR Improvements.
ARTICLE 2 - LICENSES
2.1. GRANT OF LICENSES TO LICENSEE
2.1.1. GRANT:
Subject to and conditioned upon the provisions of this Agreement, VRI
hereby grants to LICENSEE, and LICENSEE hereby accepts, the following
licenses (collectively, the "LICENSE"):
(i) a license in the Territory to make, have made, use and sell
PRODUCTS under the LICENSED PATENTS and by using LICENSED
KNOW-HOW and VRI VECTOR Improvements; and
(ii) a license in the Territory to make, have made and use the
VECTOR under the LICENSED PATENTS, and by using the
Manufacturing Know-How and VRI VECTOR Improvements, in each
case solely for the purpose of formulating PRODUCTS in the
Field of Use.
2.1.2. EXCLUSIVITY
(i) HPC ANTIGENS. Subject to and conditioned upon the provisions
of this Agreement, the LICENSE granted pursuant to this
Article II shall be exclusive (exclusive even as to VRI) to
LICENSEE in the Field of Use with respect to PRODUCTS
combining any VECTOR with any HPC Antigens (either alone,
combined with each other or combined with Other Hp Antigens).
Without limiting the generality of the foregoing, VRI
covenants that during the term of this Agreement, neither VRI
nor its Affiliates shall grant to any other Person any right,
license or privilege to make, have made, use or sell PRODUCTS
containing HPC Antigens (alone, or in combination with each
other, or in combination with Other Hp Antigens), or to make,
have made or use VECTOR,
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<PAGE> 7
or to otherwise use or exploit VRI Technology, in connection
with such PRODUCTS containing HPC Antigens (alone, or in
combination with each other, or in combination with Other Hp
Antigens).
(ii) OTHER HP ANTIGENS. Subject to and conditioned upon the
provisions of this Agreement, the LICENSE granted pursuant to
this Article II shall be non-exclusive to LICENSEE in the
Field of Use with respect to PRODUCTS combining any VECTOR
with any Other Hp Antigens (alone or combined with each
other), but only with such Other Hp Antigens. Such license
shall be non-transferable and non-sub-licensable.
(iii) For greater certainty, VRI has and retains all rights in and
to the VRI Technology outside the Field of Use and LICENSEE
has no rights in the VRI Technology outside the Field of Use.
Further, the LICENSE shall not apply to nor cover any
combination of an Helicobacter pylori vaccine with any other
vaccine, or any Helicobacter pylori vaccine containing LPS.
2.1.3. LICENSEE'S RIGHTS TO SUBLICENSE
(i) LICENSEE shall have the right, with VRI's prior written
consent (which consent shall not be unreasonably withheld), to
sublicense in the Field of Use to Third-Parties all or any
portion of the rights to LICENSED PATENTS and LICENSED
KNOW-HOW and VRI VECTOR Improvements granted to it pursuant to
this Agreement under the exclusive LICENSE.
(ii) LICENSEE shall have the right, without obtaining the further
consent of VRI, to sublicense in the Field of Use all or any
portion of the rights to the LICENSED PATENTS, the LICENSED
KNOW-HOW, VRI VECTOR Improvements and/or the Manufacturing
Know-How granted to it pursuant to this Agreement under both
the exclusive and the non-exclusive LICENSE (i) to any or all
of its Affiliates, and (ii) to any Person in any country of
the Territory if required to do so by any governmental
authority having jurisdiction in such country.
(iii) LICENSEE agrees that all sublicenses granted by LICENSEE
hereunder shall expressly bind Sublicensees to the terms of
Article 8, "Confidentiality" and to all other relevant
provisions of this Agreement. In the event LICENSEE grants
sublicenses, LICENSEE shall pay royalties to VRI as if Net
Sales of the Sublicensees were Net Sales of LICENSEE and VRI
shall be expressly made a third-party beneficiary thereof.
LICENSEE shall be responsible for the performance by any
Sub-licensee of all such terms, conditions and obligations.
(iv) Any sublicenses granted by LICENSEE shall include a
requirement that the Sublicensee maintains records and permits
inspection on terms essentially identical to Section 5.2
hereof. At VRI's request, LICENSEE shall arrange for an
independent certified public accountant selected by VRI to
inspect the records of Sublicensees, at VRI's expense, for the
purpose of verifying royalties due to VRI and shall cause such
accountant to report the results thereof to VRI.
(v) Any sublicenses granted by LICENSEE shall provide for the
termination of the sublicense, or, if the Sublicensee is a
Third-Party, at the option of such Sublicensee, the conversion
to a license directly between such Sublicensee and VRI, upon
termination of this Agreement under Article 10 (other than
expiration under Section 10.1). Such conversion shall be
subject to VRI's
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approval and contingent upon acceptance by the Sublicensee of
the remaining provisions of this Agreement.
(vi) LICENSEE shall notify VRI of each sublicense granted to
Third-Parties and shall provide VRI with the name and address
of each Sublicensee and a description of the PRODUCTS and
territory covered by each sublicenses.
2.1.4. SUBLICENSES TO LICENSEE.
To the extent LICENSED PATENTS have been, or shall be, licensed by VRI
from a Third-Party under an agreement with such Third-Party (a
"Third-Party In-license"), HPC understands and agrees as follows:
(i)- The rights sub-licensed to HPC by VRI are subject to the terms
and conditions, restrictions, limitations and obligations of
the relevant Third-Party In-license;
(ii)- HPC shall comply with the terms and conditions, restrictions,
limitations and obligations of such Third-Party In-license(s)
to the extent HPC has been permitted to review such terms,
conditions, restrictions, limitations and obligations. VRI
shall give HPC, upon request, a reasonable opportunity to
review the same except to the extent that confidentiality
obligations towards Third-Parties may prevent VRI from doing
so. In any event, VRI shall act reasonably in advising HPC of
the scope of HPC's obligations pursuant to any relevant
Third-Party In-license.
2.1.5 SUBCONTRACTING.
Notwithstanding anything herein provided for to the contrary, LICENSEE
shall be allowed to (i) sub-contract in whole or in part PRODUCTS
development to Third-Parties such as, without limitation, clinical
research organizations, (ii) appoint sales agents and distributors to
promote, market and distribute PRODUCTS and (iii) sub-contract
manufacturing of PRODUCTS and/or VECTOR with Affiliates, Third-Parties
or with VRI, or VRI's Affiliates.
2.2. LICENSES TO VRI.
Subject to and conditional upon the provisions of this Agreement,
LICENSEE shall grant to VRI a non-exclusive, sublicenseable,
royalty-free, worldwide license to LICENSEE VECTOR Improvements for
commercial use outside the Field of Use.
2.3. PROCEDURES FOR PROVISION OF KNOW-HOW.
2.3.1. DISCLOSURE OF TECHNOLOGY.
(a) BY VRI.
From time to time during the term of this Agreement, VRI shall
disclose or cause its Affiliates to disclose to LICENSEE such
VRI Technology as reasonably necessary to enable LICENSEE to
develop, manufacture and commercialize PRODUCTS and to
manufacture, have manufactured or use VECTOR for the
formulation of PRODUCTS in the Field of Use on the terms
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and subject to the conditions of this Agreement. In addition,
during the term of this Agreement, VRI shall, upon LICENSEE's
reasonable request and with adequate notice to VRI, make
available to LICENSEE at LICENSEE's or its Affiliates'
manufacturing facilities or the facility of a Third-Party
manufacturer who shall have contracted with LICENSEE to
manufacture PRODUCTS or VECTOR, VRI's or VRI Affiliate's
personnel to provide technical assistance to LICENSEE's
personnel, or LICENSEE Affiliates' personnel or Third-Party
manufacturer's personnel.
LICENSEE shall pay or have paid by its concerned Affiliates
all expenses incurred by VRI or its Affiliates in connection
with such technical assistance.
The technical assistance to be rendered by VRI and its
Affiliates hereunder may include, upon reasonable request by
LICENSEE, demonstration of Manufacturing Know-How at a VRI's
or a VRI Affiliate's facility and disclosure of any and all
sources of raw material and list and specifications of
equipment and machinery used in the production of VECTOR
according to the Manufacturing Know-How.
(b) BY LICENSEE.
From time to time during the term of this Agreement, LICENSEE
shall disclose to VRI all LICENSEE VECTOR Improvements on the
terms and subject to the conditions of the Agreement and in
particular in accordance with Section 2.2. hereof.
2.3.2. COMMUNICATION AMONG PARTIES.
Each of LICENSEE and VRI shall appoint (a) specific individual(s) who
shall be available and shall act as (a) liaison person(s) to facilitate
the day-to-day communications among the Parties. The names and
addresses of the liaison persons who shall act on behalf of each of the
Parties shall be provided by each of the Parties to the other
immediately following the execution of this Agreement. Each of LICENSEE
and VRI agrees to notify the other in accordance with the terms of
Section 17.1. of this Agreement in the event of a change in liaison
person.
2.3.3. IDENTIFICATION OF KNOW-HOW.
The Parties agree that all information, VECTORS and Materials comprised
in the Licensed Know-How to be transferred to LICENSEE pursuant to this
Agreement shall be so transferred in the case of written information,
by memoranda bearing the mention "Confidential", and, in the case of
Materials, by clearly marked and numbered containers. LICENSEE shall
designate an individual who shall be responsible for receiving
information and Materials from VRI and/or its Affiliates and the
Parties agree that such information and Materials shall in all cases
(except where the Parties agree otherwise) be sent solely to the
attention of such individual. Upon receipt of information and/or
Materials, the designated individual shall, on behalf of LICENSEE, send
an acknowledgement to VRI and/or its Affiliates confirming receipt of
information and/or Materials. The Parties agree that they shall in good
faith work together to establish and maintain a system to record the
transmission of information and/or Materials under this Agreement and
make all commercially reasonable efforts to ensure such system is
followed.
2.3.4. CONFIDENTIALITY.
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All information transferred pursuant to this Agreement shall be deemed
to be "Confidential Information" in accordance with Section 8.1.
2.3.5. SUPPLY OF VECTOR.
VRI hereby represents and warrants that any and all quantities of
VECTOR which may be supplied hereunder by VRI or its Affiliates to
LICENSEE for use in clinical trials in humans shall be manufactured in
accordance with current Good Manufacturing Practices (cGMP) as in force
in the country where such VECTOR shall be manufactured and shall meet
VECTOR specifications as shall be agreed otherwise by the Parties. The
sole and exclusive remedy for LICENSEE under this paragraph shall be
for VRI to provide replacement VECTOR complying with agreed-upon
specifications, free of any charge, in quantity equal to LICENSEE's
original order, except where VRI liability is established to be gross
negligence or willful misconduct (and LICENSEE did not use VECTOR with
knowledge of the non-compliance hereunder), in which case VRI shall
indemnify LICENSEE as provided herein.
ARTICLE 3 - DEVELOPMENT AND COMMERCIALIZATION.
3.1. DEVELOPMENT AND COMMERCIALIZATION EFFORTS.
LICENSEE (i) shall use commercially reasonable efforts to diligently
conduct such preclinical and clinical trials that are necessary or
desirable to obtain all regulatory approvals to develop and
commercialize such PRODUCTS, (ii) shall diligently develop and obtain
necessary approval to market such PRODUCTS (including, as the case may
be, pricing approval), and (iii) shall commence marketing and market
such PRODUCTS in each country in which LICENSEE has received all
applicable regulatory approvals therefor. LICENSEE shall comply with
all applicable good laboratory, clinical and manufacturing practices in
the development and commercialization of such PRODUCTS, and shall cause
its Affiliates and subcontractors to do the same. LICENSEE shall be
solely responsible for funding all costs of the development and
commercialization of each such PRODUCTS.
3.2. SUB-CONTRACTS TO VRI.
LICENSEE and VRI have agreed to have part of the research and
development work with respect to PRODUCTS sub-contracted to VRI
pursuant to and in accordance with the terms and conditions set forth
in APPENDIX A.
LICENSEE and VRI may agree to have VECTOR manufacturing sub-contracted
to VRI, in which case such contract manufacturing shall be subject to
terms and conditions set forth in APPENDIX B.
3.3. DEVELOPMENT AND COMMERCIALIZATION REPORTS.
During the term of this Agreement, LICENSEE shall keep VRI reasonably
informed as to the progress of the development of PRODUCTS by notifying
VRI of completion of each significant step.
In addition, LICENSEE agrees to update the list of HPC Antigens which
constitute the Schedule B to this Agreement, on a quarterly basis, by
indicating in writing
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CONFIDENTIAL TREATMENT
which Other Hp Antigens, if any, are included in such list and which
HPC Antigens, if any, are excluded therefrom and then become Other Hp
Antigens.
All information disclosed by LICENSEE pursuant to this Section 3.3
shall be subject to Article 8 hereof.
ARTICLE 4 - ROYALTIES AND MILESTONES.
4.1. EARNED ROYALTIES.
During the Royalty Term, LICENSEE shall pay to VRI a royalty of [*].
4.2. THIRD-PARTY ROYALTIES.
If LICENSEE, its Affiliates or Sublicensees is required to pay
royalties to any Third-Party in order to make, have made, use or sell a
PRODUCT in a country or to make, have made or use VECTOR for use in
such PRODUCT in such country, then the royalty set-forth in Section 4.1
hereof for such PRODUCT in such country shall be reduced by [*].
4.3. SINGLE ROYALTY: NON-ROYALTY SALES.
In no event shall more than one royalty be payable under Section 4.1.
hereof with respect to a particular unit of PRODUCTS. No royalty shall
be payable under this Article 4 with respect to sales of PRODUCTS among
LICENSEE and its Affiliates (provided that where a distributor is an
Affiliate, but neither a Subsidiary of LICENSEE nor a Subsidiary of
OraVax or PMC -other than HPC-, such distributor shall be deemed a
Third-Party), or among Sublicensees and their Affiliates, or among
LICENSEE and its Affiliates, but a royalty shall be due upon the
subsequent sale of the PRODUCTS to a Third-Party. No royalty shall be
payable for (i) PRODUCTS used by LICENSEE, its Affiliates or
Sublicensees, for research including, without limitation, in clinical
trials, or (ii) customary quantities of PRODUCTS distributed as free
samples.
4.4. MILESTONE PAYMENTS.
As additional consideration for the LICENSE, rights and privileges
granted to it hereunder, LICENSEE shall pay to VRI the following
milestone payments within thirty (30) days of the occurrence of each
event set forth below (unless otherwise specified below), whether such
events are achieved by LICENSEE, its Affiliates or Sublicensees:
(a) [*];
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT
(b) [*];
(d) [*];
(e) [*];
(f) [*].
The above-mentioned milestone payments shall be payable only once each.
ARTICLE 5 - ROYALTY REPORTS AND ACCOUNTING.
5.1. REPORTS, EXCHANGE RATES.
During the term of this Agreement following the First Commercial Sale,
LICENSEE shall furnish to VRI, with respect to each Calendar Quarter, a
written report showing in reasonably specific detail, on a
country-by-country basis, (a) the gross sales of PRODUCTS sold by
LICENSEE, its Subsidiaries and its Sublicensees in the Territory during
the corresponding Calendar Quarter and the calculation of Net Sales
from such gross sales; (b) the royalties payable in United States
dollars, if any, which shall have accrued hereunder based upon Net
Sales of PRODUCTS; (c) the withholding taxes, if any, required by law
to be deducted in respect of such royalties; (d) the date of the First
Commercial Sale of PRODUCTS having occurred in each country in the
Territory during the corresponding Calendar Quarter; and (e) the
exchange rates used in determining the royalty amount expressed in
United States dollars.
With respect to sales (if any) of PRODUCTS invoiced in United States
dollars, the gross sales, Net Sales, and royalties payable shall be
expressed in United Sates dollars. With respect to sales of PRODUCTS
invoiced in a currency other than United Sates dollars, the gross
sales, Net Sales and royalties payable shall be expressed in the
currency of the invoice issued by the Party making the sale together
with the United States dollars equivalent of the royalty payable,
calculated using the rate of exchange published in the WALL STREET
JOURNAL for such currency on the last business day of the concerned
Calendar Quarter.
Reports and payments shall be due on the forty fifth (45th) day
following the close of each Calendar Quarter. LICENSEE shall keep
complete and accurate records in sufficient detail to properly reflect
all gross sales and Net Sales and to enable the royalties payable
hereunder to be determined.
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
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5.2. AUDITS.
5.2.1. Upon the written request of VRI and not more than once in each calendar
year, LICENSEE shall permit an independent certified public accounting
firm of internationally recognized standing, selected by VRI and
reasonably acceptable to LICENSEE, at VRI's expense, to have access
during normal business hours to such of the records of LICENSEE as may
be reasonably necessary to verify the accuracy of the royalty reports
hereunder for any year ending not more than three (3) years prior to
the date of such request. The accounting firm shall disclose to VRI
only whether the records are correct or not and the specific details
concerning any discrepancies. No other information shall be shared.
5.2.2. If such accounting firm concludes that additional royalties were owed
during such period, LICENSEE shall pay the additional royalties within
thirty (30) days of the date VRI delivers to LICENSEE such accounting
firm's written report so concluding. The fees charged by such
accounting firm shall be paid by VRI; PROVIDED, HOWEVER, if the audit
discloses that the royalties payable by LICENSEE for the audited period
are more than one hundred and two percent (102%) of the royalties
actually paid for such period, then LICENSEE shall pay the reasonable
fees and expenses charged by such accounting firm.
5.2.3. LICENSEE shall include in each permitted sublicense granted by it
pursuant to the Agreement a provision requiring the Sublicensee to make
reports to LICENSEE, to keep and maintain records of sales made
pursuant to such sublicense and to grant access to such records by
VRI's independent accountant to the same extent required with respect
to LICENSEE's records under this Agreement.
5.2.4. Except in the case of circumstances which would have prevented an error
or anomaly from being disclosed during the audit hereabove mentioned,
such as fraud or other failure to provide accurate information, upon
the expiration of three (3) years following the end of any calendar
year, the calculation of royalties payable with respect to such year
shall be binding and conclusive upon VRI, and LICENSEE, its Affiliates
and Sublicensees shall be released from any liability or accountability
with respect to royalties for such year.
5.3. CONFIDENTIAL FINANCIAL INFORMATION.
VRI shall treat all financial information subject to review under this
Article 5 or under any sublicense as confidential, and shall cause its
accounting firm to retain all such financial information in confidence.
ARTICLE 6 - PAYMENTS.
6.1. PAYMENT TERMS.
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CONFIDENTIAL TREATMENT
Royalties shown to have accrued by each royalty report provided for
under Article 5 of this Agreement shall be due on the date such royalty
report is due. Payment of royalties in whole or in part may be made in
advance of such due date.
6.2. PAYMENT METHOD.
Except as provided in this Section 6.2., all payments by LICENSEE to
VRI under this Agreement shall be paid in United States dollars, and
all such payments shall be made without deduction of bank transfer fees
by bank wire transfer in immediately available funds to the following
bank account:
- ------------------------------------------------------
Bank : [*]
Account No. : [*]
Account name : [*]
- ------------------------------------------------------
or to any other bank account designated in writing from time to time by
VRI to LICENSEE.
6.3. EXCHANGE CONTROL.
If at any time legal restrictions prevent the prompt remittance of part
or all royalties with respect to any country in the Territory where
PRODUCTS are sold, payment shall be made through such lawful means or
method as the Parties reasonably shall determine or, at VRI's
discretion, royalties shall be based on HPC sales (if any) to HPC's
Subsidiary or Sublicensee in such country.
6.4. WITHHOLDING TAXES.
Royalties and milestone payments shall be paid by LICENSEE to VRI,
after deduction of any applicable withholding taxes. Prior to any
payment by LICENSEE to VRI, LICENSEE shall provide to VRI any forms
required to attest VRI's fiscal domiciliation in order to allow
LICENSEE to claim application of the reduced rate of withholding tax
provided for in any applicable bilateral fiscal convention. VRI shall
promptly return such forms to LICENSEE. In the event VRI fails to
promptly return such forms duly filled and signed, LICENSEE shall
declare and pay withholding tax at the common law rate of the
applicable corporate income tax, and such tax shall then be deducted
from the corresponding payment by LICENSEE to VRI. LICENSEE shall pay
withholding tax to the proper taxing authority and proof of payment of
such tax shall be secured and sent to VRI as evidence of such payment.
ARTICLE 7 - INFRINGEMENT ACTIONS BY THIRD-PARTIES.
If LICENSEE, VRI or their respective Affiliates, or LICENSEE's Sublicensees, is
sued by a Third-Party for infringement of a Third-Party's patent because of the
manufacture, use or sale of PRODUCTS or manufacture or use of VECTOR, the Party
which has been sued shall promptly notify the other Party in writing of the
institution of such suit, in which event the other Party shall have the right to
be represented by advisory counsel of its own selection, at its own expense, and
shall cooperate fully in the defense of such suit and furnish to the Party(ies)
that is(are) sued all evidences and assistance in its control.
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
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The Party controlling the suit may not settle the suit or otherwise consent to
an adverse judgment in such suit that diminishes the rights or interests of the
non-controlling Party without the express written consent of the non-controlling
Party. Any judgments, awards, settlements or damages payable with respect to
legal proceedings covered by this Article 7 shall be paid by the Party against
whom the award has been made.
ARTICLE 8 - CONFIDENTIALITY.
8.1. NON-DISCLOSURE AND RESTRICTION-OF-USE OBLIGATIONS.
Except as otherwise provided in this Article 8, during the term of this
Agreement and for a period of ten (10) years after termination of this
Agreement under Sections 10.3. or 10.4., each Party shall maintain in
confidence, and use only for purposes as expressly authorized and
contemplated by this Agreement, all information and data supplied by
the other Party under this Agreement, including but not limited to
LICENSED KNOW-HOW, Manufacturing Know-How and VECTOR Improvements. For
purposes of this Article 8, information and data described above shall
be hereinafter referred to as "CONFIDENTIAL INFORMATION".
8.2. PERMITTED DISCLOSURES.
To the extent it is reasonably necessary or appropriate to fulfill its
obligations or exercise its rights under this Agreement, (i) a Party
may disclose Confidential Information it is otherwise obligated under
this Article 8 not to disclose, to its Affiliates, Sublicensees,
consultants, outside contractors and clinical investigators, on a
need-to-know basis, provided that such Persons agree to keep the
Confidential Information confidential and not use the Information for
the same time period and to the same extent as such Party is required;
and (ii) a Party may disclose such Confidential Information to
governmental or other regulatory authorities to the extent that such
disclosure is required by applicable law, regulation or court order, or
is reasonably necessary to obtain patents, copyrights or authorizations
to conduct clinical trials with, or to commercially market PRODUCTS,
provided that the disclosing Party shall provide written notice to the
other Party and sufficient opportunity to object to such disclosure or
to request confidential treatment thereof.
The obligation not to disclose or use Confidential Information shall
not apply to any part of such Information (including LICENSED KNOW-HOW,
Manufacturing Know-How and VECTOR Improvements) that (i) is or becomes
patented, published or otherwise part of the public domain or publicly
available other than by acts of the Party obligated not to disclose
such Information, or of its Affiliates or Sublicensees, in
contravention of this Agreement; (ii) is disclosed to the receiving
Party or its Affiliates or Sublicensees by a Third Party, provided such
Information was not obtained by such Third-Party directly or indirectly
from the other Party, its Affiliates or Sublicensees, under or pursuant
to this Agrement on a confidential basis and otherwise had a lawful
right to disclose the information; (iii) prior to disclosure under
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the Agreement, was already in the possession of the receiving Party or
its Affiliates or Sublicensees, provided such Information was not
obtained directly or indirectly from the other Party under this
Agreement; (iv) is independently developed by the receiving Party
without reliance on the Confidential Information disclosed by the other
Party hereunder, (v) is disclosed in a press release agreed to by both
Parties hereto in accordance with Section 8.4. hereinafter or (vi) both
Parties have agreed to publish.
8.3. TERMS OF THE AGREEMENT.
LICENSEE and VRI shall not disclose any terms or conditions of this
Agreement to any Third-Party without the prior consent of the other
Party, except (a) to Persons with whom LICENSEE or VRI has entered into
or proposes to enter into a business relationship to which this
Agreement is relevant and substantial, provided that such Persons shall
enter into the required confidentiality agreement, or (b) as required
by applicable laws, regulations or a court order, provided that the
disclosing Party shall provide written notice to the other Party and
sufficient opportunity to object to such disclosure or to request
confidential treatment thereof.
8.4. PRESS RELEASES AND OTHER DISCLOSURES TO THIRD-PARTIES
Neither VRI nor HPC shall, without the prior written consent of the
other, issue any press release or make any other public announcement or
furnish any statement to any Person (other than either Parties'
respective Affiliates) concerning the existence of this Agreement and
the transactions contemplated by this Agreement, except for (i) general
statement referring to the existence of this Agreement, specifying the
Field of Use and identity of the Parties but no other details, (ii)
disclosures made in compliance with sections 8.2. and 8.3. hereof,
(iii) attorneys, consultants, and accountants retained to represent
them in connection with the transactions contemplated hereby or as may
be reasonably necessary to either Party's bankers, investors, attorneys
or other professional advisors in connection with a merger or
acquisition, provided such advisors are bound by confidentiality
obligations essentially identical to those provided for herein, and
(iv) occasional, brief comments by the respective officers of HPC,
OraVax, PMC and VRI consistent with such guidelines for public
statements as may be mutually agreed by HPC and VRI made in connection
with routine interviews with analysts or members of the financial
press. In addition, either Party (after consultation with counsel) in
its own right may make such further announcements and disclosures, if
any, as may be required by applicable laws and regulations, in which
case the Party making the announcement or disclosure shall use its best
efforts to give advance notice to, and discuss such announcement or
disclosure with, the other Party.
8.5. Notwihstanding anything else to the contrary, LICENSEE agrees that VRI
Technology shall be used only for the research, development,
manufacture, use and sale of PRODUCTS and that in the event that the
LICENSE is terminated, LICENSEE agrees not to use VRI Technology and
LICENSEE VECTOR Improvements for the research, development,
manufacture, use or sale of any product or process including but not
limited to PRODUCTS.
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ARTICLE 9 - INVENTIONS AND PATENTS.
9.1. OWNERSHIP OF INVENTIONS.
The entire right and title to technology, whether or not patentable,
and any patent applications or patents based thereon, made or conceived
during the term of this Agreement (other than Research Inventions as
defined in APPENDIX A attached hereto, if any), (a) by employees or
others acting solely on behalf of VRI or its Affiliates, shall be owned
solely by VRI, (b) by employees or others acting solely on behalf of
LICENSEE or its Affiliates, shall be owned solely by LICENSEE, and (c)
by both employees or others acting on behalf of LICENSEE or its
Affiliates and on behalf of VRI or its Affiliates shall be jointly
owned by LICENSEE and VRI (the "JOINT INVENTIONS"). Each Party promptly
shall disclose to the other Party the making, conception or reduction
to practice of VECTOR Improvements by employees or others acting on
behalf of such Party. VRI and LICENSEE each hereby represents that all
employees and other Persons acting on its behalf in performing its
obligations under this Agreement shall be obligated under a binding
written agreement to assign to it, or as it shall direct, all VECTOR
Improvements conceived or reduced to practice by such employees or
other Persons. The provisions of this Section 9.1 are subject to
Section 2.2 hereof.
9.2. PATENT PROSECUTION AND MAINTENANCE.
VRI shall be responsible for and shall control the preparation, filing,
prosecution, grant and maintenance of all LICENSED PATENTS. VRI shall
prepare, file, prosecute and maintain such LICENSED PATENTS in good
faith consistent with its customary patent policy and its reasonable
business judgement, and shall consider in good faith the interests of
LICENSEE in so doing. LICENSEE shall re-imburse VRI a share of
reasonable costs of prosecution and maintenance of all LICENSED PATENTS
as far as such costs are borne by VRI in the normal course of business
after the Effective Date and for so long as the LICENSE to the relevant
LICENSED PATENTS continues in effect. Such share shall be an amount
equal to the total of the costs mentioned hereinabove multiplied by a
fraction having as a numerator one (1), and as a denominator the total
number of licences granted by VRI to Third-Parties with respect to
LICENSED PATENTS. VRI shall furnish to HPC an estimated yearly budget
for such costs.
9.3. ENFORCEMENT OF LICENSED PATENTS.
In the event that LICENSED PATENTS are infringed by any Third-Party in
the Field of Use, LICENSEE shall have the right, but not the
obligation, to institute and prosecute any action or proceeding under
LICENSED PATENTS with respect to such infringement, by counsel of its
choice, including any declaratory judgement action arising from such
infringement. Any amounts recovered from Third-Parties with respect to
the LICENSED PATENTS in such action shall be retained by LICENSEE.
LICENSEE shall not have the right to settle, compromise or take any
action in such litigation which diminishes, limits or inhibits the
scope, validity or enforceability of LICENSED PATENTS without the
express permission of VRI. LICENSEE shall keep VRI advised of the
progress of such proceedings.
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In the event that a Third-Party is infringing any LICENSED PATENTS in
the Field of Use and LICENSEE does not elect to institute an action,
VRI shall have the right, but not the obligation, to commence an
infringement suit under the LICENSED PATENTS against such infringer and
shall retain any recovery; provided that it so notifies LICENSEE.
ARTICLE 10 - TERM AND TERMINATION.
10.1. EXPIRATION.
Unless terminated earlier pursuant to this Article 10 or Article 12,
the Agreement shall expire on the expiration of LICENSEE's obligations
to pay royalties under the Agreement in accordance with the Royalty
Term. Thereafter, LICENSEE and Sublicensees shall have a perpetual,
fully paid-up, royalty-free, non-cancellable, worldwide license or
sub-license (whichever is applicable) to the VRI Technology.
10.2. After First Commercial Sale of a PRODUCT or PRODUCTS in a country,
royalties for any other PRODUCT or PRODUCTS introduced into such
country will only be payable if a Valid Patent Claim is in effect in
the United States or Europe at the time such PRODUCT or PRODUCTS are
first offered for sale in such country, provided that if LICENSEE has
ceased to sell a PRODUCT in a country prior to the payment of royalties
in such country for ten (10) years, any additional PRODUCT or PRODUCTS
sold in such country thereafter will be subject to royalties without
regard to the existence of a Valid Patent Claim until VRI has received
at least ten (10) years of Royalty payments in such country.
10.3. TERMINATION BY LICENSEE.
LICENSEE shall have the right at any time as from January 1, 1998, in
its sole discretion, to terminate this Agreement, by giving not less
than three (3) months' prior written notice to VRI of such termination.
10.4. TERMINATION FOR CAUSE.
(i) Either Party may terminate this Agreement, at its option, upon
or after the breach of any material provision of the
Agreement, if the breaching Party has not cured such breach
within ninety (90) days after written notice thereof from the
other Party.
(ii) LICENSEE or VRI may terminate this Agreement upon written
notice to the other party if the other party makes a general
assignment for the benefit of creditors, is the subject of
proceedings in voluntary or involuntary bankruptcy or has a
receiver or trustee appointed for substantially all of its
property; PROVIDED that in the case of an involuntary
bankruptcy proceeding such right to terminate shall only
become effective if the other party consents thereto or such
proceeding is not dismissed within ninety (90) days after the
filing thereof.
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Each of the parties hereto acknowledges and agrees that this
Agreement (i) constitutes a license of Intellectual Property
(as such term is defined in the United States Bankruptcy code,
as amended (the "Code"), and (ii) is an executory contract,
with significant obligations to be performed by each party
hereto. The parties agree that LICENSEE may fully exercise all
of its rights and elections under the Code, including, without
limitation, those set forth in Section 365(n) of the Code. The
parties further agree that, in the event that LICENSEE elects
to retain its rights as a licensee under the Code, LICENSEE
shall be entitled to complete access to any technology
licensed to it hereunder and all embodiments of such
technology. Such embodiments of the technology shall be
delivered to LICENSEE not later than (a) the commencement of
bankruptcy proceedings against VRI, unless VRI elects to
perform its obligations under this Agreement, or (b) if not
delivered under (a) above, upon the rejection of this
Agreement by or on behalf of VRI.
10.5. EFFECT OF EXPIRATION AND TERMINATION.
Expiration or termination of the Agreement shall not relieve the
Parties of any obligation accruing prior to such expiration or
termination. The provisions of Sections 2.1.3.(v) and 9.1. and Articles
8 and 11 shall survive the expiration or termination of the Agreement.
ARTICLE 11 - INDEMNITY.
11.1. DIRECT INDEMNITY.
11.1.1. Each Party shall indemnify and hold harmless the other Party, its
Affiliates, and their respective directors, officers, shareholders,
agents, consultants and employees from and against all Third-Party
claims, demands, liabilities, damages and expenses, including
attorneys' fees and costs (collectively, the "LIABILITIES") arising out
of the breach of any material provision of this Agreement by, or an act
or an omission of, the indemnifying Party, except to the extent such
Liabilities resulted from the gross negligence, recklessness or
intentional acts or omissions of the other Party.
11.1.2. LICENSEE shall defend, indemnify and hold harmless VRI, its Affiliates,
licensors, their respective directors, officers, shareholders, agents,
consultants and employees, from and against all Liabilities suffered or
incurred arising out of any Third-Party claims in connection with the
manufacture, design, testing, possession, distribution, use, sale or
other disposition by or through LICENSEE, its Affiliates or
Sublicensees of any PRODUCTS or VECTOR, except in each case to the
extent such Liabilities resulted from the gross negligence,
recklessness or intentional acts or omissions of VRI, and except where
VRI's liability is established in accordance with EXHIBIT 1 to APPENDIX
B attached hereto as far as supply of VECTOR is concerned.
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11.2. PROCEDURE.
A Party (the "INDEMNITEE") that intends to claim indemnification under
this Article 11 shall promptly notify the other Party (the
"INDEMNITOR") of any Liability or action in respect of which the
Indemnitee intends to claim such indemnification, and the Indemnitor
shall have the right to participate in, and, to the extent the
Indemnitor so desires, jointly with any other Indemnitor similarly
noticed, to assume the defense thereof with counsel selected by the
Indemnitor; PROVIDED, HOWEVER, that the Indemnitee shall have the
right to retain its own counsel, with the fees and expenses to be paid
by the Indemnitor, if representation of such Indemnitee by the counsel
retained by the Indemnitor would be inappropriate due to actual or
potential differing interests between such Indemnitee and any other
Party represented by such counsel in such proceedings.
The indemnity obligations under this Article 11 shall not apply to
amounts paid in settlement of any loss, claim, damage, liability or
action if such settlement is effected without the consent of the
Indemnitor, which consent shall not be withheld unreasonably. The
failure to deliver notice to the Indemnitor within a reasonable time
after the commencement of any such action, if prejudicial to its
ability to defend such action, shall relieve such Indemnitor of any
liability to the Indemnitee under this Article 11. The Indemnitee, its
Affiliates, employees and agents, shall cooperate fully with the
Indemnitor and its legal representatives in the investigation of any
action, claim or liability covered by this indemnification.
ARTICLE 12 - FORCE MAJEURE.
No Party (or any of its Affiliates) shall be held liable or responsible to the
other Party (or any of its Affiliates) nor be deemed to have defaulted under or
breached the Agreement for failure or delay in fulfilling or performing any term
of the Agreement when such failure or delay is caused by or results from causes
beyond the reasonable control of the affected Party (or any of its Affiliates)
including but not limited to fire, floods, embargoes, war, acts of war (whether
war be declared or not), insurrections, riots, civil commotions, strikes,
lockouts or other labor disturbances, acts of God or acts, omissions or delays
in acting by any governmental authority or the other Party (collectively,
"EVENTS OF FORCE MAJEURE"); PROVIDED, HOWEVER, that the affected Party (i)
shall immediately notify the other Party of the occurrence of any such Event of
Force Majeure and (ii) shall exert all reasonable efforts to eliminate, cure or
overcome any such Event of Force Majeure and to resume performance of its
covenants with all possible speed; and PROVIDED, FURTHER, that nothing
contained herein shall require any Party to settle on terms unsatisfactory to
such Party any strike, lockout or other labor difficulty, any investigation or
proceeding by any governmental authority or any litigation by any Third-Party.
Notwithstanding the foregoing, to the extent that an Event of Force Majeure
continues for a period in excess of six (6) months, the affected Party shall
promptly notify in writing the other Party of such Event of Force Majeure and
within four (4) months of the other Party's receipt of such notice, the Parties
agree to negotiate in good faith either (i) to resolve the Event of Force
Majeure, if possible, (ii) to extend by mutual agreement the time period to
resolve, eliminate, cure or overcome such Event of Force Majeure, (iii) to amend
this Agreement to the extent reasonably possible, or (iv) to terminate this
Agreement.
ARTICLE 13 - ASSIGNMENT.
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This Agreement may not be assigned or otherwise transferred, nor, except as
expressly provided hereunder, may any right or obligations hereunder be assigned
or transferred to any Third-Party by either Party without the consent of the
other Party; PROVIDED, HOWEVER, that either Party may, without such consent,
assign this Agreement and its rights and obligations hereunder to any of its
Affiliates or in connection with the transfer or sale of all or substantially
all of its business, or in the event of its merger or consolidation or change in
control or similar transaction. Any permitted assignee shall assume all
obligations of its assignor under this Agreement.
Without limiting the generality of the foregoing, without the prior written
consent of LICENSEE, VRI shall not under any circumstances assign or transfer
any VRI Technology in the Field of Use unless the assignee expressly agrees in
writing that the LICENSE shall remain in full force and effect pursuant to its
terms and such assignment shall not relieve the assignor of any of its
obligations under this Agreement. Each Party acknowledges that the other Party
would suffer irreparable injury in the event of any breach of this Article 13
and that therefore the remedy at law for any breach or threatened breach hereof
by any Party shall be inadequate. Accordingly, upon a breach or threatened
breach hereof by any Party, the other Party shall, in addition and without
prejudice to any other rights and remedies it may have, be entitled as a matter
of right, without proof of actual damages, to seek specific performance hereof
and to such other injunctive or equitable relief to enforce or prevent any
violations (whether anticipatory, continuing or future) hereof.
ARTICLE 14 - NOTIFICATION OF PATENT TERM RESTORATION - PATENT EXTENSIONS.
VRI shall notify LICENSEE of (a) the issuance of each U.S. patent included
within the LICENSED PATENTS, giving the date of issue and patent number for each
such patent, and (b) each notice pertaining to any patent included within the
LICENSED PATENTS which it receives as patent owner pursuant to the United States
Drug Price Competition and Patent Term Restoration Act of 1984 (hereinafter
called the "Act"), including notices pursuant to sections 101 and 103 of the
Act from Persons who have filed an abbreviated new drug application ("ANDA").
Such notices shall be given promptly, but in any event within five (5) calendar
days of each such patent's date of issue or receipt of each such notice
pursuant to the Act, whichever is applicable. VRI shall notify LICENSEE of each
filing for patent term restoration under the Act, any allegations of failure to
show due diligence and all awards of patent term restoration (extensions) with
respect to the LICENSED PATENTS.
Likewise, VRI or LICENSEE, as the case may be, shall inform the other Party of
patent extensions and periods of data exclusivity in the rest of the world
regarding any PRODUCTS and more generally the Parties shall diligently cooperate
with respect to any procedures for patent and period of data exclusivity
extensions, such as but not limited to Supplementary Protection Certificates,
the above-mentioned Patent Term Restoration and corresponding GATT regulations.
ARTICLE 15 - ADVERSE EXPERIENCE REPORTING.
During the term of the Agreement, each Party shall notify the other immediately
of any information (howsoever obtained and from whatever source) concerning any
unexpected side effect, injury, toxicity or sensitivity reaction, or any
unexpected incidence, and the severity thereof, associated with the clinical
uses, studies, investigations, tests and marketing of PRODUCTS and, to the
extent feasible, any other product containing VECTOR (hereinafter, a "PRODUCT"),
or VECTOR. For purposes of this Article 15, "UNEXPECTED" shall mean (x) for a
non-marketed Product, an experience that is not identified in nature, severity
or frequency in
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<PAGE> 22
the current clinical investigator's confidential information brochure, and (y)
for a marketed Product, an experience which is not listed in the current
labeling for such Product, and includes an event that may be symptomatically and
pathophysiologically related to an event listed in the labelling but differs
from the event because of increased frequency or greater severity or
specificity.
Each Party further shall immediately notify the other of any information
received regarding any threatened or pending action by an agency which may
affect the safety and efficacy claims of a Product. Upon receipt of any such
information, the Parties shall consult with each other in an effort to arrive at
a mutually acceptable procedure for taking appropriate action; provided,
however, that nothing contained herein shall be construed as restricting either
Party's right to make a timely report of such matter to any government agency or
take other action that it deems to be appropriate or required by applicable law
or regulation.
ARTICLE 16 - SEVERABILITY.
Each Party hereby agrees that it does not intend to violate any public policy,
statutory or common laws, rules, regulations, treaty or decision of any
government agency or executive body thereof of any country or community or
association of countries. Should one or more provisions of this Agreement be or
become invalid, the Parties hereto shall substitute, by mutual consent, valid
provisions for such invalid provisions which valid provisions in their economic
effect are sufficiently similar to the invalid provisions that it can be
reasonably assumed that the Parties would have entered into this Agreement with
such provisions. In case such provisions cannot be agreed upon, the invalidity
of one or several provisions of this Agreement shall not affect the validity of
this Agreement as a whole, unless the invalid provisions are of such essential
importance to this Agreement that it is to be reasonably assumed that the
Parties would not have entered into this Agreement without the invalid
provisions.
ARTICLE 17 - MISCELLANEOUS.
17.1. NOTICES.
Any consent, notice or report required or permitted to be given or made
under this Agreement by one of the Parties hereto to the other shall be
in writing, delivered personally or by facsimile and promptly confirmed
by personal delivery, first class air mail or courier, postage prepaid
(where applicable), addressed to such other Party at its address
indicated below, or to such other address as the addressee shall have
last furnished in writing to the addressor and (except as otherwise
provided in this Agreement) shall be effective upon receipt by the
addressee.
~ IF TO VRI:
VIRUS RESEARCH INSTITUTE, INC.
61 Moulton Street
Cambridge MA 02138 USA
Attention: President
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<PAGE> 23
Telefax: (617) 864-6334
Telephone: (617) 864-6232
~ IF TO LICENSEE:
MERIEUX ORAVAX S.N.C.
c/o PASTEUR MERIEUX Serums & Vaccins S.A.
58, avenue Leclerc
69007 Lyon, France
Attention: Senior Vice-President, Legal & Corporate Affairs and
General Counsel, Legal Department
Telefax: 33.4.72.73.70.61
Telephone: 33.4.72.73.77.84
ORAVAX MERIEUX CO.
c/o ORAVAX, INC.
38, Sidney Street
Cambridge, MA 02139, USA;
Attention: President & Chief Executive Officer
Telefax: (617) 494-1741
Telephone: (617) 494-1339
17.2. APPLICABLE LAW.
The Agreement shall be governed by and construed in accordance with the
laws of the State of Massachusetts, without regard to the conflict of
law principles thereof.
17.3. REPRESENTATIONS, WARRANTIES AND COVENANTS.
17.3.1. REPRESENTATIONS AND WARRANTIES OF MERIEUX ORAVAX S.N.C.
(a) Merieux OraVax S.N.C. is a Societe en Nom Collectif duly
organized and existing under the laws of France, with the
corporate power to own, lease and operate its properties and
to carry on its business as now conducted.
(b) Merieux OraVax S.N.C. has all necessary corporate power and
authority to enter into this Agreement and to consummate the
transactions contemplated hereby.
(c) The execution, delivery and performance of this Agreement by
Merieux OraVax S.N.C. does not conflict with or contravene the
statuts of Merieux OraVax S.N.C., nor will the execution,
delivery or performance of this Agreement conflict with or
result in a breach of, or entitle any party thereto to
terminate, any material agreement or instrument to which
Merieux OraVax S.N.C. is a party, or by which any of its
assets or properties are bound.
(d) This Agreement has been duly authorized, executed and
delivered by Merieux OraVax S.N.C. and constitutes a legal,
valid and binding agreement of Merieux OraVax S.N.C.,
enforceable against Merieux OraVax S.N.C. in accordance with
its terms, except as enforceability may be limited by
bankruptcy,
23
<PAGE> 24
insolvency, moratorium, reorganization or other similar laws
affecting creditors' rights generally.
17.3.2. REPRESENTATIONS AND WARRANTIES OF ORAVAX MERIEUX CO.
(a) OraVax Merieux Co. is a General Partnership duly organized and
existing under the laws of the State of Massachusetts, with
the corporate power to own, lease and operate its properties
and to carry on its business as now conducted.
(b) OraVax Merieux Co. has all necessary corporate power and
authority to enter into this Agreement and to consummate the
transactions contemplated hereby.
(c) The execution, delivery and performance of this Agreement by
OraVax Merieux Co. does not conflict with or contravene the
by-laws of OraVax Merieux Co., nor will the execution,
delivery or performance of this Agreement conflict with or
result in a breach of, or entitle any party thereto to
terminate, any material agreement or instrument to which
OraVax Merieux Co. is a party, or by which any of its assets
or properties are bound.
(d) This Agreement has been duly authorized, executed and
delivered by OraVax Merieux Co. and constitutes a legal, valid
and binding agreement of OraVax Merieux Co., enforceable
against OraVax Merieux Co. in accordance with its terms,
except as enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization or other similar laws
affecting creditors' rights generally.
17.3.3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF VRI.
(a) VRI is a corporation duly incorporated and validly existing as
a corporation in good standing under the laws of the State of
Delaware, with the corporate power to own, lease and operate
its properties and to carry on its business as now conducted.
(b) VRI has all necessary corporate power and authority to enter
into this Agreement and to consummate the transactions
contemplated hereby.
(c) The execution, delivery and performance of this Agreement by
VRI does not conflict with or contravene its certificate of
incorporation or by-laws, nor will the execution, delivery or
performance of this Agreement conflict with or result in a
breach of, or entitle any party thereto to terminate, any
material agreement or instrument to which VRI is a party, or
by which any of its assets or properties are bound.
(d) This Agreement has been duly authorized, executed and
delivered by VRI and constitutes a legal, valid and binding
agreement of VRI, enforceable against VRI in accordance with
its terms, except as enforceability may be limited by
bankruptcy, insolvency, moratorium, reorganization or other
similar laws affecting creditors' rights generally.
(e) All LICENSED PATENTS listed on SCHEDULE A have been registered
in, filed in or issued by the appropriate patent offices of
each jurisdiction as indicated on such SCHEDULE A, and in each
case is currently in effect and all maintenance
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<PAGE> 25
fees and renewals thereof have been duly made with respect
thereto. VRI owns or has full and exclusive rights to use and
exploit under licenses (and to license or sublicense) all its
rights under such LICENSED PATENTS and the LICENSED KNOW-HOW.
There have been no material claims made against VRI asserting
the invalidity or unenforceability of, or with respect to such
LICENSED PATENTS , the misuse of such LICENSED PATENTS or the
LICENSED KNOW-HOW, nor is VRI aware that any such claims
exist. VRI has not received a notice of conflict of such
LICENSED PATENTS or the LICENSED KNOW-HOW with the asserted
rights of others, or otherwise challenging its rights to use
any of such LICENSED PATENTS, or the LICENSED KNOW-HOW. EXCEPT
AS OTHERWISE EXPRESSLY SET FORTH IN THIS SECTION, NEITHER
PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTIES OF
ANY KIND EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED
TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, NON-INFRINGEMENT, OR VALIDITY OF ANY PATENT RIGHTS
ISSUED OR PENDING.
17.4. DISPUTE RESOLUTION.
The Parties agree that if any dispute or disagreement arises between
LICENSEE on the one hand and VRI on the other in respect of this
Agreement, they shall follow the following procedure in an attempt to
resolve the dispute or disagreement.
(a) The Party claiming that such a dispute exists shall give
notice in writing ("NOTICE OF DISPUTE") to the other Party of
the nature of the dispute;
(b) Within twenty eight (28) business days of receipt of a Notice
of Dispute, a nominee or nominees of LICENSEE and a nominee or
nominees of VRI shall meet in person and exchange written
summaries reflecting, in reasonable detail, the nature and
extent of the dispute, and at this meeting they shall use
their reasonable endeavours to resolve the dispute;
(c) If, within a further period of twenty eight (28) business
days, the dispute has not been resolved or if, for any reason,
the required meeting has not been held, then the Parties agree
that any dispute shall be referred to an arbitrator appointed
by agreement of VRI and LICENSEE or, if no such agreement is
reached within sixty (60) business days after a Party
commences the arbitration, then by a panel of three
arbitrators, with each of LICENSEE and VRI to select one
arbitrator and those two arbitrators to select the third. If
all three arbitrators have not been selected within sixty (60)
business days after a Party commences the arbitration, then
the Parties agree to abide by the selection of the remaining
arbitrator to be named by a representative of the
International Chamber of Commerce.
The Parties agree that the Rules of the International Chamber
of Commerce shall govern such arbitration and that any
decision of the arbitrators shall be final and binding and
shall be enforceable in any court of competent jurisdiction
worldwide (regardless of whether one of the Parties fails or
refuses to participate in the arbitration) and shall be
enforced pursuant to the New-York Convention on the
Recognition and Enforcement of Arbitral Awards. The Parties
agree that all arbitrations shall be conducted in the English
language and that the exclusive venue of all arbitrations
shall be in London, England. The Party determined by the
arbitrators to be the Party
25
<PAGE> 26
substantially prevailing in the arbitration shall be entitled
to recover its legal and consultants' fees and other costs
reasonably incurred in connection with the arbitration (as
determined by the arbitrators); and
(d) in the event of a dispute regarding any payments owing under
this Agreement, all undisputed amounts shall be paid promptly
when due and the balance, if any, promptly after resolution of
the dispute.
17.5. ENTIRE AGREEMENT.
This Agreement contains the entire understanding of the Parties with
respect to the subject matter hereof. All express or implied agreements
and understandings, either oral or written, heretofore made [-] are
expressly superseded by this Agreement. This Agreement may be amended,
or any term hereof modified, only by a written instrument duly executed
by both Parties hereto.
17.6. INDEPENDENT CONTRACTORS.
VRI and LICENSEE each acknowledge that they shall be independent
contractors and that the relationship between the two Parties shall not
constitute a partnership, joint venture or agency. Neither VRI nor
LICENSEE shall have the authority to make any statements,
representations or commitments of any kind, or to take any action,
which shall be binding on the other Party, without the prior consent of
the other Party to do so.
17.7. AFFILIATES.
Each Party shall cause its respective Affiliates to comply fully with
the provisions of this Agreement to the extent such provisions
specifically relate to, or are intended to specifically relate to, such
Affiliates, as though such Affiliates were expressly named as joint
obligors hereunder.
17.8. WAIVER.
The waiver by either Party hereto of any right hereunder or the failure
to perform or of a breach by the other Party shall not be deemed a
waiver of any other right hereunder or of any other breach or failure
by said other Party whether of a similar nature or otherwise.
17.9. NO IMPLIED LICENCE.
Nothing in this Agreement shall be deemed to constitute, by implication
or otherwise, the grant by LICENSEE to VRI, or by VRI to LICENSEE, of
any license to, or interest in, or other rights under any patent,
patent application, proprietary
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<PAGE> 27
know-how, trade secrets or other intellectual property rights owned or
possessed by LICENSEE or VRI, whichever is applicable, except as
expressly provided for herein.
17.10. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first set forth above.
For VIRUS RESEARCH INSTITUTE, INC.
By: /S/ J. Barrie Ward
-------------------------
Name: J. Barrie WARD
Title: Chairman & Chief Executive Officer.
For MERIEUX ORAVAX S.N.C.
By: /s/ Jean-Jacques Bertrand
---------------------------------------
Name: PASTEUR MERIEUX Serums & Vaccins S.A.
Associe Gerant, represented by Jean-Jacques BERTRAND,
Chairman, President & Chief Executive Officer
By: /s/ Lance K. Gordon
---------------------------------------
Name: ORAVAX JVM, Inc., Associe, represented by
Lance K. GORDON, President and Chief Executive Officer
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<PAGE> 28
For ORAVAX MERIEUX, CO.
By: /s/ Herve Tainturier
---------------------------------------
Name: MERIEUX AMERICA HOLDINGS, Inc.
General Partner, represented by Herve TAINTURIER, President
By: /s/ Lance K. Gordon
---------------------------------------
Name: ORAVAX JVM, Inc., general partner,
represented by Lance K. GORDON, President
OraVax and PMC each hereby guarantee that their respective Affiliates, including
but not limited to Merieux OraVax S.N.C. and OraVax Merieux Co., shall perform
all obligations which are expressly imposed upon them pursuant to and in
accordance with this Agreement, and that OraVax and PMC shall each be bound by
the terms and conditions of this Agreement imposed on LICENSEE as if OraVax and
PMC were parties to this Agreement.
For ORAVAX INCORPORATED
By: /s/ Lance K. Gordon
---------------------------------------
Name: Lance K. GORDON
Title: President & Chief Executive Officer
For PASTEUR MERIEUX SERUMS & VACCINS S.A.
By: /s/ Jean-Jacques Bertrand
------------------------------------
Name: Jean-Jacques BERTRAND
Title: Chairman, President & Chief Executive Officer.
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<PAGE> 29
CONFIDENTIAL TREATMENT
-----------------------------------
SCHEDULE A
------------
LICENSED PATENTS
-----------------------------------
[*]
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
29
<PAGE> 30
CONFIDENTIAL TREATMENT
------------------------------------------------
SCHEDULE B
------------
LIST OF HPC ANTIGENS
------------------------------------------------
[*]
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
30
<PAGE> 31
-------------------------------------------------
APPENDIX A
------------
TERMS AND CONDITIONS APPLICABLE
TO RESEARCH CONTRACT
-------------------------------------------------
1. OBJECT.
Pursuant to a mutually agreed upon research program which shall be
definitely established by the Research Committee referred to in Section
2. hereinafter on terms substantially in accordance with the draft
research program attached hereto as EXHIBIT+1 (the "RESEARCH PROGRAM"),
VRI agrees to conduct research works described therein and LICENSEE
agrees to support and fund such Research Program in accordance with the
terms and conditions set forth here below.
2. OVERSIGHT OF THE RESEARCH PROGRAM.
2.1. OVERSIGHT. The Research Program shall be overseen and monitored by the
Research Committee as described herein (the "COMMITTEE").
2.2. MEMBERSHIP. VRI and LICENSEE shall each appoint two (2) persons (or
such other number of persons as the Parties may determine) to serve on
the Committee. Such representatives shall be qualified, by reason of
background and experience, to assess the scientific progress of the
Research Program. Each Party shall have the right to change its
representation on the Committee upon written notice sent to the other.
2.3. CHAIR. The Committee shall be chaired by one representative of
LICENSEE.
2.4. RESPONSIBILITIES. The Committee shall have authority to:
(i) review and approve the draft Research Program and establish
the definitive Research Program;
(ii) make recommendations regarding the performance of the Research
Program and the conduct of research works pursuant thereto,
and monitor performance thereunder;
(iii) modify the Research Program as it determines, for each twelve
(12) month period during the term thereof;
(iv) review any and all proposed publication or communication
relating to the Research Program and the results therefrom;
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<PAGE> 32
(v) review any and all proposed filings of patent applications in
connection with the Research Program.
2.5. MEETINGS. The Committee shall meet not less than two (2) times a year
during the term of the Research Program, at such dates and times as
agreed to by the Parties. Meetings in person shall normally take place
at VRI's premises or such other place as may be mutually agreed upon.
Meetings may be held by telecommunication means. At such meetings, the
Committee shall discuss the Research Program and the status of
performance by VRI under the Program, evaluate the results thereof and
set priorities therefor. The Committee shall prepare written minutes of
each meeting and a written record of all decisions whether made at a
formal meeting or not. Such minutes shall incorporate semi-annual
research reports prepared by VRI.
3. THE PRINCIPAL INVESTIGATOR.
3.1. PRINCIPAL INVESTIGATOR. The Principal Investigator of the Research
Program shall be Dr Kevin KILLEEN, an employee of VRI ("PRINCIPAL
INVESTIGATOR"). VRI shall consult with LICENSEE regarding any
replacement of the Principal Investigator, PROVIDED, however, that VRI
shall have the right to make, and shall make, the final determination
regarding any such replacement. The Principal Investigator shall be
appointed as a member of the Committee and may be designated by VRI to
act on behalf of VRI as co-chair on such Committee.
3.2. DUTIES. The Principal Investigator shall direct the Research Program
and coordinate the efforts of other researchers involved in the
performance of such Program. The Principal Investigator shall sit with
the Committee as provided in Section 2. hereof, shall contribute to the
performance of the duties set forth hereunder and shall be afforded the
opportunity to actively participate in all Committee deliberations. The
Principal Investigator shall provide reasonably detailed status reports
of the Research Program to the Committee at six-month intervals, as
well as at the earliest practicable time whenever, in the Principal
Investigator's judgment, an invention is created or reduced to
practice. The Principal Investigator shall devote such time and efforts
as may be required to fulfill his duties hereunder and to ensure the
successful administration and coordination of the Research Program.
3.3. REPLACEMENT. The Principal Investigator may be replaced at any time
upon the written request of either Party. In such event, or if the then
existing Principal Investigator is no longer able or is unwilling so to
serve, the Parties shall endeavour to find a mutually acceptable
substitute. If no mutually acceptable substitute can be agreed upon
within a reasonable time, then HPC shall have the right to terminate
forthwith the Research Program, and effect of such termination shall be
as provided for in Section 6.2 hereof, it being understood that
termination of the Research Program shall not entail termination of,
and shall be without any prejudice whatsoever to, the License
Agreement.
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<PAGE> 33
CONFIDENTIAL TREATMENT
4. CONDUCT OF RESEARCH PROGRAM.
4.1. GOOD LABORATORY PRACTICES. The Research Program shall be conducted by
VRI at VRI's laboratories. VRI shall use all reasonable efforts to
complete research works in accordance with the said Program. Any
research work performed by VRI pursuant hereto shall be in compliance
with current Good Laboratory Practices (cGLP) as applicable in the
United States of America.
4.2. LABORATORY NOTEBOOKS. VRI shall cause its employees to maintain
laboratory notebooks. Such laboratory notebooks shall set forth such
work in detail, including a clear description of the purposes for which
the work has been undertaken and the results expected; sufficient
details, diagrams, plans, sketches and identification of materials
used, formulations and operating conditions under which the work was
conducted as may be necessary to understand and reproduce the work
conducted; identification of any intermediate or final results
achieved; and if such laboratory notebooks contain any interpretations
of data, they shall also describe the rough data upon which such
interpretations have been based. VRI shall further cause its employees,
agents and permitted subcontractors maintaining such laboratory
notebooks to have their work corroborated periodically, which
corroboration shall include at least personal witnessing of the
notebooks indicating that the witness has read and understood the
material on the page witnessed on the date that he or she signed it.
5. FINANCIAL CONDITIONS.
5.1. SUPPORT COMMITMENT. In consideration of the work performed by VRI
pursuant to and in accordance with the Research Program, LICENSEE shall
make available to VRI during the Research Program a maximum of [*] (the
"Commitment"). The Commitment shall be inclusive of all costs incurred
by VRI implementing the Research Program.
5.2. PAYMENTS SCHEDULE. Support payments shall be made by LICENSEE to VRI in
one single payment within fifteen (15) days of the Effective Date of
this Agreement.
5.3. REPORTING. VRI shall report and reconcile budgeted versus actual
expenditures on a semi-annual basis. Two copies of the semi-annual
report shall be sent to HPC. Upon reasonable advance request and at
reasonable times (but not on more than two occasions), HPC shall have
the right on demand to receive full and true financial information
regarding any and all matters affecting compliance with Research
Program and any amounts funded hereunder and to inspect the relevant
books and records of VRI relating thereto, at HPC expenses, using
representatives of its choice. VRI's books of account and all necessary
supporting data shall be kept for at least three (3) years following
the end of the fiscal year to which each will pertain. In the event
that amounts funded pursuant hereto exceeds actual
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
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<PAGE> 34
expenditures incurred by VRI, VRI shall promptly reimburse such excess
to HPC, unless the Parties mutually agree on an extension of the
Research Program which would require consummation of such excess.
5.4. NO CONFLICT WITH RESEARCH PROGRAM. VRI agrees that the Commitment
provided by LICENSEE shall be applied to the Research Program and may
not, without LICENSEE prior written approval, be used in support of any
other research at VRI.
5.5. TITLE TO EQUIPMENT. VRI shall retain title to any equipment purchased
with funds provided by LICENSEE under this Agreement, if such purchase
is mutually agreed upon as part of the Research Program budget.
6. TERM OF THE RESEARCH PROGRAM.
6.1. The term of the Research Program shall be twelve (12) months as from
January 1, 1997, unless terminated earlier upon termination of this
Agreement in accordance with Article 10 of the License Agreement.
6.2. HPC shall be entitled to forthwith terminate the Research Program and
cease funding thereof (i) in the event of disagreement between the
Parties as to the replacement of the Principal Investigator under
Section 3.3 hereinabove, and (ii) in the event of a material breach by
VRI of any VRI's obligations and covenants hereunder. In the event of
any such termination, VRI shall reimburse HPC of any amounts paid by
HPC and found in excess of VRI's actual expenditures (reasonable
termination costs excluded) further to an accounting audit conducted in
accordance with Section 5.3 above. VRI's right to receive any unpaid
balance otherwise committed by HPC as support commitment to the
Research Program pursuant to Section 5.1 hereof shall become forfeited
and no further payments with respect to Research Program shall be due
to VRI by HPC. Termination of the Research Program pursuant to this
Section 6.2. shall not entail termination of, and shall be without any
prejudice whatsoever to the License Agreement.
7. CONFIDENTIALITY.
In order to facilitate the Research Program, either Party may disclose
confidential or proprietary information owned or controlled by it to
the other. It is hereby understood and agreed that such information
shall be deemed "CONFIDENTIAL INFORMATION" as defined in Article 8 of
the License Agreement and treated as such.
8. PUBLICATIONS.
Each Party shall have the right to publish or present the Results of
the Research Program and announce scientific progress of the Research
Program, provided such publication, presentation or announcement (and
any revisions thereof, a "Publication") is submitted to the other Party
through the Committee at least sixty (60) days prior to submitting it
to any Third-Party (including any editing person). The other Party
shall have sixty (60) days after receipt of the draft Publication to
review
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<PAGE> 35
and comment on such draft. Upon notice within such sixty (60) day
period by the other Party that such Party reasonably believes the
Publication would amount to the public disclosure of a patentable
invention upon which a patent application should be filed prior to any
such disclosure, submission of the concerned Publication to
Third-Parties shall be delayed for a ninety (90) day period from the
date of said notice, or for such longer period which may appear
necessary for appropriately drafting and filing a patent application
covering such invention. If the other Party reasonably believes that
the Publication would amount to the public disclosure of such other
Party's Confidential Information, said other Party may request deletion
of such information from the proposed Publication. In addition, each
Party shall duly take into account comments made by the other Party on
any Publication and shall accept to have employees or others acting on
behalf of the other Party be mentioned as co-authors on any Publication
describing results to which such persons will have contributed.
9. INVENTIONS.
Ownership of inventions, whether or not patentable, and of any patent
applications and patents based thereon, which may result from the
Research Program (the "RESEARCH INVENTIONS") shall be established in
accordance with the following:
(i) Any Research Invention which is solely directed to the VRI
Technology and/or VECTOR, per se, shall be owned by VRI and
automatically licensed by VRI to HPC subject to and in
accordance with the LICENSE, except that if any such invention
is patented, the term of the corresponding patent shall not be
taken into account to determine the Royalty Term;
(ii) Any Research Invention solely directed to an HPC Antigen or an
Other Hp Antigen, shall be owned by HPC;
(iii) Any Research Invention which is directed to the combination of
the VRI Technology and an antigen or antigens or another piece
of technology controlled by HPC rather than antigens in
general, shall be jointly owned by VRI and HPC and be
considered a Joint Invention. VRI's interest in such Joint
Invention shall be deemed automatically licensed by VRI to HPC
subject to and in accordance with the LICENSE, except that if
any such invention is patented, the term of the corresponding
patent shall not be taken into account to determine the
Royalty Term. Except for the rights granted to HPC in the
Field of Use under the LICENSE, neither Party shall exploit a
Joint Invention without the prior agreement in writing of the
other Party, provided VRI may request HPC to enter into good
faith negotiations if VRI wishes to exploit any such Joint
Invention outside the Field of Use or within the scope of the
non-exclusive LICENSE.
(iv) Any Research Invention which is directed to the combination of
VRI Technology and to antigens in general shall be owned by
VRI and automatically licensed by VRI to HPC, subject to and
in accordance with the LICENSE, except that if any such
invention is patented, the term of the corresponding patent
shall not be taken into account to determine the Royalty Term.
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CONFIDENTIAL TREATMENT
-----------------------------------------------
APPENDIX B
-----------
TERMS AND CONDITIONS APPLICABLE TO
VECTOR SUPPLY
-----------------------------------------------
1. THE SUPPLY AGREEMENT. VRI has stated to LICENSEE its current intention
to establish itself as a manufacturer of the VECTOR. Provided VRI can
reasonably demonstrate that it shall be able to timely manufacture
VECTOR under current Good Manufacturing Practice at competitive cost in
sufficient quantities, LICENSEE shall purchase from VRI LICENSEE's
requirements for VECTOR for use in the manufacture of PRODUCTS under
the terms and conditions of a supply agreement (the "SUPPLY
AGREEMENT"), which agreement shall be negotiated in good faith in a
timely fashion by the Parties hereto so as to become effective at least
six months before LICENSEE's expected First Commercial Sale of
PRODUCTS. The Parties agree to negotiate in good faith in a timely
fashion the detailed terms and conditions of the Supply Agreement which
shall include at a minimum the following terms and conditions set forth
in this Article 1, as well as such other terms and conditions as may be
agreed upon by the Parties.
2. VECTOR REQUIREMENTS. The Supply Agreement shall provide that VRI shall
manufacture or have manufactured and LICENSEE shall purchase from VRI,
LICENSEE's entire requirements of VECTOR (clinical lots as well as
commercial lots) for PRODUCTS and that LICENSEE shall purchase such
VECTOR for its own use in manufacturing PRODUCTS only and shall not be
permitted to sell or re-sell VECTOR to any Third-Party.
3. SPECIFICATIONS. The Supply Agreement shall provide for (i)
specifications that VRI shall be obligated to comply with; (ii)
quality control criteria and procedures; and (iii) LICENSEE's
reasonable acceptance criteria for the VECTOR.
4. FORECASTS AND ORDERS. The Supply Agreement shall provide for the
establishment of reasonable rolling forecasts and placement of orders
which shall take into account VRI's need to rationally plan its
manufacturing of VECTOR consistent with its other manufacturing
obligations.
5. PRICE. The price of VECTOR shall be negotiated in good faith by the
Parties and set forth in the Supply Agreement, but in no event shall
such price be for less than [*].
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
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6. BACK-UP INVENTORIES. Pursuant to the Supply Agreement, VRI shall agree
to supply, and LICENSEE shall agree to maintain inventory of VECTOR in
its own facility sufficient to meet its forecasted needs.
7. WARRANTIES. Pursuant to the Supply Agreement, VRI shall warrant that
(i) VECTOR at the time of delivery shall meet the specifications
referred to in Section 3. hereinabove; (ii) VECTOR shall be
manufactured in accordance with current Good Manufacturing Practices in
effect in the country where it is manufactured or in compliance in all
material respects with the principles of the current Good Manufacturing
Practices in effect in any other country where PRODUCTS are
manufactured and/or sold (if more stringent than cGMP first referred
above) and any relevant establishment and product licenses issued by
any public health authority having jurisdiction. LICENSEE shall inform
VRI of the countries in which PRODUCT is to be licensed to be sold and
of any and all Agency(ies) responsible in such countries. Upon request,
LICENSEE shall provide VRI with information regarding the regulatory
requirements in each such country. VRI SHALL DISCLAIM ANY OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS.
8. QUALITY AUDIT. Pursuant to the Supply Agreement, VRI shall permit
LICENSEE, upon reasonable notice and at reasonable times, at LICENSEE's
expense, to audit in cooperation with VRI's personnel production,
packaging, quality control and forwarding facilities of VRI and any of
its significant suppliers as they relate to VRI's manufacturing
responsibilities under the Supply Agreement.
9. ADVERSE EVENTS REPORTING. Under the Supply Agreement, the Parties shall
establish a procedure for monitoring and reporting adverse drug
experiences, consistent with Article 15 of the License Agreement.
10. ASSURANCE OF SUPPLY. Under the terms of the Supply Agreement, LICENSEE
and VRI shall cooperate to anticipate LICENSEE's reasonable long-term
requirements for VECTOR, and VRI shall take reasonable measures to
assure that LICENSEE's reasonable requirements can be met, which
measures may include the qualification of more than one manufacturing
facility (including one such facility that may be operated by LICENSEE
or an Affiliate of LICENSEE, in which case VRI shall transfer
manufacturing Know-how in accordance with Section 11 hereinafter)
and/or maintenance of safety stocks of VECTOR as provided for in
Section 6 hereof.
11. TRANSFER OF MANUFACTURING TECHNOLOGY.
The Supply Agreement shall contain provisions for the compulsory
transfer of Manufacturing Know-How from VRI to HPC under certain
circumstances such as, but not necessarily limited to, durable failure
to supply by VRI, VRI's Affiliates or contractors, VRI's material
breach of the Supply Agreement or VRI's bankruptcy.
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<PAGE> 38
12. NO ASSIGNMENT ; NO SUB-CONTRACT. VRI shall neither assign nor
sub-contract any part of its rights and obligations under this APPENDIX
B, or any part of its manufacturing responsibility under the Supply
Agreement, to any third Party without the prior written agreement of
LICENSEE which shall not unreasonably withheld.
13. LIABILITIES, INDEMNIFICATION AND INSURANCE. The Supply Agreement shall
include provisions relating to liabilities, indemnification and
insurance substantially similar to the provisions of the Indemnity
Agreement herewith attached as EXHIBIT 1.
---------------------------------------------
EXHIBIT 1
----------
INDEMNITY AGREEMENT
---------------------------------------------
WHEREAS, HPC (hereinafter called "Purchaser") and VRI (hereinafter called
"Supplier") have entered into a License Agreement (the "License") relating to
the use of a certain VECTOR (the "VECTOR") known as VibrioVec for use as a
delivery system in vaccines against Helicobacter pylori infections, dated as of
December 1, 1997;
WHEREAS, pursuant to the License, Supplier has agreed to sell, and Purchaser has
agreed to purchase, certain quantities of VECTOR, under terms and conditions set
forth in short form in the relevant provisions contained in APPENDIX B of the
License and to be finally established in a Supply Agreement to be negotiated in
good faith in a timely manner by the parties hereto;
WHEREAS, Purchaser is planning to enter into human clinical trials using VECTOR;
WHEREAS, in order to allow these actions to be timely undertaken, the parties
have agreed to set-up terms and conditions applicable to liabilities and
indemnification in connection with the early supply of clinical lots of VECTOR
which have previously been supplied to Purchaser, in advance of entering into
the definitive Supply Agreement.
NOW, THEREFORE, in consideration of the premises herein and for other good and
valuable consideration, the parties hereto agree as follows:
1. PURPOSE.
This Agreement shall set forth the terms and conditions under which
Purchaser shall provide and maintain insurance coverage and indemnify
Supplier in certain circumstances in connection with the use of VECTOR
by Purchaser in human clinical trials.
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2. INSURANCE.
Each party, at its own expense, will maintain, with insurers which are
rated A or better by A.M. BEST, a General Product Liability,
Environmental and, in the case of Purchaser, Clinical Trial insurance
program(s) in an amount commensurate with the risks incurred. Purchaser
will cause (a) Supplier to be named as an additional insured under
Purchaser's General & Product Liability and Environmental Liability
insurance policies (but under those policies only and with coverage
limited to Claims as defined in Section 4 hereof), (b) such insurance
to be designated as primary to any insurance which may be carried by
Supplier, and (e) such insurance to provide that it can only be
cancelled or materially altered upon not less than thirty (30) days
notice to Supplier. Purchaser shall not assert against Supplier and
hereby waives any and all claims against Supplier for losses, damages,
liability, judgments, costs and expenses (including attorney's fees)
imposed upon or incurred by Purchaser as a result of or arising out of
any claim covered by such insurance to the extent of such coverage and
to the extent Purchaser will have agreed to indemnify Supplier pursuant
to Section 4 hereinafter.
3. INSURANCE CERTIFICATES.
Prior to issuing the first purchase order to Supplier and from time to
time thereafter as reasonably required by Supplier, Purchaser shall
furnish Supplier with (an) insurance certificate(s) evidencing
compliance with Insurance Section above, and reciprocally.
4. INDEMNITY.
Notwithstanding the existence or lack of insurance, Purchaser shall, at
its sole cost and expense, defend Supplier from any and all claims,
demands, actions or causes of action, at law or in equity (including
but not limited to claims by Purchaser's employees and customers and
including an environmental liability) (a "Claim") and indemnify and
hold Supplier harmless from all damages, liabilities, losses, costs,
judgments, orders, assessments, interest, penalties, fines, settlement
payments, costs and expenses (including, without limitation, reasonable
attorneys fees and other investigation and defense costs and expenses)
incurred by Supplier which arise out of or result in any way from
bodily injury (including death) or property damage, however arising out
of, or related in any way, to Purchaser's possession, use, sale,
distribution, processing, shipment, storage or disposal of the VECTOR
or any derivative thereof sold or otherwise transferred by Supplier to
Purchaser for the purpose described in the preamble to this Agreement.
Purchaser shall have the duty to defend, indemnify and hold Supplier
harmless against any actual or alleged negligence by Supplier. In the
event that Purchaser fails to promptly and diligently investigate and
defend or settle any Claim then Supplier shall have the right, at
Purchaser's cost, expense and risk, from that time forward to have sole
control of the defense of the Claim and all negotiations for its
settlement or compromise.
Notwithstanding the foregoing, the INDEMNITY provided for hereinabove
shall not apply to the extent that the Claim arises out of, is based
upon or results from the gross negligence or willful misconduct (which
shall include misrepresentation or concealment of data relating to
toxicity of VECTOR) of Supplier, or an event having occurred before
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the time that title to VECTOR (or to any shipment or unit thereof)
passes to Purchaser, in which cases Supplier shall defend, indemnify
and hold Purchaser harmless in the same manner and to the same extent
than provided for hereinabove where Purchaser is the indemnifying
party, and PROVIDED further that, in any event, the INDEMNITY provided
for hereinabove shall not apply to the extent the Claim is a claim for
environmental liability arising out of, based upon or resulting from an
event occurring at a Supplier's facility or a facility of a supplier's
sub-contractor, or at any other place (including during transportation)
prior to the time title to VECTOR (or to any shipment or unit thereof)
passes to Purchaser.
The Indemnity provided for herein shall be limited to Claims relating
to units of VECTOR sold or otherwise transferred by Supplier to
Purchaser for the purpose described in the preamble to this Agreement,
as identified in the invoices and/or control certificates and other
commercial and pharmaceutical documentation issued by Supplier to
Purchaser along with the delivery of such units of VECTOR.
5. COSTS & EXPENSES.
The indemnities in INDEMNITY Paragraph of this Agreement include all
costs and expenses reasonably required to investigate and to defend any
such claim or action, any amount paid or required to be paid to settle
such claim or action, or any amount paid or required to be paid to
settle such claim or action, or any amount finally awarded by a court
as damages or otherwise in any such action, provided that neither party
will have an obligation to pay or to reimburse the other party for the
amount of any internal expenses (including, but not limited to,
compensation paid to its employees) that it may incur in connection
with its cooperation in the investigation and/or defense of such claim
or action.
6. LIMITATION OF LIABILITY.
IN NO EVENT SHALL ANY PARTY HAVE ANY LIABILITY TO THE OTHER PARTY
HEREUNDER OR OTHERWISE FOR ANY LOSS OF PROFITS, COST OR COVER OR ANY
SPECIAL, CONSEQUENTIAL, INCIDENTAL, INDIRECT OR PUNITIVE DAMAGES,
HOWEVER CAUSED, WHETHER BY THE OTHER PARTY'S BREACH OF ANY EXPRESS OR
IMPLIED WARRANTY, NEGLIGENCE, STRICT LIABILITY UNDER LAW OR OTHERWISE.
7. SURVIVAL.
The provisions of this Agreement shall survive the expiration and/or
termination of this Agreement, unless this Agreement is superseded by
the Supply Agreement, in which case the provisions relating to
Liabilities and Indemnification contained in said Supply Agreement will
supersede this Agreement.
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CONFIDENTIAL TREATMENT
CONFlDENTIAL
Exhibit I to Appendix A
RESEARCH PROPOSAL
APPLICATION OF VIBRIOVEC(TM) AND ATTENUATED SALMONELLA AS
LIVE ORAL VECTORS FOR PM-O
PROPRIETARY H. PYLORI ANTIGENS
[*]
/*/ Confidential material omitted and filed separately with the Securities and
Exchange Commission. A total of 8 pages have been omitted from this
Exhibit 1 to Appendix A.
41
<PAGE> 1
EXHIBIT 11.1 STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
VIRUS RESEARCH INSTITUTE, INC.
COMPUTATION OF NET LOSS AND PRO FORMA NET LOSS PER COMMON SHARE
YEAR ENDED DECEMBER 31,
1997 1996 1995
-----------------------------------------
Net loss ($6,564,354) ($1,581,936) ($6,297,028)
Shares used in computing net
loss per common share:
Weighted average common stock
outstanding during the period 8,897,784 2,120,604 688,720
Conversion of redeemable
convertible preferred stock (1) 0 5,519,122 5,415,951
Common stock equivalents (2) N/A N/A N/A
Weighted average common shares --------- --------- -----------
outstanding 8,897,784 7,639,726 6,104,671
Basic and diluted net loss per common
share ($ 0.74)
===========
Pro forma basic and diluted net loss
per common share ($ 0.21) ($ 1.03)
=========== ===========
(1) Effective with the closing of the Company's initial public offering of
common stock, redeemable convertible preferred stock converted into shares
of common stock. Accordingly, the equivalent number of weighted average
common shares that would have been outstanding during each period presented
have been included as outstanding.
(2) Common stock equivalents representing potential issuances of 1,116,246
shares for the year ended December 31, 1997; 1,103,618 for the year ended
December 31, 1996; and 848,115 shares for the year ended December 31, 1995
have been excluded as their effect would be antidilutive.
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement No.
333-13245 of Virus Research Corporation (The "Company") on Form S-8 of our
report dated January 30, 1998 on the financial statements of the Company as at
December 31, 1997 and December 31, 1996 and for each of the years in the three
year period ended December 31, 1997 appearing in this annual report on Form
10-K of the Company.
Richard A. Eisner & Company, LLP
Cambridge, MA
March 26, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DECEMBER 31,
1997 FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH.
</LEGEND>
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<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 2,488,963
<SECURITIES> 15,968,923
<RECEIVABLES> 0
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<INVENTORY> 0
<CURRENT-ASSETS> 20,125,912
<PP&E> 3,131,802
<DEPRECIATION> 2,416,568
<TOTAL-ASSETS> 20,878,339
<CURRENT-LIABILITIES> 1,468,492
<BONDS> 0
0
0
<COMMON> 8,928
<OTHER-SE> 19,400,919
<TOTAL-LIABILITY-AND-EQUITY> 20,878,339
<SALES> 0
<TOTAL-REVENUES> 3,804,395
<CGS> 0
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<OTHER-EXPENSES> 10,368,749
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<INCOME-PRETAX> (6,564,354)
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