<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
- ------- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
- --------- THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------------- -----------------
Commission file number 0-21794
-------
GENZYME TRANSGENICS CORPORATION
------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-3186494
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Five Mountain Road, Framingham, Massachusetts 01701
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(508) 872-8400
- --------------------------------------------------------------------------------
Registrant's telephone number, including area code
Indicate by check whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---------. -----------.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 30, 1997
----- -------------------------------
Common Stock, $0.01 par value 17,389,916
<PAGE>
GENZYME TRANSGENICS CORPORATION
TABLE OF CONTENTS
PAGE #
PART 1. FINANCIAL INFORMATION
ITEM 1 - Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of
September 28, 1997 and December 29, 1996..................................3
Condensed Consolidated Statements of Operations for
the Three Months and Nine Months Ended September 28, 1997 and
September 29, 1996........................................................4
Condensed Consolidated Statements of Cash Flows for
the Nine Months Ended September 28, 1997
and September 29, 1996....................................................5
Notes to Unaudited Condensed Consolidated
Financial Statements......................................................6
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations.............................9
PART II. OTHER INFORMATION
ITEM 6
Exhibits and Reports on Form 8-K..........................................13
SIGNATURES....................................................................16
EXHIBIT INDEX.................................................................17
<PAGE>
GENZYME TRANSGENICS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
September 28, December 29,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................................. $ 5,346 $ 8,894
Accounts receivable, net............................................... 7,156 7,499
Unbilled contract revenue.............................................. 6,058 6,740
Other current assets................................................... 1,480 1,509
------------- ------------
Total current assets.................................................. 20,040 24,642
Net property, plant and equipment....................................... 25,582 20,566
Costs in excess of net assets acquired, net............................. 19,823 20,695
Investment in Joint Venture............................................. 280 283
Other assets............................................................ 946 518
------------- ------------
$ 66,671 $ 66,704
------------- ------------
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................................ $ 1,974 $ 2,992
Accounts payable--Genzyme Corporation................................... 3,228 1,339
Revolving line of credit................................................ 6,000 6,000
Accrued expenses........................................................ 6,487 5,911
Advance payments........................................................ 6,388 6,649
Current portion of long-term debt....................................... 2,401 1,867
------------- ------------
Total current liabilities.............................................. 26,478 24,758
Long-term debt, net of current portion.................................. 8,461 5,708
Deferred lease obligation............................................... 587 508
Other liabilities....................................................... 237 526
------------- ------------
Total liabilities...................................................... 35,763 31,500
Stockholders' equity:
Preferred stock, $.01 par value, authorized 5,000,000
shares, none outstanding;.............................................. -- --
Common stock, $.01 par value; 24,000,000 shares authorized;
17,367,516 and 17,130,901 shares issued and outstanding
at September 28, 1997 and December 29, 1996, respectively.............. 174 171
Capital in excess of par value.......................................... 54,498 52,974
Accumulated deficit..................................................... (23,754) (17,931)
Accumulated translation adjustments..................................... (10) (10)
------------- ------------
Total stockholders' equity............................................... 30,908 35,204
------------- ------------
$ 66,671 $ 66,704
------------- ------------
------------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
GENZYME TRANSGENICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------- ------------------------------
SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29,
1997 1996 1997 1996
------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Revenues
Services.......................................... $ 10,363 $ 9,857 $ 32,908 $ 28,033
Research and development.......................... 4,375 2,598 12,358 6,146
--------- --------- --------- ---------
14,738 12,455 45,266 34,179
Costs and operating expenses:
Services.......................................... 8,869 8,579 27,564 24,356
Research and development.......................... 4,516 2,274 11,582 6,373
Selling, general and administrative............... 3,662 2,748 10,816 8,165
Equity in loss of Joint Venture................... -- 50 531 184
------------- ------------- --------------- -------------
17,047 13,651 50,493 39,078
------------- ------------- --------------- -------------
Loss from operations............................... (2,309) (1,196) (5,227) (4,899)
Other income (expense):
Interest income................................... 20 26 112 37
Interest expense.................................. (316) (238) (733) (911)
Other income...................................... 50 220 50 538
------------- ------------- --------------- -------------
Loss before provision for income taxes............. (2,555) (1,188) (5,798) (5,235)
Provision for income taxes......................... -- -- 25 92
------------- ------------- --------------- -------------
Net loss........................................... $ (2,555) $ (1,188) $ (5,823) $ (5,327)
------------- ------------- --------------- -------------
------------- ------------- --------------- -------------
Net loss per common share.......................... $ (0.15) $ (0.08) $ (0.34) $ (0.38)
------------- ------------- --------------- -------------
------------- ------------- --------------- -------------
Number of common shares outstanding for purposes of
computing net loss per share..................... 17,303 15,629 17,217 14,028
------------- ------------- --------------- -------------
------------- ------------- --------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
GENZYME TRANSGENICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------------
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
------------- -------------
<S> <C> <C>
Cash flows for operating activities:
Net loss........................................................ $ (5,823) $ (5,327)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization.................................. 3,097 2,735
Adjustment to Goodwill......................................... -- (233)
Equity in loss of Joint Venture................................ 531 184
Changes in assets and liabilities, net of effects
from purchase of subsidiaries:
Accounts receivable and unbilled contract revenue.............. 1,025 (6,048)
Other current assets........................................... 29 (525)
Accounts payable............................................... (1,018) (1,075)
Accounts payable--Genzyme Corporation.......................... 1,889 1,679
Other accrued expenses......................................... 788 (197)
Advance payments............................................... (261) 993
------------ -----------
Net cash provided by (used in) operating activities............ 257 (7,814)
Cash flows for investing activities:
Purchase of property, plant and equipment....................... (5,982) (1,427)
Investment in Joint Venture..................................... (528) --
Restricted cash................................................. -- 950
Other assets.................................................... (480) (58)
------------- -----------
Net cash used by investing activities.......................... (6,990) (535)
Cash flows from financing activities:
Net proceeds from the issuance of common stock.................. 1,315 13,424
Proceeds from long-term debt.................................... 5,221 --
Repayment of long-term debt..................................... (3,141) (1,368)
Net borrowings under revolving line of credit................... -- (6,000)
Investment and advances by Genzyme Corporation.................. -- 1,673
Other long-term liabilities..................................... (210) (296)
------------- -------------
Net cash provided by financing activities...................... 3,185 7,433
------------- -------------
Net decrease in cash and cash equivalents........................ (3,548) (916)
Cash and cash equivalents at beginning of the period............. 8,894 4,400
------------- -------------
Cash and cash equivalents at end of period....................... $ 5,346 $ 3,484
------------- -------------
------------- -------------
Noncash Investing and Financing Activities:
Property acquired under capital leases.......................... $ 1,207 $ 1,142
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
GENZYME TRANSGENICS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
1. Basis of Presentation:
---------------------
These unaudited condensed consolidated financial statements should be read
in conjunction with the Company's Annual Report on Form 10-K for the fiscal
year ended December 29, 1996 and the financial statements and footnotes
included therein. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
Securities and Exchange Commission rules and regulations.
Per share information is based upon the weighted average number of shares
of Common Stock outstanding during the period.
The financial statements for the nine months ended September 28, 1997 and
September 29, 1996 are unaudited but include, in the Company's opinion, all
adjustments (consisting only of normally recurring accruals) necessary for
a fair presentation of the results for the periods presented.
2. Accounting Policies:
-------------------
The accounting policies underlying the quarterly financial statements are
those set forth in Note 2 of the financial statements included in the
Company's Annual Report on Form 10-K for the year ended December 29, 1996.
3. Joint Venture:
-------------
In February 1997, the Company reached an agreement with a joint venture
formed by the Company and Sumitomo Metal Industries, Ltd. (the "Joint
Venture") entitling the Company to receive up to $4.4 million in future
milestone payments for the development of Antithrombin III ("AT-III"). In
1997, the Company earned $1.4 million in the first quarter and $1 million
in the second quarter in milestone payments under the agreement. In March
1997, the Joint Venture partners agreed to raise $2.4 million in additional
equity, of which the Company contributed $528,000 in April 1997 to maintain
its 22% ownership.
4. AT-III Joint Venture with Genzyme:
---------------------------------
In March 1997, the Company amended its Convertible Debt and Development
Funding Agreement (the "Development Funding Agreement") dated March 29,
1996 with Genzyme to provide for continued funding by Genzyme of the
development costs of the AT-III program through June 30, 1997. In June
1997, the Company agreed to extend the Agreement until December 31, 1997.
Under the extension agreement, Genzyme agreed to provide $7 million in
development funding in 1997.
<PAGE>
In July 1997, the Company and Genzyme announced an agreement to establish a
joint venture for the development, marketing and distribution of AT-III,
subject to the execution of a definitive agreement. Under the terms of the
agreement, Genzyme will provide 70 percent of the development costs, up to
a maximum contribution of $33 million, and the Company will fund the
remaining 30%. Development costs in excess of $33 million will be funded
equally by the partners. In addition to the funding, both partners will
contribute manufacturing, marketing and other resources to the joint
venture at cost and will share profits from product sales equally. The
agreement covers all territories other than Asia and may include milestone
payments from Genzyme to the Company after the product has been approved by
the United States Food and Drug Administration.
5. Pharming Litigation:
-------------------
In April 1997, the Company reached an agreement to settle its arbitration
with Pharming B.V., a Netherlands corporation, in connection with a license
agreement between the two parties. The terms of the agreement include a
stipulation dismissing all claims submitted in the arbitration proceedings
and a clarification of certain terms of the license agreement.
6. Mason Debt Financing:
--------------------
In June 1997, the Company completed financing for the expansion of its
Mason Laboratories facility. The financing package provides $5 million in
available funds from a consortium of federal, state and local government
agencies in conjunction with a commercial bank. The loan carries a 10-year
amortization schedule with a variable interest rate adjusted annually. The
current rate is 9.25%. The Company utilized $3.8 million of the line in
June to fund the initial phase of renovations and to refinance
approximately $800,000 of existing mortgage debt on the facility. The
remaining $1.2 million is available through December 31, 1998 for
additional renovations of the facility, if any.
7. Redfield Debt Financing:
-----------------------
In June 1997, the Company's Redfield Laboratories subsidiary obtained
$1,050,000 in financing from a commercial bank in conjunction with a state
government agency for the refinancing of approximately $750,000 in existing
mortgage debt and to fund expansion of its facility. The financing consists
of two notes, both at 10% annual interest. The first note, in the amount of
$350,000, has a 10-year term. The second note, in the amount of $750,000,
has a 10-year amortization with a balloon payment due in May 1998. The
annual balloon requirement is intended to be refinanced each year.
In July 1997, Redfield Laboratories obtained an additional $350,000 in
financing for the expansion of its facility from a combination of federal,
state and county government agencies. The loan is amortized over 15-year
term and carries an interest rate of 5.5%.
<PAGE>
8. Amended Convertible Debt Agreement:
----------------------------------
In September 1997, the Company and Genzyme amended the terms of the $8.3
million credit line provided by Genzyme to the Company as part of the
Development Funding Agreement (see Note 4). Under the Amended and
Restated Convertible Debt Agreement, the expiration date of the revolving
credit line was extended to March 31, 2000, with an option, at that date,
for the Company to convert the outstanding balance to a three-year term
loan. The interest rate remains at 7% through April 1, 1998, increasing
annually through the end of the term loan; starting at the lower of 8% or
the prime lending rate in the first year increasing to the lower of 10% or
the prime lending rate plus 2% in the final year of the term loan.
Financial covenants require positive quarterly earnings before interest,
taxes, depreciation, amortization and unfunded research and development
expense starting April 1, 1998.
Any amounts outstanding under the credit line may be converted into the
Company's common stock at Genzyme's option at any time for up to the full
amount outstanding or at the Company's option on a quarterly basis limited
to an amount sufficient to maintain a minimum tangible net worth. All such
conversions are to be based on the average closing stock price over 20
trading days prior to conversion.
No amounts were outstanding under this credit line at September 28, 1997.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three months ended September 28, 1997 and September 29, 1996
Total revenues for the three-month period ending September 28, 1997 were
$14.7 million, compared with $12.5 million in the comparable period of 1996,
an increase of $2.2 million or 18%. Service revenues increased to $10.4
million in the third quarter of 1997 from $9.9 million in the third quarter
of 1996, an increase of $506,000 or 5%. Research and development revenue
increased to $4.4 million in the third quarter of 1997 from $2.6 million in
the third quarter of 1996, an increase of $1.8 million or 68%, due primarily
to an increase in activity and revenues related to the funding received from
Genzyme Corporation ("Genzyme") for the development of the lead compound,
transgenic antithrombin III ("AT-III"), the achievement of a $1.5 million
milestone from Bristol-Meyers Squibb related to the BR96 collaboration and
increased commercial activity.
Cost of services for the third quarter of 1997 was $8.9 million compared to
$8.6 million in the comparable period of 1996, an increase of $290,000 or 3%,
due to the increase in service revenues. Research and development expenses
increased to $4.5 million in the third quarter of 1997 from $2.3 million in
the third quarter of 1996, an increase of $2.2 million or 99%. The increase
is due to the operating costs of a manufacturing facility coming on-line for
the production of AT-III clinical trial material and increased activity in
the research and commercial programs.
Gross profit for the third quarter of 1997 amounted to $1.4 million versus
$1.6 million in the third quarter of 1996. Gross profit on services for the
third quarter of 1997 was $1.5 million, a gross margin of 14%, versus $1.3
million, a gross margin of 13%, in the third quarter of 1996. The
improvement in services margins was primarily due to increased services
revenues.
Selling, general and administrative ("SG&A") expenses increased to $3.7
million in the third quarter of 1997 from $2.7 million in the third quarter
of 1996, an increase of $914,000 or 33%. The increase is due to an increase
in the sales and marketing effort and to the addition of administrative
personnel required to support the growth in research and development programs.
Interest income decreased to $20,000 in the third quarter of 1997, from
$26,000 in the third quarter of 1996, due to the decrease in funds available
for investment from the Company's secondary public offering in August 1996.
Interest expense increased to $316,000 in the third quarter of 1997 from
$238,000 in the third quarter of 1996 due to increased borrowings in the
third quarter of 1997 versus the comparable period in 1996.
<PAGE>
The Company recognized no Joint Venture losses during the third quarter of
1997 compared to $50,000 in the comparable period of 1996. The decrease was
due to the fact that there was no additional research funding provided by
the Joint Venture in the third quarter of 1997.
Nine months ended September 28, 1997 and September 29, 1996
Total revenues for the nine-month period ending September 28, 1997 were $45.3
million, compared with $34.2 million in the comparable period of 1996, an
increase of $11.1 million or 32%. Service revenues increased to $32.9 million
during the first nine months of 1997 from $28 million in the comparable
period of 1996, an increase of $4.9 million or 17%. Research and development
revenues increased to $12.4 million during the first nine months of 1997 from
$6.1 million in the comparable period of 1996, an increase of $6.3 million or
101%, due primarily to an increase in activity and revenues related to the
funding received from Genzyme in the development of AT-III, the achievement
of $2.4 million in milestones from the Joint Venture, the achievement of a
$1.5 million milestone from Bristol-Meyers Squibb related to the BR96
collaboration and increased commercial activity.
Cost of services during the first nine months of 1997 was $27.6 million
compared to $24.4 million in the comparable period of 1996, an increase of
$3.2 million or 13%, due, primarily, to the increased service revenues.
Research and development expenses increased to $11.6 million during the first
nine months of 1997 from $6.4 million in the comparable period of 1996, an
increase of $5.2 million or 82%. The increase is due to the operating costs
of a manufacturing facility coming on-line for the production of AT-III
clinical trial material and increased activity in the research and commercial
programs.
Gross profit for the first nine months of 1997 amounted to $6.1 million
versus $3.4 million in the comparable period of 1996. Gross profit on
services for the first nine months of 1997 was $5.3 million, a gross margin
of 16%, versus $3.7 million, a gross margin of 13%, in the comparable period
of 1996. The improvement in the services margins was primarily due to
increased services revenues and a shift to higher margin services.
Selling, general and administrative ("SG&A") expenses increased to $10.8 million
in the third quarter of 1997 from $8.2 million in the comparable period of 1996,
an increase of $2.6 million or 32%. The increase is due to an increase in the
sales and marketing effort and to the addition of administrative personnel
required to support the growth in research and development programs.
Interest income increased to $112,000 in the first nine months of 1997, from
$37,000 in the comparable period of 1996, due to the investment of funds from
the Company's secondary public offering and receipt of interest on funds that
were held in escrow last year. Interest expense decreased to $733,000 in the
first nine months of 1997 from $911,000 in the comparable period of 1996 due
to lower borrowings in 1997.
<PAGE>
The Company recognized $531,000 of Joint Venture losses during the first nine
months of 1997 compared to $184,000 in the comparable period of 1996. The
increase was due to additional research by the Joint Venture including
increased research funding to the Company (see Note 3 to the Financial
Statements appearing in this Report).
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $5.3 million at September 28,
1997. During the first nine months of 1997 the Company had a $3.5 million net
decrease in cash; $6 million was invested in capital equipment, further
expansion of the transgenic production facility and the expansion of
laboratory facilities and $3.1 million was used to pay down long-term debt.
Sources of funds during the period included $257,000 of cash provided by
operations (due primarily to a decrease in non-cash working capital of $2.5
million and $3.6 million of non-cash charges offset by the net loss of $5.8
million), $5.2 million of proceeds from issuance long-term debt and $1.3
million of proceeds from the issuance of common stock.
In June 1997, the Company completed a $3 million expansion of its Mason
Laboratories facility. The Company obtained $5 million in long-term
financing for this project from a consortium consisting of state and local
government agencies in conjunction with a commercial bank. In June 1997, the
Company received approximately $3.8 million in funds under this facility, of
which approximately $800,000 was used to pay down existing debt. In
connection with the financing, the Company issued 20,000 warrants at the
closing market value on June 26, 1997 of $8.75. The remaining $1.2 million
of financing is available through December 31, 1998 to fund future
renovations of this facility, if any (see Note 6).
In September 1997, the Company and Genzyme amended the terms of the $8.3
million credit line provided by Genzyme to the Company as part of the
Convertible Debt and Development Funding Agreement dated March 29, 1996.
Under the terms of the Amended and Restated Convertible Debt Agreement
("Genzyme Convertible Debt Agreement"), the expiration date of the revolving
credit line was extended to March 31, 2000 with an option , at that date, for
the Company to convert the outstanding balance to a three-year term loan.
There was no balance outstanding as of September 28, 1997 (see Note 8).
In September 1997, the Company entered into an agreement with Advanced Cell
Technology ("ACT") to utilize ACT's cloning technology to produce transgenic
proteins. In return for exclusive access to this technology and subject to
successful achievement of technical milestones, the Company agreed to place a
minimum of $2 million in contract services with ACT annually from 1998
through 2002.
The Company had a working capital deficit of $6.4 million at September 28,
1997 compared to a deficit of $116,000 at December 29, 1996. The Company
expects to continue to operate with negative working capital for the
foreseeable future. As of September 28, 1997 the Company had approximately
$8.3 million available under the Genzyme Convertible Debt Agreement, $1.8
million available under various capital lease lines and $1.2 million
available under the Mason facility financing.
<PAGE>
The Company is considering various alternative financing strategies, such as
collaborative arrangements, public or private sales of its securities,
including securities in certain subsidiaries, additional mortgage or lease
financing, asset sales and other funding sources. The Company expects to
realize sufficient cash from one or more of such transactions to fund
operations and capital investment through September 29, 1998.
Management's current expectations regarding the sufficiency of the Company's
cash resources are forward-looking statements and the Company's cash
requirements may vary materially from such expectations. Such
forward-looking statements are dependent on several factors, including the
results of the Company's testing services business, the ability of the
Company to enter into any transgenic research and development collaborations
in the future and the terms of such collaborations, the results of research
and development and preclinical and clinical testing, competitive and
technological advances and regulatory requirements. If the Company
experiences increased losses, the Company may have to seek additional
financing through collaborative arrangements or from public or private sales
of its securities, including equity securities. There can be no assurance
that additional funding will be available on terms acceptable to the Company,
if at all. If additional financing cannot be obtained on acceptable terms,
to continue its operations the Company could be forced to delay, scale back
or eliminate certain of its research and development programs or to enter
into license agreements with third parties for the commercialization of
technologies or products that the Company would otherwise undertake itself.
PART II
ITEM 6: Exhibits and Reports on From 8-K
--------------------------------
(a) Exhibits
10.1 Amended and Restated Employment Agreement, dated as of August 28, 1997,
between the Company and James A. Geraghty. Filed herewith.
10.2 Amended and Restated Employment Agreement, dated as of August 28, 1997,
between the Company and John B. Green. Filed herewith.
10.3 Amended and Restated Employment Agreement, dated as of September 16,
1997, between the Company and Peter Glick. Filed herewith.
10.4 Amended and Restated Convertible Debt Agreement dated as of September
4, 1997, between the Company and Genzyme Corporation. Filed herewith.
10.5* Development and Commercialization Agreement, dated as of September 25,
1997, between the Company and Advanced Cell Technology, Inc. Filed
herewith.
10.6* Development and Commercialization Agreement, dated as of September 25,
1997, between the Company and B. Braun Melsungen AG. Filed herewith.
<PAGE>
27 Financial Data Schedule. Filed herewith.
(b) Reports on Form 8-K
No reports were filed on Form 8-K during the quarter ended September 28, 1997.
___________________________________
* Certain confidential information contained in the document has been
omitted and filed separately with the Securities and Exchange Commission
pursuant to Rule 24b-2 promulgated under the Securities and Exchange Act of
1934, as amended.
<PAGE>
GENZYME TRANSGENICS CORPORATION AND SUBSIDIARY
FORM 10-Q
SEPTEMBER 28, 1997
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: November 5, 1997 GENZYME TRANSGENICS CORPORATION
BY: /s/ John B. Green
-----------------
John B. Green
Duly Authorized Officer,
Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
- -------
Description
10.1 Amended and Restated Employment Agreement, dated as of August
28, 1997, between the Company and James A. Geraghty. Filed
herewith.
10.2 Amended and Restated Employment Agreement, dated as of August 28, 1997,
between the Company and John B. Green. Filed herewith.
10.3 Amended and Restated Employment Agreement, dated as of September 16,
1997, between the Company and Peter Glick. Filed herewith.
10.4 Amended and Restated Convertible Debt Agreement dated as of
September 4, 1997, between the Company and Genzyme Corporation. Filed
herewith.
10.5* Development and Commercialization Agreement, dated as of September 25,
1997, between the Company and Advanced Cell Technology, Inc. Filed
herewith.
10.6* Development and Commercialization Agreement, dated as of September 25,
1997, between the Company and B. Braun Melsungen AG. Filed herewith.
27 Financial Data Schedule. Filed herewith.
- -------------------------------
* Certain confidential information contained in the document has been omitted
and filed separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 promulgated under the Securities and Exchange Act of 1934, as
amended.
<PAGE>
EXHIBIT 10.1
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
(James A. Geraghty)
This Amended and Restated Agreement ("Agreement"), effective as of August
28, 1997, by and between Executive and GTC (each as hereinafter defined)
amends and restates, in its entirety, that Agreement ("Original Agreement"),
dated as of March 28, 1996, by and between Genzyme Transgenics Corporation
(together with its affiliates and subsidiaries, "GTC"), a Massachusetts
corporation with its principal offices at One Mountain Road, Framingham,
Massachusetts 01701 and James A. Geraghty (the "Executive") residing at 2802
Windsor Ridge, Westborough, Massachusetts.
GTC and Executive desire to amend and restate the Original Agreement as
hereinafter set forth.
GTC desires to employ the Executive as President and Chief Executive
Officer of GTC for the period and upon the terms and conditions hereinafter
set forth.
Executive desires to serve in such capacities for such period and
upon such terms.
Accordingly, the parties hereto agree as follows:
SECTION 1. EMPLOYMENT OF EXECUTIVE.
1.1 Employment. Subject to the terms and conditions of this Agreement,
GTC agrees to employ Executive as President and Chief Executive Officer of
GTC. Executive shall perform such specific duties as are commensurate with
such positions, and as may reasonably be assigned to the Executive from time
to time by the Board of Directors of GTC, for the period commencing on the
date hereof until terminated as herein provided. Executive hereby accepts
such employment.
SECTION 2. COMPENSATION. For all services to be rendered by
Executive to GTC during the term of this Agreement, GTC shall pay to, and
provide the Executive with, the following compensation and benefits:
2.1 Base Salary and Bonus. For the period from the date hereof until
December 31, 1997, GTC shall pay to Executive (i) a base salary of not less
than $234,000 per year, pro rated for such portion of a year and payable in
substantially equal installments in accordance with GTC practice as in effect
from time to time, and (ii) incentive and compensatory bonuses, if any, as
may be awarded from time to time by GTC's Compensation Committee. With
respect to subsequent periods during the term of this Agreement, GTC will
review Executive's base salary and bonus from time to time and may
1
<PAGE>
make adjustments to such base salary and determine such bonus based upon,
among other factors: (a) Executive's performance, (b) GTC's performance, (c)
changes in costs of living, (d) changes in Executive's responsibilities, and
(e) the benefit to GTC of Executive's efforts on its behalf; provided that
Executive's base salary shall not be less than $234,000 per year during the
term of this Agreement.
2.2 Participation in Benefit Plans. Executive shall be entitled to
participate in all employee benefit plans or programs of GTC. For the
purpose of determining Executive's eligibility for such plans and programs,
Executive's tenure shall be calculated from Executive's original date of hire
at GTC (or any affiliate. or predecessor of GTC). GTC may, from time to
time, grant Executive stock options under GTC's stock option plans. GTC does
not guarantee the adoption or continuance of any particular employee benefit
or stock plan or other program during the term of this Agreement, and
Executive's participation in any such plan or program shall be subject to the
provisions, rules and regulations applicable thereto. Executive shall be
entitled to paid vacation each year in accordance with applicable GTC policy.
Health and dental plans shall cover Executive and his dependents as they do
for other GTC executives. Such health and dental plans comply with ERISA and
COBRA to the extent applicable. Under current health insurance policies,
such COBRA rights will commence on termination of the period over which
severance payments are made under Section 4.2.
2.3 Expenses. GTC shall reimburse Executive for all ordinary and
necessary business expenses incurred in the performance of Executive's duties
under this Agreement, provided that Executive accounts properly for such
expenses to GTC in accordance with the general corporate policies of GTC and
in accordance with the requirements of the Internal Revenue Service
regulations relating to substantiation of expenses.
SECTION 3. CONFIDENTIAL INFORMATION AND NON-COMPETITION AGREEMENTS.
As a condition to GTC's obligations hereunder, the Executive will execute a
confidentiality agreement pertaining to the intellectual property and
confidential information of GTC and GTC's standard form of a non-competition
agreement for executive officers and key employees.
The obligations of Executive under this section and the agreements
referenced in the preceding paragraph shall survive termination of this
Agreement for any reason.
SECTION 4. TERMINATION AND SEVERANCE PAYMENT.
4.1 Termination. The employment of the Executive by GTC may be terminated
as follows:
(a) Executive's employment hereunder shall terminate upon
Executive's death or inability, by reason of physical or mental impairment,
to perform substantially all of Executive's duties as contemplated herein for
a continuous period of 120 days or more;
2
<PAGE>
(b) Executive's employment hereunder may be terminated by GTC or
Executive without Cause (as hereinafter defined);
(c) Executive's employment hereunder may be terminated by GTC in
the event of Executive's breach of any material duty or obligation hereunder,
or intentional or grossly negligent conduct that is materially injurious to
GTC, as reasonably determined by GTC's Board of Directors, or willful failure
to follow the reasonable directions of GTC's Board of Directors (any such
event herein to be referred to as "Cause"); and
(d) Executive's employment hereunder may be terminated by Executive
within twenty-four months after the occurrence of any one of the following
(each, a "Change of Control"):
(i) the acquisition (A) by any "person" (as such term is
defined in Section 3(a)(9) of the Securities Exchange Act of 1934) or (B) by
Genzyme Corporation from any party of an amount of GTC's Common Stock so that
it holds or controls 50% or more of GTC's Common Stock;
(ii) a merger or similar combination after which 49% or more of
the voting stock of the surviving corporation is held by persons who were not
stockholders of GTC immediately prior to such merger or combination; or
(iii) the election by the stockholders of GTC of 20% or
more of the directors of GTC other than pursuant to nomination by GTC's
management.
4.2 Severance Payment; Benefits.
(a) Termination Events Resulting in Severance Payments. In the event
of the termination of the Executive's employment:
(i) by GTC under Section 4.1(b), or
(ii) by Executive under Section 4.1(d),
then GTC shall make severance payment(s) to Executive equal to (A)
twenty-four (24) months of the Executive's base salary (the "Base Salary
Payment") at the time of such termination and (B) an amount equal to the
Executive's maximum incentive bonus that would next be payable to him and
would otherwise be due to Executive if such termination had not occurred and
the maximum amount of such bonus had been fully earned, pro rated on the
basis of the number of days that have elapsed between the beginning of the
bonus period in which such termination occurs and the termination date,
together payable in a lump sum within ten (10) days after the termination
date. No severance shall be payable in the event that Executive's employment
is terminated pursuant to Section 4.1(a) or (c), or by Executive pursuant to
Section 4.1(b).
3
<PAGE>
(b) Benefits. Executive's coverage under GTC's life, health and
dental insurance plans will remain in effect and Executive will be entitled
to continue to participate in GTC's retirement plans, all at GTC's expense,
during the period following termination that has the duration of the time
period used to determine the Base Salary Payment, unless Executive notifies
GTC in writing that such coverage is no longer necessary. If, because of
limitations required by third parties or imposed by law, Executive cannot be
provided such benefits through GTC's plans, then GTC will provide Executive
with substantially equivalent benefits on an aggregate basis, at its expense.
4.3 Accelerated Vesting of Options Upon a Change of Control. If this
Agreement is terminated by Executive pursuant to Section 4.1(d) or if GTC
terminates the Employee without Cause upon a Change in Control, any options then
held by Executive to purchase shares of the Common Stock of GTC which options
are then subject to vesting, shall, notwithstanding any contrary provision in
the agreement or plan pursuant to which such options had been granted, be fully
vested and exercisable on the date immediately preceding the effective date of
such termination for the duration of the term of such options as if such
termination of employment had not occurred.
SECTION 5. MISCELLANEOUS.
5.1 Assignment. This Agreement may not be assigned, in whole or in part,
by any party without the prior written consent of the other party, except that
GTC may, without the consent of Executive, assign its rights and obligations
under this Agreement to any corporation, firm or other business entity with or
into which GTC may merge or consolidate, or to which GTC may sell or transfer
all or substantially all of its assets, or of which 50% or more of the equity
investment and of the voting control is owned, directly or indirectly, by, or is
under common ownership with, GTC. After any such assignment by GTC, GTC shall
be discharged from all further liability hereunder and such assignee shall have
all the rights and obligations of GTC under this Agreement.
5.2 Notices. All notices, requests, demands and other communications to
be given pursuant to this Agreement shall be in writing and shall be deemed to
have been duly given if delivered by hand or mailed by registered or certified
mail, return receipt requested, postage prepaid, to the addresses set forth at
the beginning of this Agreement or such other address as a party shall have
designated by notice in writing to the other party, provided that notice of any
change in address must actually have been received to be effective hereunder.
5.3 Integration. This Agreement is the entire agreement of the parties
with respect to the subject matter hereof and supersedes any prior agreement or
understanding relating to Executive's employment with or compensation by GTC,
including but not limited to the Employment Agreement dated as of May 19, 1995
between GTC and the Executive. This Agreement may not be amended, supplemented
or otherwise modified except by a writing signed by Executive and GTC.
4
<PAGE>
5.4 Binding Effect. Subject to Section 5.1, this Agreement shall inure
to the benefit of and be binding upon the parties hereto and their
successors, assigns, heirs and personal representatives.
5.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and shall together
constitute one and the same instrument.
5.6 Severability. If any provision hereof shall, for any reason, be held
to be invalid or unenforceable in any respect, such invalidity or
unenforceability shall not affect any other provision hereof, and this
Agreement shall be construed as if such invalid or unenforceable provision
had not been included herein. If any provision hereof shall for any reason
be held by a court to be excessively broad as to duration, geographical
scope, activity or subject matter, it shall be construed by limiting and
reducing it to make it enforceable to the extent compatible with applicable
law as then in effect.
5.7 Governing Law. This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts, without regard to its conflict of law
provisions.
IN WITNESS WHEREOF, the undersigned have duly executed and delivered this
Agreement as of the date first written above.
EXECUTIVE
/s/ James A. Geraghty
---------------------
James A. Geraghty
GENZYME TRANSGENICS CORPORATION
By: /s/ John B. Green
---------------------
Title: John B. Green
5
<PAGE>
EXHIBIT 10.2
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
(John B. Green)
This Amended and Restated Agreement ("Agreement"), effective as of August
28, 1997, by and between Employee and GTC (each as hereinafter defined) amends
and restates, in its entirety, that Agreement ("Original Agreement"), dated as
of March 28, 1996, by and between Genzyme Transgenics Corporation (together with
its affiliates and subsidiaries, "GTC"), a Massachusetts corporation with its
principal offices at One Mountain Road, Framingham, Massachusetts 01701 and John
B. Green (the "Employee") residing at 46 Rivercliff Road, Lowell, Massachusetts
01852.
GTC and Employee desire to amend and restate the Original Agreement as
hereinafter set forth.
GTC desires to employ the Employee as Vice President, Treasurer and Chief
Financial Officer of GTC for the period and upon the terms and conditions
hereinafter set forth.
Employee desires to serve in such capacities for such period and upon such
terms.
Accordingly, the parties hereto agree as follows:
SECTION 1. EMPLOYMENT OF EMPLOYEE.
1.1 Employment. Subject to the terms and conditions of this Agreement,
GTC agrees to employ Employee as Vice President, Treasurer and Chief Financial
Officer of GTC. Employee shall perform such specific duties as are commensurate
with such positions, and as may reasonably be assigned to the Employee from time
to time by the Board of Directors of GTC or GTC's Chief Executive Officer, for
the period commencing on the date hereof until terminated is herein provided.
Employee hereby accepts such employment.
SECTION 2. COMPENSATION. For all services to be rendered by Employee
to GTC during the term of this Agreement, GTC shall pay to, and provide the
Employee with, the following compensation and benefits:
2.1 Base Salary Bonus. For the period from the date hereof until December
31, 1997, GTC shall pay to Employee (i) a base salary of not less than $150,000
per year pro rated for such portion of a year, payable in substantially equal
installments in accordance with GTC practice as in effect from time to time and
(ii) incentive and compensatory bonuses, if any, as may be awarded from time to
time by GTC's Compensation Committee. With respect to subsequent periods during
the term of this Agreement, GTC will review Employee's base salary and bonus
from time to time and may make adjustments to such base
1
<PAGE>
salary and determine such bonus based upon, among other factors: (a) Employee's
performance, (b) GTC's performance, (c) changes in costs of living, (d) changes
in Employee's responsibilities, and (e) the benefit to GTC of Employee's efforts
on its behalf; provided that Employee's base salary shall not be less than
$150,000 per year during the term of this Agreement.
2.2 Participation in Benefit Plans. Employee shall be entitled to
participate in all employee benefit plans or programs of GTC. For the purpose
of determining Employee's eligibility for such plans and programs, Employee's
tenure shall be calculated from Employee's original date of hire at GTC (or any
affiliate or predecessor of GTC). GTC may, from time to time, grant Employee
stock options under GTC's stock option plans. GTC does not guarantee the
adoption or continuance of any particular employee benefit or stock plan or
other program during the term of this Agreement, and Employee's participation in
any such plan or program shall be subject to the provisions, rules and
regulations applicable thereto. Employee shall be entitled to paid vacation each
year in accordance with applicable GTC policy. Health and dental plans shall
cover Employee and his dependents as they do for other GTC executives. Such
health and dental plans comply with ERISA and COBRA to the extent applicable.
Under current health insurance policies, such COBRA rights will commence on
termination of the period over which severance payments are made under Section
4.2.
2.3 Expenses. GTC shall reimburse Employee for all ordinary and necessary
business expenses incurred in the performance of Employee's duties under this
Agreement, provided that Employee accounts properly for such expenses to GTC in
accordance with the general corporate policies of GTC and in accordance with the
requirements of the Internal Revenue Service regulations relating to
substantiation of expenses.
SECTION 3. CONFIDENTIAL INFORMATION AND NON-COMPETITION AGREEMENTS.
The Employee confirms that he has executed a confidentiality and non-competition
agreement pertaining to GTC's intellectual property and confidential information
and including GTC's standard non-competition covenant for executive officers and
key employees.
The obligations of Employee under this section and the agreements
referenced in the preceding paragraph shall survive termination of this
Agreement for any reason.
SECTION 4. TERMINATION AND SEVERANCE PAYMENT.
4.1 Termination. The employment of the Employee by GTC may be terminated
as follows:
(a) Employee's employment hereunder shall terminate upon Employee's
death or inability, by reason of physical or mental impairment, to perform
substantially all of Employee's duties as contemplated herein for a continuous
period of 120 days or more;
2
<PAGE>
(b) Employee's employment hereunder may be terminated by GTC or
Employee without Cause (as hereinafter defined);
(c) Employee's employment hereunder may be terminated by GTC in the
event of Employee's breach of any material duty or obligation hereunder, or
intentional or grossly negligent conduct that is materially injurious to GTC, as
reasonably determined by GTC's Board of Directors, or willful failure to follow
the reasonable directions of GTC's Board of Directors (any such event herein to
be referred to as "Cause"); and
(d) Employee's employment hereunder may be terminated by Employee
within twenty-four months after the occurrence of any one of the following
(each, a "Change of Control"):
(i) the acquisition (A) by any "person" (as such term is defined
in Section 3(a)(9) of the Securities Exchange Act of 1934) or (B) by Genzyme
Corporation from any party of an amount of GTC's Common Stock so that it holds
or controls 50% or more of GTC's Common Stock;
(ii) a merger or similar combination after which 49% or more of
the voting stock of the surviving corporation is held by persons who were not
stockholders of GTC immediately prior to such merger or combination; or
(iii) the election by the stockholders of GTC of 20% or more
of the directors of GTC other than pursuant to nomination by GTC's management.
4.2 Severance Payment; Benefits.
(a) Termination Events Resulting in Severance Payments. In the event
of the termination of the Employee's employment:
(i) by GTC under Section 4.1(b), or
(ii) by Employee under Section 4.1(d),
then GTC shall make severance payment(s) to Employee equal to (A) the Base
Salary Payment (as defined below) and (B) an amount equal to the Employee's
maximum incentive bonus that would next be payable to him and would otherwise be
due to Employee if such termination had not occurred and the maximum amount of
such bonus had been fully earned, pro rated on the basis of the number of days
that have elapsed between the beginning of the bonus period in which such
termination occurs and the termination date, together payable in a lump sum
within ten (10) days after the termination date. No severance shall be payable
in the event that Employee's employment is terminated pursuant to Section 4.1(a)
or (c), or by the Employee pursuant to 4.1(b). For the purposes of this Section,
the "Base Salary Payment" shall mean (a) twelve months of the Employee's base
salary at the time of
3
<PAGE>
termination in the event GTC terminates the Employee pursuant to Section 4.1(b)
at any time other than during the period 180 days prior to and twenty-four
months after a Change in Control and (b) twenty-four months of the Employee's
base salary at the time of such termination in the event GTC terminates the
Employee during the period 180 days prior to and twenty-four months after a
Change in Control and in the event the Employee terminates employment under
Section 4.1(d).
(b) Benefits. Employee's coverage under GTC's health and dental
insurance plans will remain in effect and Employee will be entitled to continue
to participate in GTC's retirement plans, all at GTC's expense, during the
period following termination that has the duration of the time period used to
determine the Base Salary Payment, unless Employee notifies GTC in writing that
such coverage is no longer necessary. If, because of limitations required by
third parties or imposed by law, Employee cannot be provided such benefits
through GTC's plans, then GTC will provide Employee with substantially
equivalent benefits on an aggregate basis, at-its expense.
4.3 Accelerated Vesting of Options Upon a Change of Control. If this
Agreement is terminated by Employee pursuant to Section 4.1(d) or if GTC
terminates the Employee without Cause upon a Change in Control, any options then
held by Employee to purchase shares of the Common Stock of GTC, which options
are then subject to vesting, shall, notwithstanding any contrary provision in
the agreement or plan pursuant to which such options had been granted, be fully
vested and exercisable on the date immediately preceding the effective date of
such termination for the duration of the term of such options, as if such
termination of employment had not occurred.
SECTION 5. MISCELLANEOUS.
5.1 Assignment. This Agreement may not be assigned, in whole or in part,
by either party without the prior written consent of the other party, except
that GTC may, without the consent of Employee, assign its rights and obligations
under this Agreement to any corporation, firm or other business entity with or
into which GTC may merge or consolidate, or to which GTC may sell or transfer
all or substantially all of its assets, or of which 50% or more of the equity
investment and of the voting control is owned, directly or indirectly, by, or is
under common ownership with, GTC. After any such assignment by GTC, GTC shall
be discharged from all further liability hereunder and such assignee shall have
all the rights and obligations of GTC under this Agreement.
5.2 Notices. All notices, requests, demands and other communications to
be given pursuant to this Agreement shall be in writing and shall be deemed to
have been duly given if delivered by hand or mailed by registered or certified
mail, return receipt requested, postage prepaid, to the addresses set forth at
the beginning of this Agreement or such other address as a party shall have
designated by notice in writing to the other party, provided that notice of any
change in address must actually have been received to be effective hereunder.
4
<PAGE>
5.3 Integration. This Agreement is the entire agreement of the parties
with respect to the subject matter hereof and supersedes any prior agreement or
understanding relating to Employee's employment with or compensation by GTC or
any of its subsidiaries, including, but not limited to, an Employment Agreement
dated June 14, 1994 between GTC, the Employee and TSI Corporation. This
Agreement may not be amended, supplemented or otherwise modified except by a
writing signed by Employee and GTC.
5.4 Binding Effect. Subject to Section 5.1, this Agreement shall inure to
the benefit of and be binding upon the parties hereto and their successors,
assigns, heirs and personal representatives.
5.5 Counterparts. This Agreement may be executed in two counterparts,
each of which shall be deemed an original and shall together constitute one and
the same instrument.
5.6 Severability. If any provision hereof shall, for any reason, be held
to be invalid or unenforceable in any respect, such invalidity or
unenforceability shall not affect any other provision hereof, and this Agreement
shall be construed as if such invalid or unenforceable provision had not been
included herein. If any provision hereof shall for any reason be held by a
court to be excessively broad as to duration, geographical scope, activity or
subject matter, it shall be construed by limiting and reducing it to make it
enforceable to the extent compatible with applicable law as then in effect.
5.7 Governing Law. This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts, without regard to its conflict-of-law provisions.
IN WITNESS WHEREOF, the undersigned have duly executed and delivered this
Agreement as of the date first written above.
EMPLOYEE
/s/ John B. Green
-----------------------------------
John B. Green
GENZYME TRANSGENICS CORPORATION
By: /s/ James A. Geraghty
---------------------------------
Title: President and Chief Executive
Officer
5
<PAGE>
EXHIBIT 10.3
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
(Peter Glick)
This Amended and Restated Agreement ("Agreement"), effective as of
September 16, 1997, by and between Employee and GTC (each as hereinafter
defined) amends and restates, in its entirety, that Agreement ("Original
Agreement"), dated as of March 28, 1996, by and between Genzyme Transgenics
Corporation (together with its affiliates and subsidiaries, "GTC"), a
Massachusetts corporation with its principal offices at One Mountain Road,
Framingham, Massachusetts 01701 and Peter Glick (the "Employee") residing at 34
Minebrook Road, Sudbury, Massachusetts 01776.
GTC and Employee desire to amend and restate the Original Agreement as
hereinafter set forth.
GTC desires to employ the Employee as Vice President, Marketing and
Corporate Development of GTC for the period and upon the terms and conditions
hereinafter set forth.
Employee desires to serve in such capacity for such period and upon such
terms.
Accordingly, the parties hereto agree as follows:
SECTION 1. EMPLOYMENT OF EMPLOYEE.
1.1 Employment. Subject to the terms and conditions of this Agreement,
GTC agrees to employ Employee as Vice President, Marketing and Corporate
Development of GTC. Employee shall perform such specific duties as are
commensurate with such position, and as may reasonably be assigned to the
Employee from time to time by the Board of Directors of GTC or GTC's Chief
Executive Officer, for the period commencing on the date hereof until terminated
as herein provided. Employee hereby accepts such employment.
SECTION 2. COMPENSATION. For all services to be rendered by Employee
to GTC during the term of this Agreement, GTC shall pay to, and provide the
Employee, with, the following compensation and benefits:
2.1 Base Salary and Bonus. For the period from the date hereof until
December 31, 1997, GTC shall pay to Employee (i) a base salary of not less than
$154,000 per year, pro rated for such portion of a year and payable in
substantially equal installments in accordance with GTC practice as in effect
from time to time and (ii) incentive and compensatory bonuses, if any, as may be
awarded from time to time by GTC's Compensation Committee. With respect to
subsequent periods during the term of this Agreement, GTC will review Employee's
base salary and bonus from time to time and may make adjustments to such base
salary and determine such bonus based upon, among other
1
<PAGE>
factors: (a) Employee's performance, (b) GTC's performance, (c) changes in
costs of living, (d) changes in Employee's responsibilities, and (e) the benefit
to GTC of Employee's efforts on its behalf; provided that Employee's base salary
shall not be less than $154,000 per year during the term of this Agreement.
2.2 Participation in Benefit Plans. Employee shall be entitled to
participate in all employee benefit plans or programs of GTC. For the purpose
of determining Employee's eligibility for such plans and programs, Employee's
tenure shall be calculated from Employee's original date of hire at GTC (or any
affiliate or predecessor of GTC). GTC may, from time to time, grant Employee
stock options under GTC's stock option plans. GTC does not guarantee the
adoption or continuance of any particular employee benefit or stock plan or
other program during the term of this Agreement, and Employee's participation in
any such plan or program shall be subject to the provisions, rules and
regulations applicable thereto. Employee shall be entitled to paid vacation each
year in accordance with applicable GTC policy. Health and dental plans shall
cover Employee and his dependents as they do for other GTC executives. Such
health and dental plans comply with ERISA and COBRA to the extent applicable.
Under current health insurance policies, such COBRA rights will commence on
termination of the period over which severance payments are made under Section
4.2.
2.3 Expenses. GTC shall reimburse Employee for all ordinary and necessary
business expenses incurred in the performance of Employee's duties under this
Agreement, provided that Employee accounts properly for such expenses to GTC in
accordance with the general corporate policies of GTC and in accordance with the
requirements of the Internal Revenue Service regulations relating to
substantiation of expenses.
SECTION 3. CONFIDENTIAL INFORMATION AND NON-COMPETITION AGREEMENTS.
The Employee confirms that he has executed a confidentiality and non-competition
agreement pertaining to GTC's intellectual property and confidential information
and including GTC's standard non-competition covenant for executive officers and
key employees.
The obligations of Employee under this section and the agreements
referenced in the preceding paragraph shall survive termination of this
Agreement for any reason.
SECTION 4. TERMINATION AND SEVERANCE PAYMENT.
4.1 Termination. The employment of the Employee by GTC may be terminated
as follows:
(a) Employee's employment hereunder shall terminate upon Employee's
death or inability, by reason of physical or mental impairment, to perform
substantially all of Employee's duties as contemplated herein for a continuous
period of 120 days or more;
2
<PAGE>
(b) Employee's employment hereunder may be terminated by GTC or
Employee without Cause (as hereinafter defined);
(c) Employee's employment hereunder may be terminated by GTC in the
event of Employee's breach of any material duty or obligation hereunder, or
intentional or grossly negligent conduct that is materially injurious to GTC, as
reasonably determined by GTC's Board of Directors, or willful failure to follow
the reasonable directions of GTC's Board of Directors (any such event herein to
be referred to as "Cause");
(d) Employee's employment hereunder may be terminated by Employee
within twenty-four months after the occurrence of any one of the following
(each, a "Change of Control"):
(i) the acquisition (A) by any "person" (as such term is defined
in Section 3(a)(9) of the Securities Exchange Act of 1934) or (B) by Genzyme
Corporation from any party of an amount of GTC's Common Stock so that it holds
or controls 50% or more of GTC's Common Stock;
(ii) a merger or similar combination after which 49% or more of
the voting stock of the surviving corporation is held by persons who were not
stockholders of GTC immediately prior to such merger or combination; or
(iii) the election by the stockholders of GTC of 20% or more
of the directors of GTC other than pursuant to nomination by GTC's management;
and
(e) Employee's employment hereunder may be terminated by Employee
within twenty-four months after the acquisition by any "person" (as heretofore
defined) of all, substantially all or a majority of GTC's CRO business unless
Employee accepts an offer of employment with such acquiring person within six
months of Employee's termination of his employment.
4.2 Severance Payment; Benefits.
(a) Termination Events Resulting in Severance Payments. In the event
of the termination of the Employee's employment:
(i) by GTC under Section 4.1(b), or
(ii) by Employee under Section 4.1(d) or 4.1(e),
then GTC shall make severance payment(s) to Employee equal to (A) the Base
Salary Payment (as defined below) and (B) an amount equal to the Employee's
maximum incentive bonus that would next be payable to him and would otherwise be
due to Employee if such termination had not occurred and the maximum amount of
such bonus had been fully earned,
3
<PAGE>
pro rated on the basis of the number of days that have elapsed between the
beginning of the bonus period in which such termination occurs and the
termination date, together payable in a lump sum within ten (10) days after the
termination date. No severance shall be payable in the event that Employee's
employment is terminated pursuant to Section 4.1(a) or (c), or by the Employee
pursuant to 4.1(b).
For the purposes of this Section, the "Base Salary Payment" shall mean
(I) twelve months of the Employee's base salary at the time of
termination:
(i) in the event GTC terminates the Employee pursuant to Section
4.1(b) at any time other than during the period 180 days prior to
and twenty-four months after a CRO Disposition or
(ii) in the event Employee terminates employment under Section 4.1(d)
and
(II) twenty-four months of the Employee's base salary at the time of such
termination
(i) in the event GTC terminates the Employee during the period 180
days prior to and twenty-four months after a CRO Disposition or
(ii) in the event the Employee terminates employment under Section
4.1(e).
(b) Benefits. Employee's coverage under GTC's health and dental
insurance plans will remain in effect and Employee will be entitled to continue
to participate in GTC's retirement plans, all at GTC's expense, during the
period following termination that has the duration of the time period used to
determine the Base Salary Payment, unless Employee notifies GTC in writing that
such coverage is no longer necessary. If, because of limitations required by
third parties or imposed by law, Employee cannot be provided such benefits
through GTC's plans, then GTC will provide Employee with substantially
equivalent benefits on an aggregate basis, at its expense.
4.3 Accelerated Vesting of Options Upon a Change of Control. If this
Agreement is terminated by Employee pursuant to Section 4.1(d) or 4.1(e) or if
GTC terminates the Employee without Cause upon a Change in Control or a CRO
Disposition, any options then held by Employee to purchase shares of the Common
Stock of GTC, which options are then subject to vesting, shall, notwithstanding
any contrary provision in the agreement or plan pursuant to which such options
had been granted, be fully vested and exercisable on the date immediately
preceding the effective date of such termination for the duration of the term of
such options, as if such termination of employment had not occurred.
SECTION 5. MISCELLANEOUS.
4
<PAGE>
5.1 Assignment. This Agreement may not be assigned, in whole or in part,
by either party without the prior written consent of the other party, except
that GTC may, without the consent of Employee, assign its rights and obligations
under this Agreement to any corporation, firm or other business entity with or
into which GTC may merge or consolidate, or to which GTC may sell or transfer
all or substantially all of its assets, or of which 50% or more of the equity
investment and of the voting control is owned, directly or indirectly, by, or is
under common ownership with, GTC. After any such assignment by GTC, GTC shall
be discharged from all further liability hereunder and such assignee shall have
all the rights and obligations of GTC under this Agreement.
5.2 Notices. All notices, requests, demands and other communications to
be given pursuant to this Agreement shall be in writing and shall be deemed to
have been duly given if delivered by hand or mailed by registered or certified
mail, return receipt requested, postage prepaid, to the addresses set forth at
the beginning of this Agreement or such other address as a party shall have
designated by notice in writing to the other party, provided that notice of any
change in address must actually have been received to be effective hereunder.
5.3 Integration. This Agreement is the entire agreement of the parties
with respect to the subject matter hereof and supersedes any prior agreement or
understanding relating to Employee's employment with or compensation by GTC or
any of its subsidiaries, including, but not limited to, an Employment Agreement
dated June 14, 1994 between GTC, the Employee and TSI Corporation. This
Agreement may not be amended, supplemented or otherwise modified except by a
writing signed by Employee and GTC.
5.4 Binding Effect. Subject to Section 5.1, this Agreement shall inure to
the benefit of and be binding upon the parties hereto and their successors,
assigns, heirs and personal representatives.
5.5 Counterparts. This Agreement may be executed in two counterparts,
each of which shall be deemed an original and shall together constitute one and
the same instrument.
5.6 Severability. If any provision hereof shall, for any reason, be held
to be invalid or unenforceable in any respect, such invalidity or
unenforceability shall not affect any other provision hereof, and this Agreement
shall be construed as if such invalid or unenforceable provision had not been
included herein. If any provision hereof shall for any reason be held by a
court to be excessively broad as to duration, activity or subject matter, it
shall be construed by limiting and reducing it to make it enforceable to the
extent compatible with applicable law as then in effect.
5.7 Governing Law. This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts, without regard to its conflict-of-law provisions.
5
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed and delivered this
Agreement as of the date first written above.
EMPLOYEE
/s/ Peter Glick
---------------------------------
Peter Glick
GENZYME TRANSGENICS CORPORATION
By: /s/ James A. Geraghty
-----------------------------------
Title: President and Chief Executive
Officer
6
<PAGE>
EXHIBIT 10.4
AMENDED AND RESTATED CONVERTIBLE
DEBT AGREEMENT
THIS AMENDED AND RESTATED CONVERTIBLE DEBT AGREEMENT dated as of
September 4, 1997 (this "Agreement") is between Genzyme Transgenics Corporation,
a Massachusetts corporation ("GTC"), and Genzyme Corporation, a Massachusetts
corporation ("Genzyme").
RECITALS:
A. Genzyme and GTC entered into a Convertible Debt and Development
Funding Agreement dated as of March 29, 1996, as amended by a First Amendment
dated as of May 3, 1996, by Amendment No. 2 dated March 31, 1997 and by
Amendment No. 3 dated June 30, 1997 (as amended, the "Prior Agreement") whereby
Genzyme provided (i) a revolving line of credit and (ii) certain funding for the
continued development of antithrombin III ("AT-III"), to GTC in exchange for
securities of GTC and certain co-marketing rights to AT-III.
B. Genzyme and GTC intend to enter into a separate Collaboration
Agreement relating to the further development and commercialization of AT-III
and funding therefor in satisfaction of Section 2.4 of the Prior Agreement.
C. Genzyme and GTC desire to amend certain terms and conditions relating
to the revolving credit facility provided by Genzyme to GTC, including, among
other terms, a reduction in the amount of credit available to GTC, an option for
GTC to convert the revolving credit facility into a term loan upon maturity and
the establishment of mandatory prepayment obligations for GTC.
D. Article 1 of the Prior Agreement (except Sections 1.10 and 1.11) shall
be superseded and replaced by the terms of this Agreement and the remainder of
the Prior Agreement shall remain in full force and effect.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, GTC and Genzyme agree as follows:
ARTICLE 1. REVOLVING CREDIT
1.1. Line of Credit. Subject to the terms and conditions set forth herein,
Genzyme shall make loans to GTC (the "Revolving Credit Loans") from time to time
during the Revolving Credit Availability Period (but not more often than twice
in any month) in immediately available funds in the aggregate principal amount
not exceeding the Revolving Credit Commitment. Within the foregoing limits and
subject to the terms and conditions set forth herein, GTC may borrow, prepay and
reborrow the Revolving Credit Loans.
<PAGE>
1.2. The Note.
(a) The Revolving Credit Loans shall be evidenced by a promissory note
(the "Revolving Credit Note") made by GTC and payable to the order of Genzyme,
substantially in the form of Exhibit A annexed hereto, in the principal amount
equal to the initial Revolving Credit Commitment with a final maturity of the
Revolving Credit Maturity Date. The Revolving Credit Note shall be dated on or
before the date of the first Revolving Credit Loan and shall have the blanks
therein appropriately completed.
(b) Genzyme shall maintain records in which it shall record (i) the amount
of each Loan made hereunder, (ii) the amount of any principal or interest due
and payable or to become due and payable from GTC hereunder and (iii) the amount
of any sum received by Genzyme hereunder.
(c) The entries made in the records maintained pursuant to paragraph (b)
of this Section 1.2 shall be prima facie evidence of the existence and amounts
of the obligations recorded therein; provided that the failure of Genzyme to
maintain such account or any error therein shall not in any manner affect the
obligation of GTC to repay the Loans in accordance with the terms of this
Agreement.
1.3. Use of Proceeds. GTC shall use all proceeds of the Revolving Credit
Loans to fund its current operations.
1.4. Requests for Revolving Credit Loans.
(a) To request a Revolving Credit Loan, GTC shall notify Genzyme of such
request by a written loan request signed by GTC and received by Genzyme not
later than 11:00 a.m., Boston, Massachusetts time, two (2) Business Days before
the date of the proposed Borrowing.
(b) Each such written loan request shall specify the following
information:
(i) the aggregate amount requested, which shall not be less than
$100,000;
(ii) the requested date of such Revolving Credit Loan, which shall be
a Business Day; and
(iii) the location and number of GTC's account to which funds are
to be disbursed.
2
<PAGE>
Each loan request shall constitute a certification that the representations and
warranties contained herein were true and correct when made and are true and
correct as of the date of such Revolving Credit Loan and that no Default or
Event of Default has occurred and is continuing.
1.5. Termination and Reduction of Commitment.
(a) Unless previously terminated, the Revolving Credit Commitment shall
terminate at the close of business on the Revolving Credit Maturity Date.
(b) GTC may, at its option, at any time terminate, or from time to time
reduce, the Revolving Credit Commitment.
(c) Any conversion of the outstanding principal amount of any Revolving
Credit Loans pursuant to Section 1.7 shall reduce the Revolving Credit
Commitment to the extent of such converted principal amount.
(d) GTC shall notify Genzyme of any election to terminate or reduce the
Revolving Credit Commitment under paragraph (b) of this Section 1.5 at least
three (3) Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof. Each notice
delivered by GTC pursuant to this Section 1.5 shall be irrevocable; provided
that a notice of termination of Revolving Credit Commitment delivered by GTC may
state that such notice is conditioned upon the effectiveness of other credit
facilities, in which case such notice may be revoked by GTC (by notice to
Genzyme on or prior to the specified effective date) if such condition is not
satisfied. Any termination or reduction of Revolving Credit Commitment shall be
permanent.
1.6. Repayment of Loans.
(a) GTC hereby unconditionally promises to pay to Genzyme the then unpaid
principal amount of the Revolving Credit Loans on the Revolving Credit Maturity
Date. In addition, if following any reduction in the Revolving Credit
Commitment the aggregate principal amount of the Revolving Credit Loans shall
exceed the aggregate Revolving Credit Commitment, GTC shall immediately pay the
Revolving Credit Loans in an aggregate amount equal to such excess; provided
that any prepayments on account of reductions in the Revolving Credit Commitment
pursuant to Section 1.11 shall be made in accordance with Section 1.11(b)(iii).
(b) Conversions pursuant to Section 1.7 of outstanding principal amounts
shall be deemed to be repayments as of the date of such conversion.
1.7. Conversion to GTC Common Stock.
(a) Genzyme's Option. All or part of any outstanding Loans and accrued
interest thereon, or any portion thereof, may, at Genzyme's option, be converted
at any time into shares of GTC's common stock, par value $.01 per share (the
"GTC Common Stock"), at a conversion price equal to the average closing price of
GTC Common Stock over the 20 Trading Day period ending two (2) Trading Days
prior to the date of conversion (the "Conversion Price").
3
<PAGE>
(b) GTC's Option. Outstanding Loans and accrued interest thereon, or any
portion thereof, may, at the option of GTC, be converted at the Conversion Price
once each fiscal quarter into GTC Common Stock; provided, however, such GTC
conversion right may be exercised only to the extent necessary, in the
reasonable judgment of GTC, to maintain GTC's tangible net worth as determined
at the end of such fiscal quarter at the minimum amount required for continued
listing on the Nasdaq National Market.
(c) Registration Rights. The shares of GTC Common Stock issuable upon
conversion shall be entitled to same registration rights as are applicable to
the other shares of Common Stock held by Genzyme, which rights are set forth in
Section 8 of the Series A Convertible Preferred Stock Purchase Agreement dated
May 1, 1993 between GTC and Genzyme.
1.8. Term Loan.
(a) Making the Term Loan. Subject to Section 1.8(c), Genzyme agrees that,
subject to the terms and conditions of this Agreement, and in reliance upon the
representations, warranties and covenants contained herein and provided no
Default or Event of Default has occurred, at GTC's option, Genzyme shall make a
term loan (the "Term Loan" and with the Revolving Credit Loans, collectively the
"Loans") to GTC for the purpose of repaying all outstanding principal of the
Revolving Credit Loans, on the Revolving Credit Maturity Date which Term Loan
shall be in a principal amount equal to the outstanding balance of the Revolving
Credit Loans on the Revolving Credit Maturity Date, or in such lesser amount as
is specified in writing by GTC to Genzyme at least two (2) Business Days prior
to the Revolving Credit Maturity Date. Any portion of the Revolving Credit
Loans not repaid by the making of the Term Loan shall be due and payable in
full, along with all accrued interest thereon, on the Revolving Credit Maturity
Date. Genzyme shall make the Term Loan hereunder on the Revolving Credit
Maturity Date by crediting the amount thereof to the payment of the Revolving
Credit Note.
(b) Term Note: Repayment Terms. The Term Loan shall be evidenced by a
note (the "Term Note"), substantially in the form of Exhibit B annexed hereto,
payable to the order of Genzyme, duly executed on behalf of GTC, dated the
Revolving Credit Maturity Date. The Term Loan shall be payable in 12
installments consisting of 11 equal consecutive installments of principal, each
installment in an amount sufficient to fully amortize the original principal
amount of the Term Loan assuming quarterly principal payments over a seven-year
period, payable on each Payment Date together with interest payable in
accordance with Section 1.9(c) plus one final installment on the Term Loan
Maturity Date which shall include all unpaid principal, accrued interest and any
and all other amounts due and payable under the Term Note or hereunder.
(c) Conditions Include Additional Covenants. The commitment of Genzyme to
provide the Term Loan is subject to the agreement of GTC to certain additional
covenants in form and substance satisfactory to both Genzyme and GTC, regarding
the financial performance of GTC which covenants shall include covenants
establishing the minimum liquidity of GTC and its Subsidiaries.
4
<PAGE>
1.9. Interest Rate.
(a) Unless and until converted to GTC Common Stock pursuant to Section
1.7, each Loan shall bear interest at a rate per annum equal to the Interest
Rate.
(b) Notwithstanding the foregoing, (i) in the event that an Event of
Default shall have occurred under Section 4.1(a), all amounts which are not paid
when due shall bear interest beginning on the date such amounts were originally
due until paid in full at the Post-Default Rate and (ii) during the period when
any other Event of Default shall have occurred the principal of all Loans
hereunder shall bear interest, after as well as before judgment, at the
Post-Default Rate beginning on the date such Event of Default occurred until
such Event of Default is cured, in each case to the extent permitted by law.
(c) Accrued interest on each Loan shall be payable in arrears on each
Payment Date; provided that (i) interest accrued at the Post-Default Rate shall
be payable on demand, (ii) in the event of any repayment or prepayment in full
of any Term Loan, accrued interest on the principal amount repaid or prepaid
shall be payable on the date of such repayment or prepayment and (iii) all
accrued interest on Revolving Credit Loans shall be payable upon the Revolving
Credit Maturity Date or the earlier termination of the Revolving Credit
Commitment.
(d) All interest hereunder shall be computed on the basis of a year of 360
days, and in each case shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).
1.10. Payments Generally.
(a) GTC shall make each payment required to be made by it hereunder
(whether of principal, interest or fees, or otherwise) prior to 12:00 noon,
Boston, Massachusetts time, on the date when due, in immediately available
funds, without set-off or counterclaim. Any amounts received after such time on
any date may, in Genzyme's discretion be deemed to have been received on the
next succeeding Business Day for purposes of calculating interest thereon. All
such payments shall be made to Genzyme at its principal offices or at such of
its other offices in Cambridge, Massachusetts as shall be notified to the
relevant parties from time to time. If any payment hereunder shall be due on a
day that is not a Business Day, the date for payment shall be extended to the
next succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension. All
payments hereunder shall be made in U.S. dollars.
(b) If at any time insufficient funds are received by and available to
Genzyme to pay fully all amounts of principal, interest and fees then due
hereunder, such funds shall be applied (i) first, to pay interest and fees then
due hereunder and (ii) second, to pay principal and then due hereunder.
5
<PAGE>
1.11. Prepayment of Loans.
(a) Optional Prepayments. GTC shall have the right at any time and from
time to time to prepay the Loans in whole or in part. Each prepayment of a Term
Loan shall be applied in inverse order of maturity.
(b) Mandatory Prepayments. GTC shall make prepayments of the Loans
hereunder (and reduce the Revolving Credit Commitment hereunder) as follows:
(i) Offering of Equity. GTC agrees, on or prior to the closing of
any sale of equity securities by GTC or any of its Subsidiaries, to deliver
to Genzyme a statement certified by the chief financial officer of GTC, in
form and detail reasonably satisfactory to Genzyme, of the estimated amount
of the Net Cash Payments of such sale of securities that will (on the date
of such sale of securities) be received by GTC or any of its Subsidiaries
in cash. The Revolving Credit Commitment hereunder shall be reduced on the
date of such receipt, or the Term Loan shall be prepaid, in an aggregate
amount equal to
(1) 10% of the amount of the first $40,000,000 of all Net Cash
Payments received by GTC or any of its Subsidiaries from the sale of
securities from and after the date hereof plus
(2) when the aggregate Net Cash Payments received by GTC from
the sale of securities from and after the date hereof exceeds
$40,000,000, 20% of the amount of such Net Cash Payments received by
GTC or any of its Subsidiaries from the sale of securities from and
after the date hereof in excess of $40,000,000, and
GTC shall make prepayments of Revolving Credit Loans to the extent required
by Section 1.6(a). Prepayments of Loans and reductions of the Revolving
Credit Commitment shall be effected in each case in the manner and to the
extent specified in paragraph (iii) of this Section 1.11(b).
(ii) Sale of Assets. GTC agrees, on or prior to the occurrence of any
Disposition by GTC or any of its Subsidiaries, to deliver to Genzyme a
statement certified by the chief financial officer of GTC, in form and
detail reasonably satisfactory to Genzyme, of the estimated amount of the
Net Cash Payments of such Disposition that will be received by GTC or any
of its Subsidiaries in cash on the date of such Disposition plus the
amount, if any expected to be received thereafter. The Revolving Credit
Commitment hereunder shall be reduced on the date of the receipt of such
Net Cash Payments relating to any Disposition or the Term Loan shall be
prepaid, as follows:
(1) until the aggregate Net Cash Payments of all Dispositions
from and after the date hereof equal or exceed $20,000,000, no
reduction of the Revolving Credit Commitment or prepayment of the Term
Loan is required from the proceeds of Dispositions;
6
<PAGE>
(2) when the aggregate Net Cash Payments of all Dispositions
from and after the date hereof are cumulatively equal to or greater
than $20,000,000 but less than $40,000,000, the Revolving Credit
Commitment shall be reduced by, or the Term Loan shall be prepaid in
an amount equal to, $4,000,000; and
(3) when the aggregate Net Cash Payments of all Dispositions
from and after the date hereof are cumulatively greater than
$40,000,000, all Loans shall be repaid in full and the Revolving
Credit Commitment shall terminate, and
GTC shall make prepayments of Revolving Credit Loans to the extent required
by Section 1.6(a). Prepayments of Loans and reductions of the Revolving
Credit Commitment shall be effected in each case in the manner and to the
extent specified in paragraph (iii) of this Section 1.11(b).
(iii) Application. Upon the occurrence of any of the events
described in paragraphs (i) or (ii) of this Section 1.11(b), (1) the
Revolving Credit Commitment shall be reduced as provided in such paragraphs
and (2) GTC shall prepay (A) the Revolving Credit Loans to the extent that
the aggregate principal amount of such Revolving Credit Loans exceeds the
Revolving Credit Commitment as adjusted or in full if required paragraph
(ii)(3) above or (B) the Term Loan as provided in such paragraphs and, in
each case, the amount of the required prepayment shall be applied to the
prepayment of the Loans on the ninetieth day after the date on which such
Net Cash Proceeds are received by GTC satisfying such conditions. Each
prepayment of any Term Loan shall be applied to the installments thereof in
the inverse order of maturity.
(iv) Prepayments Accompanied by Interest. Prepayments shall be
accompanied by accrued interest to the extent required by Section 1.9.
1.12. Fees.
(a) GTC agrees to pay to Genzyme a commitment fee, which shall accrue at a
rate equal to 0.125% on the daily average unused amount of the respective
Revolving Credit Commitment during the period from and including the date hereof
to but excluding the date on which such Revolving Credit Commitment terminates.
Accrued commitment fees shall be payable in arrears on each Payment Date and, in
respect of any Revolving Credit Commitment, on the date such Revolving Credit
Commitment terminate, commencing on the first such date to occur after the date
hereof. All commitment fees shall be computed on the basis of a year of 360
days and shall be payable for the actual number of days elapsed (including the
first day but excluding the last day).
(b) The fee payable under Section 1.12(a) may be paid by GTC in cash or by
issuance to Genzyme of warrants with a term of five (5) years for the purchase
of GTC Common Stock. The exercise price of each such warrant shall be equal to
the closing price of GTC Common Stock on the Trading Day immediately preceding
the date on which such warrant is issued as reported by the Nasdaq National
Market or such other principal securities exchange or market on which GTC Common
Stock is then traded. The number of shares of GTC Common Stock subject to each
such warrant shall be determined using the Black-Scholes valuation method and
7
<PAGE>
using the per share exercise price of the warrant as the value per share of GTC
Common Stock for purposes of such calculation, and Coopers & Lybrand L.L.P. (or
such other independent accounting firm mutually agreeable to Genzyme and GTC)
shall perform such calculation.
1.13. Subordination. Genzyme has executed a Subordination Agreement in
favor of GTC's senior lender, BankBoston, N.A., formerly The First National Bank
of Boston (the "Bank"), whereby the obligations of GTC to repay amounts accrued
hereunder to Genzyme are subordinated to GTC's obligations to the Bank and shall
confirm such subordination at the reasonable request of the Bank.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES
2.1. Representations, Warranties and Covenants of GTC. GTC represents,
warrants and covenants to Genzyme as follows:
(a) GTC is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts with corporate
powers adequate for executing, delivering and performing its obligations under
this Agreement and the Notes.
(b) The execution, delivery and performance of this Agreement, the Notes
and any other documents delivered or to be delivered to Genzyme have been duly
authorized by all necessary corporate action on the part of GTC and this
Agreement, the Notes and all other necessary documents have been duly executed
and delivered and, as executed, constitute the valid and binding obligations of
GTC, enforceable against GTC in accordance with their respective terms.
(c) The execution, delivery and performance of this Agreement, the Notes
and any other documents delivered or to be delivered to Genzyme do not and will
not conflict with or contravene any provision of the charter documents or
by-laws of GTC or any agreement, document, instrument, indenture or other
obligation of GTC, nor does it or will it result in a violation of or default
under any law, rule, regulation, order, writ, judgment, injunction, decree,
determination, award, indenture, agreement, lease or instrument now in effect
having applicability to GTC, or to any of its properties, nor does it or will it
result in any encumbrance on GTC or any of its properties, nor does it or will
it require any governmental or third party consents. As of the date hereof, GTC
is not in default under any provision under the Prior Agreement.
(d) The financial statements of GTC as at December 31, 1996 and for the
period then ended included in its filings under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), fairly present the financial condition of
GTC as of the dates thereof and its results of operations for the periods then
ended and have been prepared in accordance with generally accepted accounting
principles consistently applied.
(e) There is no litigation or proceeding pending before any court or
governmental or administrative agency or, to the knowledge of GTC, threatened,
or any basis therefor, that is
8
<PAGE>
required to be disclosed in GTC's periodic filings under the Exchange Act and
that has not been so disclosed.
(f) Since December 31, 1996, there has been no material adverse change in
the business, prospects, financial condition or operations of the GTC.
(g) The issuance and delivery to Genzyme of the shares of GTC Common Stock
issuable upon conversion of any amounts payable to Genzyme hereunder in
accordance with this Agreement have been duly authorized by all necessary
corporate action on the part of GTC. Said shares when so issued and delivered
in accordance with the provisions of this Agreement will be duly and validly
issued, fully paid and non-assessable.
2.2. Representations, Warranties and Covenants of Genzyme. Genzyme
represents, warrants and covenants to GTC as follows:
(a) Genzyme is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts with corporate
powers adequate for executing, delivering and performing its obligations under
this Agreement.
(b) This Agreement has been executed in the name and on behalf of Genzyme
by a duly elected officer of Genzyme, and the execution, delivery and
performance of this Agreement by Genzyme are subject to the ratification and
confirmation of this Agreement by Genzyme's Board of Directors. Genzyme shall
use its reasonable best efforts to obtain the aforementioned ratification and
confirmation as soon as practicable after the date hereof.
(c) The execution, delivery and performance of this Agreement do not and
will not conflict with or contravene any provision of the charter documents or
by-laws of Genzyme or any agreement, document, instrument or other obligation of
Genzyme.
(d) Genzyme is acquiring the Notes and the GTC Common Stock issuable upon
conversion thereof (the "Conversion Shares") for its own account for investment
and not with a view to, or for sale in connection with, any distribution
thereof, nor with any present intention of distributing or selling the same; and
Genzyme has no present or contemplated agreement, undertaking, arrangement,
obligation, indebtedness or commitment providing for the disposition thereof.
(e) As the holder of approximately 43% of the outstanding GTC Common
Stock, Genzyme is familiar with GTC, its business and its personnel. The
officers of GTC have made available to Genzyme any and all information which it
has requested and have answered to Genzyme's satisfaction all inquiries made by
Genzyme. Genzyme has such knowledge and experience as is necessary to properly
evaluate the risks and merits of an investment in GTC.
(f) Genzyme acknowledges that the Notes and the Conversion Shares shall
not be sold or transferred unless either (i) they first shall have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or (ii) GTC first shall have been furnished with an opinion of legal counsel,
reasonably satisfactory to GTC, to the effect that such sale or transfer is
exempt from the registration requirements of the Securities Act, and that the
Revolving Credit
9
<PAGE>
Note and the certificates representing the Conversion Shares shall bear an
appropriate legend to that effect.
ARTICLE 3. COVENANTS
3.1. Covenants of GTC. On and after the date hereof and so long as the
Revolving Credit Commitment is outstanding and until all of the Loans and all
other amounts due hereunder from GTC to Genzyme shall have been paid in full,
GTC shall comply with the covenants set forth in Section 3.2 as well as the
affirmative and negative covenants set forth in Section 8 of the Revolving
Credit Agreement dated as of July 3, 1995 among GTC, its subsidiaries and the
Bank, as amended (the "Credit Agreement"), which covenants are hereby
incorporated by reference as if set forth herein in full, as such covenants may
from time to time be amended by the parties to the Credit Agreement or waived by
the Bank; provided that for purposes of this Section 3.1 and the covenants so
incorporated, "Borrower" shall mean GTC, "Bank" shall mean Genzyme and
"Agreement" shall mean this Agreement; provided further that the certificate
required to be delivered to Genzyme by GTC pursuant to this Section 3.1 as
required by Section 8.1(a)(iii) of the Credit Agreement shall include a
computation demonstrating the amount of Unfunded R&D and compliance with the
covenants set forth in Section 3.2. All other terms incorporated and not
otherwise defined in this Section 3.1 shall have the meanings set forth in the
Credit Agreement. Such covenants shall be deemed to survive with respect to the
parties hereto notwithstanding the earlier termination of the Credit Agreement.
3.2. Additional Financial Covenants of GTC. GTC agrees that, so long as
the Revolving Credit Commitment and until all of the Loans and all other amounts
due hereunder from GTC to Genzyme shall have been paid in full:
(a) for the period commencing on April 1, 1998, and ending at the end of
each fiscal quarter through the fiscal quarter ending March 31, 1999, GTC will
not permit its Consolidated EBITDA for any such period as at the last day of
such period to be less than zero; and
(b) commencing with the fiscal quarter ending on June 30, 1999, GTC will
not, as at the last day of each fiscal quarter, permit its Consolidated EBITDA
for the period of four (4) consecutive fiscal quarters ending or most recently
ended prior to such date to be less than zero.
ARTICLE 4. EVENTS OF DEFAULT
4.1. Events of Default. Each of the events set forth below shall
constitute an "Event of Default":
(a) A payment of principal and/or interest on any Loan is not made within
five (5) days after the date due;
(b) A representation or warranty of GTC in this Agreement shall prove to
have been incorrect when made or deemed made in any material respect;
10
<PAGE>
(c) GTC shall be in default under any provision of this Agreement and
shall fail to remedy such default within 20 days of receiving written notice
thereof from Genzyme;
(d) Any bankruptcy, receivership, insolvency or reorganization proceedings
shall be instituted by GTC or any such proceedings shall be instituted against
GTC and not dismissed within 60 days or GTC shall make an assignment for the
benefit of creditors or consent to the appointment of a receiver; or
(e) GTC shall fail to make any payment in excess of $10,000 in respect of
Indebtedness for money borrowed by GTC when such payment is due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) or
shall fail to perform or observe any provision of any agreement or instrument
relating to such Indebtedness, which failure has resulted in the acceleration of
such Indebtedness by the holder thereof.
4.2. Remedies. Following the occurrence and during the continuance of any
Event of Default, Genzyme may (i) decline to make any or all further Loans
(including conversion to the Term Loan in accordance with Section 1.8) and (ii)
by written notice to GTC, declare the entire unpaid principal of the Loans,
accrued interest and other amounts payable hereunder to be due and payable
without further demand, presentment, protest or further notice of any kind, all
of which are hereby waived by GTC; provided, however, that upon the occurrence
of an Event of Default described in paragraph (d) of Section 4.1, the Revolving
Credit Commitment and Genzyme's commitment to make the Term Loan shall
immediately terminate and all Loans, accrued interest and other amounts payable
hereunder shall be immediately due and payable, all without any demand or
notices of any kind. Thereafter, Genzyme may proceed to protect and enforce its
rights by suit in equity, action at law and/or other appropriate proceeding; and
Genzyme may offset and apply toward the payment of such amounts or part thereof
any Indebtedness of it to GTC.
ARTICLE 5. DEFINITIONS
5.1. Certain Defined Terms. As used herein, the following terms shall have
the following meanings (all terms defined in this Section 5.1 or in other
provisions of this Agreement in the singular to have the same meanings when used
in the plural and visa versa.
"Agreement" has the meaning assigned to such term in the introductory
paragraph of this Agreement.
"AT-III" has the meaning assigned to such term in Recital A of this
Agreement.
"Bank" has the meaning assigned to such term in Section 1.13.
"Business Day" means any day that is not a Saturday, Sunday or other day on
which commercial banks in Boston, Massachusetts are authorized or required by
law to remain closed.
"Consolidated EBITDA" shall mean, for any period, the sum, for GTC, of the
following: (a) Consolidated Operating Income for such period (excluding any
amounts deducted for
11
<PAGE>
Unfunded R&D and reported by GTC to Genzyme on the certificate required to be
delivered by Section 3.1) plus (b) depreciation and amortization, but only to
the extent deducted in determining Consolidated Operating Income for such
period.
"Consolidated Net Income" shall mean, for any period, net income (or loss)
for GTC and its Subsidiaries (determined in accordance with GAAP); provided,
however, that Consolidated Net Income shall not include amounts included in
computing net income (or loss) in respect of (a) the write-up of assets (other
than marketable investments) after December 31, 1996 and (b) extraordinary and
non-recurring gains or losses.
"Consolidated Operating Income" shall mean, for any period, the
Consolidated Net Income of GTC for such period; provided, however, that, to the
extent the following items have been included in determining Consolidated Net
Income, they shall NOT be considered in computing Consolidated Operating Income:
provision for income taxes, interest expense, equity in the operating results of
unconsolidated Subsidiaries and other affiliates and non-operating, non-cash
items including, but not limited to, write-off of acquired technology or
acquired, in-process research and development which, in accordance with GAAP,
must be charged to income.
"Conversion Price" has the meaning assigned to such term in Section 1.7(a).
"Conversion Shares" has the meaning assigned to such term in
Section 2.2(d).
"Credit Agreement" has the meaning assigned to such term in Section 3.1.
"Default" means an event or act which with the giving of notice or the
passage of time, or both, would become an Event of Default.
"Disposition" means any sale, assignment, transfer or other disposition of
any property (whether now owned or hereafter acquired) by GTC or any of its
Subsidiaries to any other Person excluding (a) the granting of Liens to Genzyme
and (b) any sale, assignment, transfer or other disposition of (i) any property
sold or disposed of in the ordinary course of business and on ordinary business
terms and (ii) any property no longer used or useful in the business of GTC.
"Disposition Investment" means, with respect to any Disposition, any
promissory notes or other evidences of indebtedness or investments received by
GTC or any of its Subsidiaries in connection with such Disposition.
"Exchange Act" has the meaning assigned to such term in Section 2.1(e).
"Event of Default" has the meaning assigned to such term in Section 4.1.
"Force Majeure" has the meaning assigned to such term in Section 6.11.
12
<PAGE>
"GAAP" means generally accepted accounting principles applied on a basis
consistent with those that, in accordance with the last sentence of
Section 5.2(a), are to be used in making the calculations for purposes of
determining compliance with this Agreement.
"Genzyme" has the meaning assigned to such term in the introductory
paragraph of this Agreement.
"GTC" has the meaning assigned to such term in the introductory paragraph
of this Agreement.
"GTC Common Stock" has the meaning assigned to such term in Section 1.7(a).
"Indebtedness" means, in respect of any Person, all obligations, contingent
and otherwise, that in accordance with GAAP should be classified as liabilities,
including without limitation (i) all debt obligations, (ii) all liabilities
secured by Liens, (iii) all guarantees and (iv) all liabilities in respect of
bankers' acceptances or letters of credit.
"Interest Rate" means, for all Loans outstanding, the lesser (where
applicable) of respective interest rates indicated below for the periods set
forth below:
Period Interest Rates
From the date hereof to
and including April 1, 1998 7.0%
From April 2, 1998 to
and including April 1, 1999 8.0% or Prime Rate
From April 2, 1999 to
and including April 1, 2000 8.5% or Prime Rate plus 0.5%
From April 2, 2000 to
and including April 1, 2001 9.0% or Prime Rate plus 1.0%
From April 2, 2001 to
and including April 1, 2002 9.5% or Prime Rate plus 1.5%
From April 2, 2002 to and
including the Term Loan Maturity Date 10.0% or Prime Rate plus 2.0%,
but, in any event, not in excess of the maximum amount permitted by law.
"Liens" means any encumbrance, mortgage, pledge, hypothecation, charge
restriction or other security interest of any kind securing any obligation of
any Person.
"Loans" has the meaning assigned to such term in Section 1.8.
13
<PAGE>
"Net Cash Payments" means,
(a) with respect to all offerings of equity securities, the aggregate
amount of all cash proceeds received by GTC or any of its Subsidiaries
therefrom less all legal, accounting, underwriting and similar fees and
expenses incurred in connection therewith.
(b) with respect to any Disposition, the aggregate amount of all cash
payments received by GTC or any of its Subsidiaries directly or indirectly
in connection with such Disposition, whether at the time of such
Disposition or after such Disposition under deferred payment arrangements
or investments entered into or received in connection with such Disposition
(including, without limitation, Disposition Investments); provided that
(i) Net Cash Payments shall be net of (I) the amount of any
legal, accounting, title, transfer and recording tax expenses,
commissions and other fees and expenses payable by GTC or any of its
Subsidiaries in connection with such Disposition and (II) any Federal,
state and local income or other taxes estimated to be payable by GTC
or any of its Subsidiaries as a result of such Disposition net of any
available tax credits and carryforwards, but only to the extent that
such estimated taxes are in fact paid to the relevant Federal, state
or local governmental authority within 12 months of the date of
receipt of cash payments relating to such Disposition; and
(ii) Net Cash Payments shall be net of any repayments by GTC or
any its of Subsidiaries of Indebtedness to the extent that (I) the
holder of such Indebtedness requires repayment of such Indebtedness or
(II) the transferee of (or holder of a Lien on) such property requires
that such Indebtedness be repaid as a condition to the purchase of
such property.
"Notes" means the Revolving Credit Note and the Term Note.
"Payment Dates" means the last Business Day of March, June, September and
December in each year, the first of which shall be the first such day after the
date of this Agreement.
"Person" means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, governmental authority
or other entity.
"Post-Default Rate" means, a rate per annum equal to the applicable
Interest Rate plus 4%
"Prime Rate" means for any day the rate from time to time equal to the
highest rate of interest reported in The Wall Street Journal as the prime rate
or in the event that such publication is not available such other or similar
rate selected by Genzyme representing the prime rate charged by major banking
institutions.
"Prior Agreement" has the meaning assigned to such term in Recital A of
this Agreement.
14
<PAGE>
"Revolving Credit Availability Period" means the period from and including
the date hereof to the Revolving Credit Maturity Date.
"Revolving Credit Commitment" means $8,327,000 as such commitment may be
reduced from time to time pursuant to Sections 1.5 and 1.11.
"Revolving Credit Loans" has the meaning assigned to such term in Section
1.1.
"Revolving Credit Maturity Date" means the last Business Day in March 2000.
"Revolving Credit Note" has the meaning assigned to such term in Section
1.2.
"Subsidiary" means, with respect to any Person (the "parent") at any date,
any corporation, limited liability company, partnership, association or other
entity the accounts of which would be consolidated with those of the parent in
the parent's consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests representing more than 50%
of the ordinary voting power or, in the case of a partnership, more than 50% of
the general partnership interests are, as of such date, owned, controlled or
held, or (b) that is, as of such date, otherwise Controlled, by the parent or
one or more subsidiaries of the parent or by the parent and one or more
subsidiaries of the parent. References herein to "Subsidiaries" shall, unless
the context requires otherwise, be deemed to be references to Subsidiaries of
the Borrower.
"Securities Act" has the meaning assigned to such term in Section 2.2(f).
"Trading Day" means any day on which GTC Common Stock is traded for any
period on the Nasdaq National Market or on the principal securities exchange or
market on which the GTC Common Stock is then traded.
"Term Loan" has the meaning assigned to such term in Section 1.8(a).
"Term Loan Maturity Date" means the last Business Day in March 2003.
"Term Note" has the meaning assigned to such term in Section 1.8(b).
"Unfunded R&D" means, for any period, (a) the amount of expenses for
research and development costs for such period minus (b) revenues earned for
such period attributable to contracts for the performance of research and
development.
5.2. Accounting Terms and Determinations.
(a) Except as otherwise expressly provided herein, all accounting terms
used herein shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to Genzyme
hereunder shall (unless otherwise disclosed to Genzyme in writing at the time of
delivery thereof in the manner described in subsection (b) below) be prepared,
in accordance with GAAP applied on a basis consistent with those used in
15
<PAGE>
the preparation of the latest annual or quarterly financial statements furnished
to the Lender hereunder (which, prior to the delivery of the first annual or
quarterly financial statements under Section 3.1 hereof, shall mean the audited
financial statements as at December 31, 1996).
(b) To enable the ready and consistent determination of compliance with
the covenants set forth in Article 5, GTC will not change its fiscal year.
5.3. Section References. References to particular sections are references
to sections of this Agreement unless otherwise indicated.
ARTICLE 6. MISCELLANEOUS
6.1. Replacement of Prior Agreement. Upon the execution and delivery of
this Agreement, Article 1 (except Sections 1.10 and 1.11) of the Prior Agreement
shall be superseded and replaced by the terms of this Agreement and the
remainder of the Prior Agreement shall remain in full force and effect.
6.2. Expenses. GTC shall pay all costs and expenses incurred by Genzyme in
connection with the preparation, execution, administration and enforcement of
this Agreement and the Notes, including reasonable attorneys' fees.
6.3. Notices. All notices, requests and other communications to GTC or
Genzyme hereunder shall be in writing (including telecopy or similar electronic
transmissions), shall refer specifically to this Agreement and shall be
personally delivered or sent by telecopy or other electronic facsimile
transmission (with conformation of receipt and a hard copy sent by mail), by the
next business day service of a nationally recognized overnight courier or by
registered mail or certified mail, return receipt requested, postage prepaid, in
each case to the respective address specified below (or to such address as may
be specified in writing to the other party hereto in accordance with this
Section 6.3):
To GTC:
Genzyme Transgenics Corporation
One Mountain Road
Framingham, MA 01701
Attention: President
Facsimile (508) 370-3797
To Genzyme:
Genzyme Corporation
One Kendall Square
Cambridge, MA 02139
Attention: General Counsel
Facsimile (617) 252-7553
16
<PAGE>
Any notice or communication given in conformity with this Section 6.3 shall
be deemed to be effective when received by the addressee, if delivered by hand
or facsimile, the next Business Day after mailing, if mailed via an overnight
courier, and seven (7) days after mailing, if sent by registered or certified
mail.
6.4. Entire Agreement. This Agreement, together with any agreements
referenced herein, constitutes, on and as of the date hereof, the entire
agreement of GTC and Genzyme with respect to the subject matter hereof, and all
prior or contemporaneous understandings or agreements, whether written or oral,
between GTC and Genzyme with respect to such subject matter are hereby
superseded in their entirety.
6.5. No Implied Waivers; Rights Cumulative. No failure on the part of GTC
or Genzyme to exercise and no delay in exercising any right, power, remedy or
privilege under this Agreement, or provided by statute or at law or in equity or
otherwise, including, without limitation, the right or power to terminate this
Agreement, shall impair, prejudice or constitute a waiver of any such right,
power, remedy or privilege or be construed as a waiver of any breach of this
Agreement or as an acquiescence therein, nor shall any single or partial
exercise of any such right, power, remedy or privilege preclude any other or
further exercise thereof or the exercise of any other right, power, remedy or
privilege.
6.6. Amendments. No amendment, modification, waiver, termination or
discharge of any provision of this Agreement, nor consent to any departure by
GTC or Genzyme therefrom, shall in any event be effective unless the same shall
be in writing specifically identifying this Agreement and the provision intended
to be amended, modified, waived, terminated or discharged and signed by the
party against whom enforcement of such amendment is sought, and each such
amendment, modification, waiver, termination or discharge shall be effective
only in the specific instance and for the specific purpose for which given. No
provision of this Agreement shall be varied, contradicted or explained by any
oral agreement, course of dealing or performance or any other matter not set
forth in an agreement in writing and signed by the party against whom
enforcement of such variation, contradiction or explanation is sought.
6.7. Successors and Assigns. The terms and provisions of this Agreement
shall inure to the benefit of, and be binding upon, GTC, Genzyme and their
respective successors and assigns. Neither GTC nor Genzyme may assign or
transfer any of the respective rights or interests, nor delegate any of their
respective obligations, hereunder, without prior written consent from the other
party, except that either party may fully assign its rights and interests and
delegate its obligations hereunder (a) to an affiliate if such affiliate assumes
all of the obligations of such party hereunder in writing and this Agreement
remains binding upon the assigning party or (b) to any entity which acquires all
or substantially all of the assets of the assigning party or which is the
surviving entity in a merger or consolidation with such party, if such entity
assumes all of the obligations of such party hereunder in writing.
6.8. Survival. All covenants, agreements, representations and warranties
made by GTC herein, and in any certificates or other instruments delivered in
connection with or pursuant to this Agreement, shall be considered to have been
relied upon by Genzyme and shall survive the execution and delivery of this
Agreement and the making of any Loans, regardless of any
17
<PAGE>
investigation made by any such other party or on its behalf and notwithstanding
that Genzyme may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect so long as the principal of or any
accrued interest on any Loan or any fee or any other amount payable under this
Agreement is outstanding and so long as the Revolving Credit Commitment has not
expired or terminated.
6.9. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
6.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.10.
6.11. Force Majeure. GTC and Genzyme shall each be excused for any
failure or delay in performing any of its respective obligations under this
Agreement, if such failure or delay is caused by Force Majeure. For purposes of
this Agreement, "Force Majeure" shall mean any act of God, accident, explosion,
fire, storm, earthquake, flood, drought, peril of the sea, riot, embargo, war or
foreign, federal, state or municipal order of general application, seizure,
requisition or allocation, any failure or delay of transportation, shortage of
or inability to obtain supplies, equipment, fuel or labor or any other
circumstances or events beyond the reasonable control of the party relying upon
such circumstances or events.
6.12. Further Assurances. Each of GTC and Genzyme agrees to duly
execute and deliver, or cause to be duly executed and delivered, such further
instruments and do and cause to be done such further acts and things, including,
without limitation, the execution of such additional assignments, agreements,
documents and instruments, that may be necessary or as the other party hereto
may at any time and from time to time reasonably request in connection with this
Agreement or to carry out more effectually the provisions and purposes of, or to
better assure and confirm unto such other party its rights and remedies under,
this Agreement.
6.13. Severability. If any provision hereof should be held invalid,
illegal or unenforceable in any respect in any jurisdiction, then, to the
fullest extent permitted by law, (a) all other provisions hereof shall remain in
full force and effect in such jurisdiction and shall be liberally construed in
order to carry out the intentions of the parties hereto as nearly as may be
possible and (b) such invalidity, illegality or unenforceability shall not
affect the validity, legality or enforceability of such provision in any other
jurisdiction. To the extent permitted by
18
<PAGE>
applicable law, GTC and Genzyme hereby waive any provision of law that would
render any provision hereof prohibited or unenforceable in any respect.
6.14. Headings. Headings used herein are for convenience only and
shall not in any way affect the construction of, or be taken into consideration
in interpreting, this Agreement.
6.15. Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original, and all of which counterparts,
taken together, shall constitute one and the same instrument.
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as an instrument under seal in their respective corporate names by
their respective authorized representatives as of the date first set forth
above.
GENZYME TRANSGENICS CORPORATION
By /s/ John B. Green
------------------------------------------
John B. Green
Vice President and Chief Financial Officer
GENZYME CORPORATION
By /s/ David J. McLachlan
------------------------------------------
David J. McLachlan
Executive Vice President, Finance, and
Chief Financial Officer
20
<PAGE>
EXHIBIT A
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THE ACT
AND SUCH LAWS OR (1) REGISTRATION UNDER APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED AND (2) AN OPINION OF COUNSEL SATISFACTORY TO THE BORROWER IS FURNISHED
TO THE BORROWER TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED.
CONVERTIBLE REVOLVING CREDIT NOTE
$8,327,000 September 4, 1997
Cambridge, Massachusetts
FOR VALUE RECEIVED, Genzyme Transgenics Corporation, a Massachusetts
corporation (the "Borrower"), hereby unconditionally promises to pay to the
order of Genzyme Corporation (the "Lender"), at the place and times provided in
that certain Amended and Restated Convertible Debt Agreement dated of even date
herewith (as amended from time to time, the "Agreement") between the Borrower
and the Lender, the principal sum of
EIGHT MILLION THREE HUNDRED TWENTY-SEVEN THOUSAND DOLLARS
($8,327,000)
or such lesser amount as may be then outstanding hereunder, in lawful money of
the United States of America, as provided in the Agreement, and in immediately
available funds, and to pay interest on the unpaid principal balance hereof from
time to time outstanding, in like money, for the period commencing on the date
hereof until paid in full, at the Interest Rate on the dates provided in the
Agreement. Each change in the Interest Rate based upon the Prime Rate shall
take effect simultaneously with the corresponding change in such Prime Rate.
All amounts outstanding which are not paid when due and during the period when
any Event of Default shall have occurred and be continuing for a period of 30 or
more days, the principal of all Loans hereunder shall bear interest, after as
well as before judgment, at the Post-Default Rate.
This Convertible Revolving Credit Note is subordinated to certain
indebtedness of the Borrower to BankBoston, N.A., formerly The First National
Bank of Boston (the "Bank") as set forth in a Subordination Agreement between
the Lender and the Bank dated as of March 29, 1996.
This Convertible Revolving Credit Note is the "Revolving Credit Note"
referred to in the Agreement, and is entitled to the benefits of and its subject
to the provisions of the Agreement but neither this reference to the Agreement
nor any provision thereof shall affect or impair the absolute and unconditional
obligation of the undersigned maker of this Convertible Revolving Credit Note to
pay the principal of and interest on this Convertible Revolving Credit Note as
herein provided. All capitalized terms used herein and not specifically
defined shall have the meanings given to them in the Agreement.
<PAGE>
Each Loan made by the Lender pursuant to the Agreement and all payments
made on account of principal and interest shall be recorded by the Lender in its
records and prior to any transfer hereof, endorsed on the grid schedule attached
hereto. The Borrower acknowledges that, notwithstanding the state of the grid
schedule hereto, the Lender's records with respect to Loans and payments made
hereunder shall constitute, in the absence of manifest error, presumptive
evidence of the Borrower's indebtedness from time to time under the Agreement
and hereunder.
Subject to the terms of the Agreement, the outstanding principal and
interest payable hereunder shall be convertible into shares of Common Stock,
$.01 par value per share, of the Borrower at the Conversion Price set forth in
Section 1.7 thereof.
This Convertible Revolving Credit Note may be prepaid at any time without
penalty or fee as provided in the Agreement.
Upon the occurrence of an Event of Default specified in Section 4.1 of the
Agreement, the holder hereof may declare the entire outstanding indebtedness
evidenced by this Convertible Revolving Credit Note, with interest accrued
thereon, to be immediately due and payable as provided in the Agreement.
PRESENTMENT, DEMAND, PROTEST AND NOTICE OF DISHONOR AND NON-PAYMENT ARE
HEREBY WAIVED BY THE UNDERSIGNED.
This Convertible Revolving Credit Note shall be governed by the laws of the
Commonwealth of Massachusetts and shall have the effect of an instrument under
seal.
GENZYME TRANSGENICS CORPORATION
By
-------------------------
John B. Green
Vice President and
Chief Financial Officer
<PAGE>
GRID SCHEDULE
TO CONVERTIBLE REVOLVING CREDIT NOTE
Dated: September __, 1997
- -------------------------------------------------------------------------------
Date of Amount Amount of Amount of Outstanding Notation
Advance/Payment of Advance Principal Paid Interest Paid Credit Made By
- -------------------------------------------------------------------------------
<PAGE>
EXHIBIT B
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THE ACT
AND SUCH LAWS OR (1) REGISTRATION UNDER APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED AND (2) AN OPINION OF COUNSEL SATISFACTORY TO THE BORROWER IS FURNISHED
TO THE BORROWER TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED.
CONVERTIBLE TERM NOTE
$[__________] March 31, 2000
Cambridge, Massachusetts
FOR VALUE RECEIVED, Genzyme Transgenics Corporation, a Massachusetts
corporation (the "Borrower"), hereby unconditionally promises to pay to the
order of Genzyme Corporation (the "Lender") at the place and times provided in
that certain Amended and Restated Convertible Debt Agreement dated as of
September 4, 1997 (as amended from time to time, the "Agreement"), between the
Borrower and the Lender, the principal sum of
[________________________________________________] DOLLARS ($__________)
or, if less, the aggregate unpaid principal amount of the Term Loan made by the
Lender to the Borrower pursuant to the Agreement, in lawful money of the United
States of America, as provided in the Agreement, and in immediately available
funds, and to pay interest on the unpaid principal balance hereof from time to
time outstanding, in like money, for the period commencing on the date hereof
until paid in full, at the Interest Rate on the dates provided in the Agreement.
Each change in the Interest Rate based upon the Prime Rate shall take effect
simultaneously with the corresponding change in such Prime Rate. Principal on
this Convertible Term Note shall be payable quarterly in arrears in 12
consecutive quarterly installments consisting of 11 equal consecutive quarterly
installments of principal in an amount sufficient to fully amortize the original
principal amount of the Term Loan in quarterly payments over a seven-year
period, beginning on June 30, 2000, and payable on each Payment Date thereafter,
plus one final installment on March 31, 2003 which shall include all unpaid
principal, unpaid and accrued interest and any and all other amounts due and
payable hereunder and under the Agreement, and together with interest thereon
from the date hereof payable at the Interest Rate in arrears on each Payment
Date. All amounts outstanding which are not paid when due and during the period
when any Event of Default shall have occurred and be continuing for a period of
30 or more days, the principal of all Loans hereunder shall bear interest, after
as well as before judgment, at the Post-Default Rate.
This Convertible Term Note is subordinated to certain indebtedness of the
Borrower to BankBoston, N.A., formerly The First National Bank of Boston (the
"Bank") as set forth in a Subordination Agreement between the Lender and the
Bank dated as of March 29, 1996.
<PAGE>
This Convertible Term Note is the "Term Note" referred to in the Agreement,
and is entitled to the benefits of and its subject to the provisions of the
Agreement but neither this reference to the Agreement nor any provision thereof
shall affect or impair the absolute and unconditional obligation of the
undersigned maker of this Convertible Term Note to pay the principal of and
interest on this Convertible Term Note as herein provided. All capitalized
terms used herein and not specifically defined shall have the meanings given to
them in the Agreement.
All payments made on account of principal and interest shall be recorded by
the Lender in its records. The Borrower acknowledges that the Lender's records
with respect to payments made hereunder shall constitute, in the absence of
manifest error, presumptive evidence of the Borrower's indebtedness from time to
time under the Agreement and hereunder.
Subject to the terms of the Agreement, the outstanding principal and
interest payable hereunder shall be convertible into shares of Common Stock,
$.01 par value per share, of the Borrower at the Conversion Price set forth in
Section 1.7 thereof.
This Convertible Term Note may be prepaid at any time without penalty or
fee as provided in the Agreement.
Upon the occurrence of an Event of Default specified in Section 4.1 of the
Agreement, the holder hereof may declare the entire outstanding indebtedness
evidenced by this Convertible Term Note, with interest accrued thereon, to be
immediately due and payable as provided in the Agreement.
PRESENTMENT, DEMAND, PROTEST AND NOTICE OF DISHONOR AND NON-PAYMENT ARE
HEREBY WAIVED BY THE UNDERSIGNED.
This Convertible Term Note shall be governed by the laws of the
Commonwealth of Massachusetts and shall have the effect of an instrument under
seal.
GENZYME TRANSGENICS CORPORATION
By
-------------------------------------------
John B. Green
Vice President and Chief Financial Officer
<PAGE>
EXHIBIT 10.5
DEVELOPMENT AND
COMMERCIALIZATION AGREEMENT
THIS DEVELOPMENT AND COMMERCIALIZATION AGREEMENT (together with the
attached Schedule, the "Agreement") is dated as of September 25, 1997 (the
"Effective Date") by and between Genzyme Transgenics Corporation, a
Massachusetts corporation with a business address at Five Mountain Road,
Framingham, Massachusetts 01701-9322 ("GTC") and Advanced Cell Technology, Inc.,
a Delaware corporation with a business address at One Innovation Drive,
Worcester, Massachusetts 01605 ("ACT").
1. Background.
1.1. GTC. GTC is a biopharmaceutical company with experience in the
production of recombinant human proteins/products in the milk of
animals through the application of transgenic technology. GTC has
developed proprietary technologies suitable for the transgenic
production of recombinant human serum albumin ("hSA"), and has a
program to produce hSA in the milk of transgenic cattle.
1.2. ACT. ACT is engaged in, among other fields, the research and
development of [*] and the cloning of transgenic cattle derived
therefrom.
1.3. hSA Project. GTC and ACT are interested in the development of
Transgenic Cattle (defined below) generated through application of
the ACT Technology (defined below) which produce hSA, in their milk,
and the commercialization of such transgenically produced hSA.
1.4. Other Projects. GTC and ACT also are interested in the development
of Transgenic Cattle generated through application of the ACT
Technology which produce other recombinant proteins/products in their
milk, and the commercialization of such transgenically produced
proteins/products.
1.5. Exclusive Relationship with GTC. Subject to the terms and conditions
of this Agreement, ACT shall work exclusively with GTC in the Field
(defined below).
2. Definitions. As used in this Agreement, the following terms shall have the
meanings set forth below.
2.1. "Affiliate" means any corporation, company, partnership, joint venture
and/or firm which controls, is controlled by or is under common
control with a Party. For purposes of this Section 2.2, "control"
means (a) in the case of corporate entities, direct or indirect
ownership of more than fifty percent (50%) of the stock or shares
entitled to vote for the election of directors; and (b) in the case of
non-corporate entities, direct or indirect ownership of more than
fifty
*Confidential Treatment has been requested for the marked portion.
<PAGE>
percent (50%) of the equity interest with the power to direct
the management and policies of such noncorporate entities.
Notwithstanding the foregoing, Genzyme Corporation shall be deemed an
Affiliate of GTC for purposes of this Agreement.
2.2. "ACT Patent Rights" means any and all patents and patent applications
owned or licensed by ACT in which ACT has a licensable interest and
which exists as of the date of this Agreement or which come into
existence during the term of this Agreement which are useful,
necessary or required for the Parties to perform their respective
obligations under this Agreement. ACT Patent Rights shall include any
reissues, extensions (or other governmental acts which effectively
extend the period of exclusivity by the patent holder), substitutions,
confirmations, registrations, revalidations, additions, continuations,
continuations-in-part, divisions or foreign counterparts of or to the
foregoing patent rights. ACT Patent Rights include, without
limitation, the patents and patent applications listed on Schedule A
attached to this Agreement.
2.3. "ACT Technology" means the following which are owned or controlled by
ACT during the term of this Agreement which are useful, necessary or
required for the Parties to perform their respective obligations under
this Agreement: confidential information, knowledge and data,
including but not limited to, inventions (whether patentable or not),
trade secrets, ideas, designs, drawings, know-how, processes,
techniques and like technological information pertaining to the
derivation, maintenance and use of [*] for the generation of
transgenic or other cattle. Additionally, ACT Technology shall
include any process described within the ACT Patent Rights.
2.4. "BLA" means a United States biologics license application or its
foreign counterparts.
2.5. "Confidential Information" includes, without limitation, any
scientific, technical, trade or business information disclosed by one
party to the other which is treated or otherwise identified by the
party providing such information as confidential or proprietary.
"Confidential Information" does not include information which (a) was
known to the receiving Party at the time it was disclosed, other than
by previous disclosure by the disclosing Party, as evidenced by
written records at the time of disclosure; (b) is at the time of
disclosure or later becomes publicly known under circumstances
involving no breach of this Agreement; (c) is lawfully and in good
faith made available to the receiving Party by a third party who did
not derive it from the disclosing Party and who imposes no obligation
of confidence on the receiving Party; or (d) is developed by the
receiving Party independent of any disclosure by the disclosing Party.
2.6. "Developments" include, without limitation, discoveries, inventions,
*Confidential Treatment has been requested for the marked portion.
<PAGE>
developments, patents and patent rights, know-how, trade secrets,
techniques, methodologies, modifications, innovations, improvements,
writings, documentation, data and rights (whether or not protectible
under state, federal, or foreign patent, trademark, copyright or
similar laws) that are conceived, discovered, invented, developed,
created, made or reduced to practice by or on behalf of one or both of
the Parties in performing their respective obligations under this
Agreement.
2.7. "FDA" means the United States Food and Drug Administration.
2.8. "Field" means the manufacture, use, import, sale or other
commercialization of (a) recombinant human proteins/products which are
produced in the milk of Transgenic Cattle for pharmaceutical,
Nutraceutical and/or other therapeutic uses, (b) other recombinant
proteins/products which are produced in the milk of Transgenic Cattle
for such uses in humans, and (c) the Transgenic Cattle which produce
such proteins/products. The Field does not include the development of
Transgenic Cattle for any other purposes, including, without
limitation, the development of cattle with improved agricultural
and/or veterinary characteristics (e.g., milk yields, animal size or
disease resistance).
2.9. "GTC Technology" means the following which are owned or controlled by
GTC: confidential information, knowledge and data, including but not
limited to, inventions (whether patentable or not), trade secrets,
ideas, designs, drawings, know-how, processes, techniques and like
technological information pertaining to the transgenic production of
recombinant proteins/products in the milk of transgenic animals, which
are useful, necessary or required for the Parties to perform their
respective obligations under this Agreement.
2.10. hSA Project" means the production, through application of the
ACT Technology, of Transgenic Cattle which contain the hSA
transgene and express hSA in their milk, as set forth on the hSA
Project Summary attached to this Agreement as Schedule B.
2.11. Net Sales" means the aggregate United States dollar equivalent
of gross revenues derived by or paid to GTC (or its Affiliates,
if applicable) from or on account of the sales or transfers of
the Transgenic Cattle developed by ACT under this Agreement, or
the proteins/products produced in the milk of such Transgenic
Cattle, to third parties which are not Affiliates, less
(a) reasonable credits or allowances, if any, actually granted on
account of price adjustments, recalls, rejection or return of
items previously sold, (b) excises, sales taxes, value added
taxes, consumption taxes, duties or other taxes imposed upon and
paid with respect to such sales (excluding income or franchise
taxes of any kind) and (c) separately itemized insurance and
transportation costs incurred in shipping such proteins/products
to such third parties. No deduction shall be
-3-
<PAGE>
made for any item of cost incurred by GTC in preparing, manufacturing,
shipping or selling such proteins/products except as permitted
pursuant to clauses (a), (b) and (c) of the foregoing sentence.
In addition, in order to ensure the full royalty payments contemplated
under this Agreement, in the event any Transgenic Cattle or the
proteins/products produced in the milk of such Transgenic Cattle are
sold to any Affiliate or corporation, firm or association with which
GTC has an agreement, understanding or other arrangement with respect
to other forms of consideration (for example, an option to purchase
stock or actual stock ownership; an arrangement involving division of
profits or special rebates or allowances) royalties shall be
calculated for sales of such Transgenic Cattle/proteins/products
based upon the fair market value of such Transgenic
Cattle/proteins/products, as determined by the Liaison Committee.
Notwithstanding the foregoing, no transfer of such proteins/products
for testing, pre- clinical, clinical or developmental purposes or as
samples shall be considered a sale hereunder for accounting and
royalty purposes.
2.12. "Nutraceutical" means any food or other preparation intended for
consumption by humans which, when taken into the human body, (a)
serves to nourish or build up tissues or supply energy and/or (b)
maintains, restores or supports adequate nutritional status or
metabolic function.
2.13. "Party" means GTC or ACT; "Parties" means GTC and ACT.
2.14. "Transgenic Cattle" means cattle (including, without limitation,
transgenic eggs, semen and embryos and progeny thereof) that are
produced under this Agreement (a) with or by use of the ACT
Technology, (b) are transfected with GTC's recombinant DNA
constructs and (c) are used for the sole purpose of transgenic
production of recombinant proteins/products in milk.
3. Liaison Committee. Within thirty (30) days of the Effective Date, GTC and
ACT shall form a committee (the "Liaison Committee") to coordinate the
Parties' activities under this Agreement. The Liaison Committee shall
consist of four (4) members, two (2) of whom shall be designated by GTC and
two (2) of whom shall be designated by ACT. Each Party may assign its
members to the Liaison Committee as it deems appropriate, and designated
substitutes may represent Liaison Committee members at regularly scheduled
meetings at the discretion of the substituting Party. The Liaison
Committee will meet at least once per calendar quarter, alternating between
GTC and ACT locations, to assess the progress under this Agreement. In
addition to reports to, and meetings of, the Liaison Committee, there will
be frequent communications among the scientists and project managers to
keep ACT and GTC advised of current activities of the Parties under this
Agreement.
-4-
<PAGE>
4. hSA Project.
4.1. hSA Project Summary. Immediately upon execution of this Agreement,
the Parties will initiate the hSA Project pursuant to the hSA Project
Summary attached to this Agreement as Schedule B. The hSA Project
Summary may be modified only by agreement of the Parties.
4.2. Responsibilities of ACT for hSA Project.
a. Conduct of the hSA Project. ACT shall provide qualified
technical and managerial staff to conduct the hSA Project. ACT
shall provide a team of at least two individuals (the "ACT's hSA
Project Team") to supply expertise in the areas of [*].
b. Provision of Facilities. ACT shall provide all facilities and
equipment acceptable to GTC which are necessary for the conduct
of the hSA Project, including space, housing and utilities
services necessary to maintain [*]. All bovine stock for the hSA
Project will be housed at a facility controlled by ACT or, with
GTC's prior written consent, an ACT designated facility under the
control of a third party.
c. Sources of Cattle. ACT shall provide heifers selected in
accordance with good agricultural practice ("GAP") criteria
provided by GTC and agreed upon by ACT, as are necessary to
conduct the hSA Project. All Transgenic Cattle used and/or
produced by ACT under this Agreement shall be free from bovine
spongiform encephalopathy and/or other infectious agents. If, at
any time during the term of this Agreement, ACT and/or GTC have
any reason to believe (or have any reason to conclude that a
governmental regulatory authority believes) that bovine
spongiform encephalopathy and/or other infectious agents have or
may be detected in cattle in the United States, ACT will promptly
institute procedures acceptable to the Parties to ensure the
health of the Transgenic Cattle used and/or produced by ACT under
this Agreement.
d. [*]
e. Care of Animals. ACT or its designee shall have sole
responsibility for the care and maintenance of all bovine stock
used and generated during the hSA Project, as defined in the hSA
Project Summary. ACT shall also provide all required feed and
veterinary care.
f. Animal Welfare Regulations. The hSA Project shall undergo
then-applicable animal welfare and animal research committee
review and approval by GTC and ACT in accordance with
then-applicable standards.
-5-
*Confidential Treatment has been requested for the marked portion.
<PAGE>
g. Compliance with Other Regulations. ACT shall conduct all aspects
of the hSA Project in full compliance with USDA, FDA and other
regulatory requirements for the production of clinical-grade
proteins/products in the milk of transgenic animals; provided,
however, in the event that regulatory requirements significantly
and materially change during the term of this Agreement for the
hSA project or other projects under Section 5, below, such that
ACT's compliance therewith would result in significantly
increased costs for ACT, then such change in regulatory
requirements shall be deemed an event of force majeure under this
Agreement; and further provided, that in the event of force
majeure under this Section, GTC, at its option, may elect the
remedies set forth in Section 7.10 of this Agreement for any
project for which ACT has declared an event of force majeure.
GTC shall have the ongoing right to audit ACT's compliance with
this Section and other Sections of the Agreement to ensure such
compliance.
4.3. Responsibilities of GTC for hSA Project.
a. GTC's hSA Project Team. GTC shall provide a team of two
individuals ("GTC's hSA Project Team") to supply expertise in
transgenic expression of hSA in the milk of cattle. GTC's hSA
Project Team shall consult with ACT's hSA Project Team in the
transfection of hSA constructs into [*].
b. DNA Constructs. GTC's hSA Project Team shall assist ACT's hSA
Project Team by providing all necessary DNA constructs jointly
deemed necessary by the Parties for use in the hSA Project,
including, without limitation, the [*] and/or other suitable
selectable markers.
c. Identification of Transgenic Lines and Animals. GTC shall
provide all materials and resources necessary for the
identification and evaluation of [*]. Such materials shall
include, without limitation, DNA probes and polymerase chain
reaction ("PCR") primers.
d. Other Expertise. GTC's hSA Project Team shall provide additional
expertise, as reasonably necessary, during the course of the hSA
Project, including, without limitation, lactation induction, and
pharmaceutical protein purification, characterization and
regulatory advice.
e. Characterization of Transgenic Cattle. Following the birth of
Transgenic Cattle generated during the hSA Project, GTC shall
-6-
*Confidential Treatment has been requested for the marked portion.
<PAGE>
characterize individual animals derived from specific recombinant
cell lines, and elect whether to expand the Transgenic Cattle
from select cell lines. Characterization shall be comprised of
genotyping, animal health and measurement of the levels of hSA in
the induced and/or natural lactation of such Transgenic Cattle.
4.4. hSA Project Compensation. GTC shall pay ACT the following
compensation in consideration of ACT's work under the hSA Project:
a. Base Fee. GTC shall pay ACT a [*] within [*].
b. [*]. GTC shall pay ACT a [*] payable in up to [*] with each
payment due within [*].
c. Success Fee. GTC shall pay ACT a [*] upon achievement by ACT of
[*]. The success fee shall be paid within [*].
d. [*].
e. [*].
4.5. hSA Commercialization. Following characterization of the Transgenic
Cattle generated during the hSA Project, GTC may elect from the
following options:
a. ACT to Expand Herd and Produce hSA-Containing Milk. Subject to
ACT's consent, GTC may contract with ACT for the expansion of the
Transgenic Cattle herd and the production of hSA in the milk of
the Transgenic Cattle generated through the use of the ACT
Technology. In such event, the Parties shall enter a separate
supply agreement, which shall include among its terms, without
limitation, the following provisions:
a. Non-Commercial Supply. ACT shall supply GTC exclusively
with hSA-containing milk from Transgenic Cattle, at
competitive prices to be agreed upon by the Parties, for
use solely by GTC, its Affiliates and corporate partners in
processing and testing, and for the conduct of clinical
trials (i.e., for non-commercial purposes). The form of
such milk and the specifications thereof will be determined
by the Liaison Committee.
b. Herd Expansion Costs. GTC shall pay or reimburse ACT, at
commercially reasonable and competitive prices to be agreed
upon by the Parties, for the herd expansion necessary for
ACT to supply GTC with hSA-containing milk for
-7-
*Confidential Treatment has been requested for the marked portion.
<PAGE>
non-commercial and commercial purposes, and for any other
scale-up expenses authorized by the Liaison Committee.
c. Commercial Supply. ACT shall use commercially reasonable
and diligent efforts (or shall cause a third party
acceptable to GTC to use commercially reasonable and
diligent efforts) to (a) develop a number of Transgenic
Cattle expected to produce sufficient quantities of hSA to
meet GTC's (and its Affiliates' and corporate partners')
commercial and regulatory requirements for hSA and (b)
supply GTC and its Affiliates and corporate partners with
the quantities of hSA-containing milk for such commercial
purposes, at a commercially reasonable price per gram to be
separately agreed to by the Parties. Unless otherwise agree
to by the Parties, GTC, at its cost and expense, will
process the hSA-containing milk supplied by ACT and
formulate the hSA contained therein. GTC shall conduct all
necessary testing and other studies, and shall make all
regulatory filings, necessary to market and sell
transgenically-produced hSA. ACT shall provide GTC with
data which relates to hSA produced under this Agreement and
ACT's performance of its obligations under this Agreement
which is reasonably necessary to support such regulatory
filings.
In the event GTC elects to have ACT supply it with
hSA-containing milk for commercial purposes, the Liaison
Committee shall agree upon terms regarding (i) the form of
the hSA to be supplied (e.g., hSA-containing whole milk,
freeze-dried milk, condensed milk or spray-dried milk); (ii)
the specifications for such hSA and milk and the resulting
price to be paid therefor; (iii) QA/release testing
requirements; (iv) the certificate of analysis; (v) GTC's
acceptance testing; (vi) quarterly twelve-month rolling
forecast procedures; (vii) order and delivery times; and
(viii) other usual and customary terms.
b. GTC to Take Possession of Transgenic Cattle. As set forth in
Section 7.1, below, all Transgenic Cattle produced by ACT under
this Agreement are owned by GTC, and GTC may take possession of
some or all of the Transgenic Cattle produced by ACT and may
maintain (or have a third party maintain, with ACT's reasonable
assistance, as necessary, with such assistance to be paid for by
GTC based upon agreements between the Parties, following the
procedures set forth in Section 4.4(d) hereof) such Transgenic
Cattle at any location; provided, however, (i) GTC shall give ACT
the first opportunity (either directly or with a collaborator
acceptable to GTC) to expand the herd and produce hSA in the milk
-8-
<PAGE>
of Transgenic Cattle, and to supply such milk to GTC, as provided
in Section 4.5(a), above, and (ii) to the extent GTC takes
possession of such Transgenic Cattle, (A) GTC shall only use
such Transgenic Cattle for the production of hSA from milk and
(B) GTC may expand such Transgenic Cattle herd using breeding or
other techniques which do not use the ACT Patent Rights. For
avoidance of doubt, however, the sale of hSA produced in the milk
of such Transgenic Cattle shall be subject to royalty payments
to ACT, as set forth in Section 7.9, below.
c. Discontinue Herd Expansion. GTC may discontinue further herd
expansion from such Transgenic Cattle.
5. Other Projects.
5.1. Development and Commercialization. In addition to the hSA Project,
ACT shall collaborate with GTC on the production of (a) other
recombinant proteins/products which are produced in the milk of
Transgenic Cattle for pharmaceutical and/or Nutraceutical uses in the
Field, and (b) the Transgenic Cattle which produce such recombinant
proteins/products, on the basic terms set forth in this Agreement
(including, without limitation, the terms for hSA set forth in Section
4, above; provided, however, the Parties shall adjust the amount and
timing of payments up or down taking into account the size, complexity
and commercial nature of each project) and on such other reasonable
and customary terms which may be negotiated by the Parties in good
faith prior to the commencement of each separate project. The
corporate form of such collaborations shall be subject to GTC's
requirements under contracts with third parties. In the course of such
collaboration, GTC will not require ACT to make significant capital
investments or similar long-term expenditure commitments, unless GTC
has first (i) discussed with ACT the need for capital investment and
other expenditures; (ii) identified appropriate schedules and plans
for the use of such capital investments and other expenditures; and
(iii) provided ACT with reasonable business commitments for the use of
such investments and other expenditures in collaborative projects
under this Agreement.
5.2. ACT Exclusivity in Field; Project Scope.
a. Exclusivity. During the term of this Agreement, ACT shall work
exclusively with GTC in the Field, subject to the conversion
provision set forth in Section 5.3, below.
b. Scope. GTC shall use commercially reasonable efforts to
collaborate with ACT on commercially available projects which
-9-
<PAGE>
generate the maximum achievable payments to ACT per project per
year, such that ACT shall have an opportunity to work efficiently
by conducting a limited number of significant projects in return
for the annual payments set forth below.
5.3. Minimum Annual Payments.
a. Minimum Annual Payments for Initial Two Year Period; Limited
Right to Cease Such Payments. GTC agrees that it shall make
minimum annual payments of not less than Two Million Dollars
($2,000,000) per year to ACT for calendar years 1998 and 1999
(the "Initial Two Year Period"), except as follows: If, by
reason of force majeure, scientific/technical difficulties or
legal proceedings or the threat of legal proceedings (for
example, without limitation, a patent infringement action brought
by a third party), ACT is unable to perform its obligations under
this Agreement, and such inability continues for a period of six
(6) months, GTC shall not be required to continue such minimum
annual payments to ACT, and ACT shall have the right at any time
thereafter, in its sole discretion and upon sixty (60) days prior
written notice to GTC, to convert the exclusive arrangement in
the Field to non-exclusive only with respect to any future
proteins/products from Transgenic Cattle developed by ACT for GTC
under this Agreement; provided, however, GTC may, at its option,
preserve the exclusivity of its arrangement with ACT in the Field
for such future proteins/products if, within said 60 day period,
it pays to ACT the balance of the minimum annual payments due for
such calendar year. ACT's arrangement with GTC shall remain
exclusive for any proteins/products for which GTC has paid ACT
development or other payments in a significant funded project
under this Agreement.
b. Minimum Annual Payments for Subsequent Three Year Period; Limited
Right to Cease Such Payments. GTC agrees that it shall make
minimum annual payments of not less than Two Million Dollars
($2,000,000) per year to ACT for calendar years 2000, 2001 and
2002 (the "Subsequent Three Year Period"), except as follows: If
(i) by reason of force majeure, scientific/technical difficulties
or legal proceedings or the threat of legal proceedings (for
example, without limitation, a patent infringement action brought
by a third party), ACT is unable to perform its obligations under
this Agreement, or (ii) ACT has not achieved milestones (to be
set forth on Schedule B on a protein-by protein basis),
including, but not limited to, technical success defined to
include natural lactation of Transgenic Cattle for any one of the
then-existing projects contracted to ACT under this Agreement
beginning in calendar year 2000, then GTC shall not be required
-10-
<PAGE>
to continue such minimum annual payments to ACT, and ACT shall
have the right at any time thereafter, in its sole discretion and
upon sixty (60) days prior written notice to GTC, to convert the
exclusive arrangement in the Field to non-exclusive only with
respect to any future proteins/products from Transgenic Cattle
developed by ACT for GTC under this Agreement; provided, however,
GTC may, at its option, preserve the exclusivity of its
arrangement with ACT in the Field for such future
proteins/products if, within said 60 day period, it pays to ACT
the balance of the minimum annual payments due for such calendar
year. ACT's arrangement with GTC shall remain exclusive for any
proteins/products for which GTC has paid ACT development or other
payments in a significant funded project under this Agreement.
c. Following Subsequent Three Year Period. Beginning in calendar
year 2003, GTC shall have the option to continue the exclusive
arrangement in the Field by making minimum annual payments of not
less than [*] per year to ACT. In the event GTC elects for any
reason not to make such minimum annual payments, it shall provide
ACT with written notice of such election on or before October 1st
in the year prior to the year in which such minimum annual
payments would otherwise be due. If ACT has not received such
written notice from GTC on or before October 1st in a given
calendar year, ACT shall contact GTC within ten (10) business
days of October 1st regarding GTC's intention or lack of
intention to make minimum annual payments for the following
calendar year. Within ten (10) additional business days of
receipt of this inquiry from ACT, GTC shall confirm in writing
its intentions with respect to such annual minimum payments. If,
following the above-stated procedure, GTC has affirmatively
elected not to make such minimum annual payments for the next
calendar year, then ACT shall have the right, at any time in its
sole discretion and upon sixty (60) days prior written notice to
GTC, to convert the exclusive arrangement in the Field to
non-exclusive only with respect to any future proteins/products
from Transgenic Cattle developed by ACT for GTC under this
Agreement. ACT's arrangement with GTC shall remain exclusive for
any proteins/products for which GTC has paid ACT development or
other payments in a significant funded project under this
Agreement.
d. Credits. Unless otherwise adjusted by the Liaison Committee to
fairly balance the Parties' interests, up to [*] in minimum
annual payments made by GTC under this Section 5.3 in any year
solely to preserve exclusivity in the Field shall be creditable
against work performed or to be performed by ACT, and against
future annual obligations incurred by GTC, on or before October
1st in the next calendar year.
-11-
*Confidential Treatment has been requested for the marked portion.
<PAGE>
e. Source of Minimum Annual Payments. The source of the minimum
annual payments set forth in this Section may include, without
limitation, funds from the hSA Project (other than funds payable
under Sections 4.4(a) and (b), above), new project fees, research
and development payments (other than success fees paid under
Section 5.4), royalties on product sales, or any other payments
made to ACT by GTC which specifically and directly relate to its
work under this Agreement.
f. Minimum Annual Payments Subject to Satisfaction of Technical
Requirement. GTC's obligation to make minimum annual payments to
ACT under this Section 5.3 is subject to ACT satisfying the
following requirement: ACT, on an ongoing basis, must provide
GTC with sufficient technical information regarding ACT's use and
development of the ACT Patent Rights and ACT Technology in the
Field, such that the Parties can negotiate a separate Schedule B
for each project brought to ACT by GTC under this Agreement.
5.4. Success Fee. GTC shall pay ACT a success fee upon achievement by ACT
of an agreed-upon expression level for each protein produced by ACT or
other appropriate success criteria agreed to by the Parties prior to
commencement of the particular protein production project. The
success fee shall be not less than [*], and may be increased by
agreement of the Parties.
6. Option for Rights to Transgenic Goats and Rabbits; Equity Investment.
6.1. Option for Rights to Transgenic Goats and Rabbits. GTC shall have an
option, exercisable by written notice to ACT during the first eighteen
(18) months of this Agreement, to expand the scope of this Agreement,
including, without limitation, the license set forth in Section 7.6,
below, to cover the production, using the ACT Patent Rights and the
ACT Technology, of recombinant proteins/products in the milk of cloned
transgenic goats and rabbits for use in the Field, on reasonable and
customary terms and conditions to be negotiated by the Parties.
6.2. Equity Investment. Subject to valuation and other terms to be agreed
to by the Parties, including, without limitation, restrictions on
ACT's rights to sell any such GTC stock, and customary registration
and participation rights with respect to any private placement or
public offering of securities by ACT, GTC shall acquire equity in ACT,
valued at [*], for cash or GTC stock. GTC shall make any such
investment (a) within thirty (30) days of the date ACT notifies GTC,
and the Liaison Committee confirms, the birth of the first of the
Transgenic Cattle produced by ACT for GTC under this Agreement or (b)
December 31, 1998, whichever is earlier.
-12-
*Confidential Treatment has been requested for the marked portion.
<PAGE>
7. Proprietary Rights.
7.1. GTC. GTC shall own the GTC Technology, all proprietary DNA
constructs, all recombinant cell lines generated with GTC's DNA
constructs, and the Transgenic Cattle produced during the hSA Project
and other projects under this Agreement.
7.2. ACT. ACT shall own the ACT Patent Rights and ACT Technology, together
with any improvements thereto.
7.3. Joint Developments. The Parties shall jointly own all Developments
conceived, discovered, invented, developed, created, made or reduced
to practice by both Parties in the Field in performance of their
obligations under this Agreement. Ownership of Developments shall be
determined according to U.S. patent law.
7.4. Filing and Maintenance of Patents on Joint Developments. GTC shall
have the right to decide whether or not to seek or continue to seek or
maintain patent protection on jointly-developed Developments in any
country in the world, and shall have the right, jointly in its and
ACT's name, to file for, procure, and maintain patents on any such
Developments in any country in the world, with the expenses being
borne by GTC. If GTC elects not to seek or continue to seek or
maintain patent protection on any jointly- developed Developments in
any country in the world, GTC promptly shall notify ACT thereof in
writing, and ACT shall have the right, in its name, to file, procure
and maintain in such countries patents on such jointly-developed
Developments, with the expenses being borne by ACT. GTC agrees to
advise ACT in writing of all decisions taken under this Subsection in
a timely manner, but in any case at least ninety (90) days prior to
the time any action is required, in order to allow ACT to decide to
take any such action, and to take such action, related to the
jointly-developed Developments.
7.5. Patent Cooperation. Each Party shall provide the other Party with
copies of all substantive communications from all patent offices
regarding applications or patents on any jointly-developed
Developments promptly after the receipt thereof. Each Party shall
provide the other Party with copies of all proposed substantive
communications to such patent offices regarding applications or
patents on any such jointly-developed Developments in sufficient time
before the due date in order to enable the other Party an opportunity
to comment on the content thereof. Each Party shall make available to
the other Party or its authorized attorneys, agents, or
representatives, such of its employees whom the other Party in its
reasonable judgment deems necessary in order to assist it in pursuing
patent protection for the jointly-developed Developments. Each Party
shall sign or use its best efforts to have signed (at no cost to the
other Party) all legal documents necessary to file and prosecute
patent applications or to obtain or maintain patents on any
jointly-developed Developments.
-13-
<PAGE>
7.6. License. In order to enable GTC to perform its obligations under, and
realize the benefits of, this Agreement, ACT grants to GTC and its
Affiliates:
a. an exclusive, worldwide, royalty-bearing license under the ACT
Patent Rights; and
b. an exclusive, worldwide, royalty-bearing license to use the ACT
Technology,
including the right to grant sublicenses, limited to the Field, for
the sole and exclusive purposes of (i) using, importing, selling and
have sold, the Transgenic Cattle produced by ACT under this Agreement
and (ii) making, having made, using, importing, selling and have sold,
the proteins/products produced in such Transgenic Cattle, on the basic
terms set forth in this Agreement and on such other reasonable and
customary terms which may be negotiated by the parties in good faith.
The licenses granted pursuant to Section 7.6.a shall continue in
effect until the expiration of the last patent licensed to GTC
hereunder. The licenses granted pursuant to Section 7.6.b. shall
continue in effect for twelve (12) years from the date of first
commercial sale of product developed by or on behalf of ACT under this
Agreement; provided, however, GTC shall have a renewable right to
extend such licenses for successive twelve (12) year terms by delivery
of written notice to ACT.
7.7. Conversion to Non-Exclusive Licenses. In the event that GTC fails to
meet the minimum annual payment requirements set forth in Section 5.3,
above, ACT shall have the right at any time thereafter, upon sixty
(60) days prior written notice to GTC, to convert the license set
forth in Section 7.6, above, from exclusive to non-exclusive with
respect to any proteins/products from Transgenic Cattle which, as of
such date, are not being developed by ACT for GTC in a significant
funded project under this Agreement; provided, however, GTC may, at
its option, preserve the exclusivity of such license if, within said
60 day period, it pays to ACT the balance of the annual minimum
purchase requirement then due for such calendar year; and further
provided, that GTC's license shall remain exclusive with respect to
all proteins/products from Transgenic Cattle previously developed by
ACT for GTC in a significant funded project under this Agreement.
7.8. Commercialization Fee. For each transgenic protein produced in
Transgenic Cattle developed by ACT under this Agreement, GTC shall
pay to ACT a commercialization fee equivalent to [*] of GTC's
-14-
<PAGE>
estimated sales of each such protein during the fifth (5th) year
following commercial launch of such protein, with such
commercialization fee not to exceed [*] for any one transgenic
protein. Such estimate shall be made by GTC in good faith using its
best sales projections, and shall be payable to ACT within ninety (90)
days of the date GTC's BLA for each such protein is approved by the
FDA.
7.9. Royalties. GTC shall pay to ACT the following royalties:
a. Milk from Transgenic Cattle Developed by ACT. GTC shall pay ACT
the following applicable percentage of Net Sales during the term
of the licenses granted to GTC under Section 7.6, above:
[*]
b. Milk from Transgenic Cattle Developed by Third Parties. In the
event ACT undertakes a development project for GTC under this
Agreement to produce a particular protein in the milk of
Transgenic Cattle, and GTC does not use the resulting Transgenic
Cattle to produce such protein, but instead produces such protein
in cattle developed by GTC outside of this Agreement, then GTC
shall pay to ACT a [*] royalty on Net Sales of proteins/products
from milk produced in such cattle.
c. Royalty Rate upon Conversion to Non-Exclusive. In the event
ACT's exclusive arrangement with GTC in the Field converts to
nonexclusive, as set forth in Section 7.7, above, the royalty
payable to ACT on Net Sales of proteins/products from Transgenic
Cattle developed by ACT in projects which commenced following
such conversion to nonexclusive shall be fifty percent (50%) of
the royalty rates set forth above.
d. Audits. ACT and/or its qualified designated representative shall
have the right to audit, in confidence, those books and records
of GTC which relate to amounts payable to ACT under this Section
7.9. Such audits shall require reasonable prior notice to GTC
and may not occur more than once per calendar year.
7.10. Failure or Inability to Perform.
a. Causes of Nonperformance. If, for any reason, and at any time
any of the following events occur, the Parties immediately shall
meet to determine and agree upon what actions ACT will take, to
GTC's reasonable satisfaction, in response to the such
occurrence:
-15-
*Confidential Treatment has been requested for the marked portion.
<PAGE>
i. if ACT is unable to develop and produce cloned Transgenic
Cattle for GTC under this Agreement, and such inability
lasts for more than one hundred twenty (120) days longer
than the agreed-upon date of delivery of such Transgenic
Cattle;
ii. Subject to Section 5.1, ACT is unable or unwilling to make
the investments in the physical and human resources deemed
reasonably necessary by the Liaison Committee for ACT to
perform its obligations under this Agreement;
iii. failure by ACT to institute appropriate procedures against
bovine spongiform encephalopathy and/or other similar
infectious agents, as set forth in Section 4.2(c), above; or
iv. any person or entity not previously an ACT Affiliate
acquires all or a controlling interest in the equity of ACT
or any of its Affiliates, or of all or substantially all of
the assets of ACT, without the agreement of such party to be
bound by this Agreement.
b. Performance Failure. If ACT fails to take appropriate action, to
GTC's reasonable satisfaction, in response to the occurrence of
any of the events listed in Section 7.10(a), above, within sixty
(60) days of the occurrence of such event, or if at any time ACT
ceases its operations, GTC may declare that a "Performance
Failure" has occurred. GTC shall notify ACT promptly in writing
upon the declaration or occurrence of any Performance Failure.
In the event of a Performance Failure, GTC may, at its sole
option and without prejudice to any other remedy it may have,
terminate this Agreement under Section 10, below, and thereafter
manufacture itself or have manufactured all or any part of its
requirements for Transgenic Cattle, and/or the proteins/products
produced in such Transgenic Cattle, utilizing the ACT Patent
Rights and ACT Technology. ACT, at GTC's cost and expense, shall
immediately transfer to GTC the exclusive right to use the ACT
Patent Rights and ACT Technology in the Field. In addition, ACT,
at GTC's own cost and expense, will promptly and diligently
provide GTC with the all reasonable technical assistance, so that
GTC may use the ACT Patent Rights and ACT Technology to develop,
use, conduct preclinical and clinical studies for, register for
governmental medical or pricing approval, manufacture, have
manufactured, distribute and/or sell the proteins/products
produced in the milk of cloned Transgenic Cattle. In the event
GTC elects to manufacture or have a third party manufacture
cloned Transgenic Cattle and/or the proteins/products produced in
such clone Transgenic Cattle, GTC shall pay ACT a fee, to be
-16-
<PAGE>
negotiated by the Parties, as compensation to ACT for GTC's use
of such manufacturing rights.
8. Confidential Information.
8.1. Nondisclosure of Confidential Information. Neither party shall
directly or indirectly publish, disseminate or otherwise disclose,
deliver or make available to any person outside its organization any
of the other Party's Confidential Information. Each Party may
disclose the other Party's Confidential Information to persons within
its organization and to its Affiliates which have a need to receive
such Confidential Information in order to further the purposes of this
Agreement and who/which are bound to protect the confidentiality of
such Confidential Information, as set forth in Section 8.3, below.
Each Party may disclose the other Party's Confidential Information to
a governmental authority or by order of a court of competent
jurisdiction, provided that such disclosure is subject to all
applicable governmental or judicial protection available for like
material and reasonable advance notice is given to the other Party.
8.2. Use of Confidential Information. Each Party shall use the other
Party's Confidential Information solely for the purposes contemplated
in this Agreement or for such other purposes as may be agreed upon by
the Parties in writing.
8.3. Agreements with Personnel and Third Parties. The Parties have or
shall obtain agreements with all personnel and third parties who will
have access to the other Party's Confidential Information which impose
comparable confidentiality obligations as are set forth in this
Agreement on such personnel and third parties.
9. Warranties and Indemnity.
9.1. Warranty by ACT. ACT represents and warrants to GTC that, with
respect to the hSA and other proteins/products produced by or on
behalf of ACT under this Agreement, and the Transgenic Cattle which
produce such hSA and other proteins/products:
a. ACT shall have the unrestricted right to transfer good and
marketable title to such proteins/products, the milk containing
such proteins/products and/or the Transgenic Cattle in which such
proteins/products and milk are produced, to GTC pursuant to this
Agreement, free and clear of any lien, charge or encumbrance
created or permitted by ACT;
-17-
<PAGE>
b. such proteins/products, milk and Transgenic Cattle conform with
the applicable specifications established by the Liaison
Committee;
c. such proteins/products and milk are not (i) adulterated or
misbranded within the meaning of the Federal Food, Drug and
Cosmetic Act, as amended, or within the meaning of any applicable
state or municipal law in which the definitions of adulteration
and misbranding are substantially the same as those contained in
the Federal Food, Drug and Cosmetic Act, as such Act and laws are
constituted and effective at the time of delivery, or (ii) an
article which may not be introduced into interstate commerce
under the provisions of Sections 404, 505 or 512 of such Act, as
amended;
d. such proteins/products, milk and Transgenic Cattle have been
manufactured in accordance with all current material applicable
federal, state and local laws and regulations relating to ACT's
activities under this Agreement, including without limitation
applicable GMPs and GAPs; and
e. with respect to the ACT Patent Rights and ACT Technology only,
the commercialization of such proteins/products will not infringe
the patent or other intellectual property rights of any third
party
ACT further represents and warrants to GTC that the execution of, and
performance of the transactions contemplated by, this Agreement have
been approved by the ACT board of directors and will not conflict with
or result in any breach of any of the terms, conditions or provisions
of, or constitute a default under, any agreement to which ACT is a
party or by which ACT is bound.
9.2. Indemnification by ACT. ACT agrees to defend, indemnify and hold
harmless GTC and its Affiliates, agents, directors, officers and
employees, at ACT's cost and expense, from and against any and all
losses, costs, liabilities, damages, fees and expenses, including
reasonable attorneys' fees and expenses (collectively, "Liabilities")
incurred in connection with any claim, action or proceeding arising
out of or in connection with ACT's breach of this Agreement,
including, without limitation, the warranties set forth herein,
regardless of the form in which any such claim is made; provided that
such defense and indemnification shall not apply to the extent that
the existence or incurrence of any such Liabilities is attributable to
any negligence or willful misconduct of, or material breach of this
Agreement by, GTC.
9.3. Indemnification by GTC. GTC agrees to defend, indemnify and hold
harmless ACT and its Affiliates, agents, directors, officers and
-18-
<PAGE>
employees, at ACT's cost and expense, from and against any and all
Liabilities incurred in connection with any claim, action or
proceeding arising out of or in connection with (a) the making, using,
development, testing, registration, distribution, and/or sale of any
proteins/products produced by ACT in Transgenic Cattle under this
Agreement or (b) GTC's breach of this Agreement, regardless of the
form in which any such claim is made; provided that such defense and
indemnification shall not apply to the extent that the existence or
incurrence of any such Liabilities is attributable to any negligence
or willful misconduct of, or material breach of this Agreement by,
ACT.
9.4. Limitation of Liability. Neither Party will be liable for any
indirect, incidental, consequential or special damages of any type
or kind (including, without limitation, lost profits) arising out of
this Agreement, whether any such damages are based on a claim of
negligence, strict liability, breach of warranty or otherwise.
9.5. Insurance. Prior to the commencement of the first Phase I clinical
trial of any proteins/products produced in Transgenic Cattle
developed by ACT under this Agreement, each Party shall obtain and
maintain, at all times during the term of this Agreement, general
liability insurance with appropriate bodily injury, death and
property damage limits. Upon request, a Party shall furnish a
certificate of insurance signed by an authorized representative of
its insurance underwriter evidencing such coverage and providing for
at least thirty (30) days prior written notice of any cancellation,
termination or reduction of coverage.
9.6. Indemnification Claims. Each Party shall give the other Party prompt
notice of any claim for which indemnification under this Section 9 is
or may be applicable. The indemnifying Party shall be required to
provide and be entitled to control the defense of any claim covered
hereunder with counsel reasonably satisfactory to the other Party
which may, at its own expense, participate in the defense of any claim
after the indemnifying Party assumes control of the defense thereof.
10. Term and Termination.
10.1. Term. The term of this Agreement shall commence on the Effective
Date and shall continue indefinitely unless terminated as provided
in this Section 10.
10.2. Termination for Breach. Each Party shall be entitled to terminate
this Agreement by written notice to the other Party in the event
that the other Party shall be in default of any of its material
obligations hereunder, and shall fail to remedy any such default
within sixty (60) days after notice thereof by the
-19-
<PAGE>
non-breaching Party. Any such notice shall specifically state that
the non-breaching Party intends to terminate this Agreement in the
event that the breaching Party shall fail to remedy the default.
Upon any termination of this Agreement pursuant to this Section 10.2,
neither Party shall be relieved of any obligations incurred
prior to such termination, including, without limitation, royalty
payments and payment for work undertaken by ACT but not yet paid by
GTC according to the terms of this Agreement.
10.3. Survival of Obligations; Return of Confidential Information.
Notwithstanding any termination of this Agreement, the obligations
of the Parties under Sections 7.1, 7.2, 7.3, 7.4, 7.5, , 7.8, 7.9,
7.10(b), 8, 9, 10 and 11, as well as under any other provisions
which by their nature are intended to survive any such termination,
shall survive and continue to be enforceable. Upon any termination
of this Agreement pursuant to Section 10.2 hereof, each Party shall
promptly return to the other Party all written Confidential
Information, and all copies thereof, of the other Party.
11. Miscellaneous.
11.1. Publicity. Neither Party, nor any of its Affiliates, shall
originate any publicity, news release or other public announcement,
written or oral, relating to this Agreement or the existence of an
arrangement between the Parties, without the prior written approval
of the other Party, which approval shall not be unreasonably
withheld, except as otherwise required by law. It is expressly
understood that nothing in this Section 11.1 shall prevent a Party
from making a disclosure in connection with any required filings
with the Securities and Exchange Commission or in connection with
the offering of securities or any financing.
11.2. No Implied Licenses. No implied licenses are granted pursuant to
the terms of this Agreement. No license rights shall be created by
implication or estoppel.
11.3. No Agency. Nothing herein shall be deemed to constitute either
Party as the agent or representative of the other Party, or both
Parties as joint venturers or partners for any purpose. Each Party
shall be an independent contractor, not an employee or partner of
the other Party, and the manner in which each Party renders its
services under this Agreement shall be within its sole discretion.
Neither Party shall be responsible for the acts or omissions of the
other Party, and neither Party will have authority to speak for,
represent or obligate the other Party in any way without prior
written authority from the other Party.
11.4. Notice. All notices required under this Agreement to be given by
one Party to the other shall be in writing and shall be given by
addressing the same to the other at the address or facsimile
-20-
<PAGE>
number set forth below, or at such other address or facsimile number
as either may specify in writing to the other. All notices shall
become effective three (3) days after deposit in the United States
Mail with proper postage for first class registered or certified
mail prepaid, return receipt requested, or if promptly confirmed by
mail as provided above, when dispatched by facsimile.
GTC: Genzyme Transgenics Corporation
Five Mountain Road
Framingham, Massachusetts 01701-9322
Telecopier (508) 370-3793
Attn: Vice President and General Counsel
ACT: Advanced Cell Technology, Inc.
One Innovation Drive
Worcester, Massachusetts 01605
Telecopier: (508) 756-0931
Attn: President and CEO
11.5. Assignment. This Agreement, and the rights and obligations
hereunder, may not be assigned or transferred, in whole or in part,
by either Party without the prior written consent of the other
Party, except that (a) either Party may assign this Agreement to an
Affiliate, provided that such Party remains primarily liable and/or
responsible for the performance of such obligations and such
Affiliate, and provided further that such Affiliate agrees to be
bound to the terms and conditions of this Agreement and (b) either
Party may transfer this Agreement in connection with the merger,
consolidation or sale of all or substantially all of that Party's
assets.
11.6. Force Majeure. Except with respect to the payment of monies due
hereunder, and the responsibility to maintain the Confidential
Information in confidence, neither Party shall be responsible for
failure to perform hereunder or for any loss or damage due to causes
beyond its reasonable control, including, but not limited to,
governmental requirements, inability to obtain required export
licenses, work stoppages, fires, civil disobedience, embargo, war,
riots, rebellions, earthquakes, strikes, floods, water and the
elements, inability to secure equipment, raw materials or transport,
acts of God, and similar occurrences. Performance shall be resumed
as soon as possible after the cessation of such cause. Notice to
this effect ("Notice of Force Majeure") shall be given in a manner
prescribed in Section 11.4 hereof at once to the other Party. The
existence of such causes of delay shall justify the suspension of
performance hereunder by either party and shall extend the time for
such performance for a period equal to the period of delay; provided
however, that if such period of delay shall exceed ninety (90) days
from the
-21-
<PAGE>
receipt of Notice of Force Majeure, either Party may terminate this
Agreement upon written notification to the other.
11.7. Non-Solicitation. During the Term of this Agreement and for a period
of one (1) year thereafter, neither Party may solicit any person who
is employed by or a consultant to the other Party or any Affiliate
of such Party to terminate such person's employment by or
consultancy to such Party or such Affiliate. As used herein, the
term "solicit" shall include, without limitation, requesting,
encouraging, assisting or causing, directly or indirectly, any such
employee or consultant to terminate such person's employment with or
consultancy to such Party or Affiliate.
11.8. Entire Agreement. This Agreement constitutes the entire agreement
of the Parties with regard to its subject matter, and supersedes all
previous written or oral representations, agreements and
understandings between the Parties. The parties acknowledge and
agree that there are no representations, warranties, arrangements,
promises or agreements outstanding between them, whether oral or in
writing, other than those contained or referred to in this Agreement.
11.9. No Modification. This Agreement may be changed only by a writing
signed by the Parties.
11.10. Headings. The headings contained in this Agreement are for
convenience of reference only and shall not be considered in
construing this Agreement.
11.11. Waiver. The waiver by either Party of a breach or a default of any
provision of this Agreement by the other Party shall not be
construed as a waiver of any succeeding breach of the same or any
other provision, nor shall any delay or omission on the part of
either Party to exercise or avail itself of any right, power or
privilege that it has or may have hereunder operate as a waiver of
any right, power, or privilege by such Party.
11.12. Severability. In the event that any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions
of this Agreement, and all other provisions shall remain in full
force and effect. If any of the provisions of this Agreement is
held to be excessively broad or invalid, illegal or unenforceable in
any jurisdiction, it shall be reformed and construed by limiting and
reducing it so as to be enforceable to the maximum extent permitted
by law in conformance with its original intent.
-22-
<PAGE>
11.13. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Parties hereto and their successors and
permitted assigns.
11.14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
11.15. Dispute Resolution. In the event the Parties are unable to resolve
any issue which properly comes before it within sixty (60) days,
senior executives from each of GTC and ACT shall meet promptly
following a notice from either Party in order to discuss and
resolve, within sixty (60) days, the outstanding issues facing the
Parties. If GTC and ACT fail to reach agreement during this sixty
(60) day period, the senior executive representatives of GTC and ACT
shall meet promptly with a mediator acceptable to GTC and ACT in
order to continue to discuss and resolve the outstanding issues
facing GTC and ACT. The costs of such mediation will be borne
equally by the Parties. Thereafter, any dispute which remains
unresolved by the Parties shall be resolved by arbitration in New
York City, New York in accordance with the Commercial Rules of
Arbitration of the American Arbitration Association.
11.16. Applicable Law. This Agreement shall in all events and for all
purposes be governed by, and construed in accordance with, the law
of The Commonwealth of Massachusetts without regard to any choice of
law principle that would dictate the application of the law of
another jurisdiction.
-23-
<PAGE>
IN WITNESS WHEREOF, duly-authorized representatives of the parties
have signed this Agreement as of the Effective Date.
GENZYME TRANSGENICS CORPORATION
By /s/ Michael W. Young
---------------------
Print Name: Michael W. Young
Title Vice President, Commercial Development
---------------------------------------
duly authorized
ADVANCED CELL TECHNOLOGY, INC.
By /s/ Steve Parkinson
--------------------
Print Name: Steve Parkinson
Title: President
----------------
duly authorized
-24-
<PAGE>
Schedule A
ACT Patent Rights
Serial No./ Filing Date/
Title 1st Inventor Patent No. Grant Date
Cultured inner Stice, Steven US 08/626,054 April 1, 1996
cell mass cell
lines derived
from ungulate PCT/US97/04736 March 24, 1997
embryos
Embryonic or Robl, James US 08/699,040 August 19, 1996
stem-like cell
lines produced
by cross
species nuclear PCT/US97/12919 July 28, 1997
transplantation
[*]
-25-
*Confidential Treatment has been requested for the marked portion.
<PAGE>
Schedule B
hSA Project Summary
[*]
-26-
*Confidential Treatment has been requested for the marked portion.
<PAGE>
EXHIBIT 10.6
DEVELOPMENT AND COMMERCIALIZATION AGREEMENT
THIS DEVELOPMENT AND COMMERCIALIZATION AGREEMENT (together with the
attached Schedules, the "Agreement") is made as of this 25th day of September,
1997 (the "Effective Date") by and between Genzyme Transgenics Corporation, a
Massachusetts corporation having a principal place of business at Five Mountain
Road, Framingham, Massachusetts 01701-9322 ("GTC") and B. Braun Melsungen AG, a
German corporation having a principal place of business at Carl-Braun-Stra e 1,
D-34212 Melsungen, Germany ("B. Braun").
1. Background.
1.1. GTC. GTC is a biopharmaceutical company with experience in the
production of recombinant human proteins in the milk of goats through
the application of transgenic technology. GTC has the rights to make,
use and sell transgenically-produced recombinant human [*] ("rh[*],"
more fully defined below).
1.2. B. Braun. B. Braun is engaged in the development, manufacture and
sale of pharmaceutical and other products, and is interested in the
sale and distribution in the Territory (defined below) of Products
(defined below) which are filled and finished by B. Braun from the
rh[*] supplied to it by GTC under this Agreement.
2. Definitions.
2.1. "Acceptance Assays" means (a) the assays which are included in GTC's
BLA for Bulk rh[*], to be listed as part of the Specifications on
Schedule A to this Agreement, the procedures for the performance of
which will be transferred to B. Braun by GTC on a schedule to be
agreed upon by the parties, and (b) such other or additional assays
which B. Braun and/or GTC is required by the applicable Regulatory
Authorities to perform for production and/or import of the Bulk rh[*]
(or any Product properly filled and finished therefrom) into the
Territory for distribution, sale and use.
2.2. "Affiliate" means an individual, trust, business trust, joint venture,
partnership, subsidiary, corporation, association or any other entity
which (directly or indirectly) is controlled by, controls or is under
common control with a Party. For the purposes of this definition, the
term "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with") as used with respect
to any Party, shall mean the possession (directly or indirectly) of at
least forty percent (40%) of the outstanding voting securities of a
corporation or comparable equity interest in any other type of entity,
or the power to control or direct management even in the absence of a
controlling interest.
2.3. "BLA" means a United States biologics license application or its
foreign
*Confidential Treatment has been requested for the marked portion.
<PAGE>
equivalent.
2.4. "Bulk rh[*]" means transgenically-produced rh[*] supplied to B. Braun
by GTC under this Agreement.
2.5. "Certificate of Analysis" means a duly authorized, signed and dated
document accompanying each shipment of Bulk rh[*] from GTC under this
Agreement which is intended for administration to humans, certifying
that the Bulk rh[*], identified by batch number, meets the
Specifications, and that the Transgenic Goats, production processes,
equipment, materials, facilities and procedures associated with the
production of such Bulk rh[*] conform to GMP guidelines and all
applicable regulatory filings.
2.6. "Confidential Information" means all proprietary information and
materials, patentable or otherwise, including DNA sequences, vectors,
cells, substances, formulations, techniques, methodology, equipment,
data, reports, know-how, sources of supply, patent positioning and
business plans, including any negative developments, which are
communicated to, learned of, developed or otherwise acquired by GTC or
B. Braun, and any other information designated by the disclosing party
as confidential or proprietary, whether or not related to the Bulk
rh[*] or Product. As used in this Agreement, the term "Confidential
Information" shall be interpreted consistent with the exceptions set
forth in Section 15.2, below.
2.7. "Cost of Goods Sold" means, with respect to the manufacture of a
Product, all direct and indirect labor and overhead, tangible
materials and supplies, fringe benefits, taxes and charges and direct
and indirect general and administration charges incurred by B. Braun
related to the manufacture and sale of the Product, and accounted for
according to B. Braun's standard accounting practices consistent with
generally accepted accounting principles.
2.8. "CPMP" means the Committee for Proprietary Medicinal Products.
2.9. "Direct Cost" means (a) costs directly attributable to an activity
(i.e., those costs which vary with such activity), including, but not
limited to, direct labor and benefit expenses for such activity, and
consumable bulk and other materials, as determined in accordance with
generally accepted cost accounting practices in the country of the
activity, plus (b) fixed overhead costs allocable to the activity,
including, but not limited to, direct benefit and labor expenses for
technical services and support services, depreciation, maintenance and
repairs and insurance costs associated with such activity, as
determined in accordance with generally accepted cost accounting
practices in the country of the activity.
2.10."EMEA" means the European Medicines Evaluation Agency.
2.11."Field" means the use of rh[*] for medicinal purposes, including,
without limitation, [*].
2
*Confidential Treatment has been requested for the marked portion.
<PAGE>
2.12. "Founder Goat(s)" means a Transgenic Goat from which a Production
Herd can be produced using standard animal husbandry techniques.
2.13. "GMP" means the Good Manufacturing Practice regulations of the
FDA as described in the United States Code of Federal Regulations
or any successor regulations and any similar or equivalent
regulations in the European Community or Japan.
2.14. "GTC Patent Rights" means any and all patents and patent
applications owned or licensed by GTC in which GTC has a
licensable interest and which exists as of the date of this
Agreement or which comes into existence during the term of this
Agreement, including, without limitation, the patents and patent
applications attached to this Agreement as Schedule B; provided,
however, such patents and patent applications, if developed by
GTC during the term of this Agreement, shall be deemed solely to
be Project Patent Rights as defined in Section 2.24, below,
unless GTC can reasonably demonstrate that such patents or patent
applications were independently developed by GTC outside of the
scope of this Agreement.
GTC Patent Rights shall include any reissues, extensions (or other
governmental acts which effectively extend the period of
exclusivity by the patent holder), substitutions, confirmations,
registrations, revalidations, additions, continuations,
continuations-in-part, divisions or foreign counterparts of or to
the foregoing patent rights.
2.15. "GTC Technology" means information, data, trade secrets,
processes, inventions, improvements and know-how which is owned
or controlled by GTC and in which GTC has a licensable interest,
and which exists as of the date of this Agreement or which comes
into existence during the term of this Agreement, related to the
transgenic production of rh[*], provided, however, such
technology, if developed by GTC during the term of this
Agreement, shall be deemed solely to be Project Technology as
defined in Section 2.25, below, unless GTC can reasonably
demonstrate that such technology was independently developed by
GTC outside of the scope of this Agreement.
2.16. "rh[*]" means the recombinant human [*] produced by Transgenic
Goats in the Production Herd pursuant to the terms and conditions
of this Agreement and in accordance with the protocols and
specifications established herein.
2.17. "IND" means an Investigational New Drug application or its
equivalent for initiating clinical trials in the United States or
any corresponding foreign application, registration, or
certification.
2.18. "Koseisho" means the Japanese Ministry of Health.
2.19. "Net Sales Price" means the gross billing price derived by or
payable to B. Braun and its Affiliates and permitted sublicensees
from or on account of the sale
3
*Confidential Treatment has been requested for the marked portion.
<PAGE>
of Product to third parties which are not Affiliates of B. Braun,
less: (a) customary trade, quantity or cash discounts or rebates
allowed; (b) amounts rebated, refunded or credited for rejected
or returned Products or because of retroactive price reductions,
rebates or chargebacks; (c) customs duties, consular fees and
other like charges; (d) sales, use, turnover, excise taxes, or
other governmental charges levied on or measured by sales, but not
franchise or income taxes; (e) uncollected accounts receivable
attributable to sales of Products; and (f) transportation,
freight and handling charges, and insurance on shipments to
customers. Transfer of a Product by B. Braun to an Affiliate
shall not be considered a sale.
In the event any Product is sold as a component of a combination
of functional elements, Net Sales Price for purposes of
determining royalty payments on such combination shall be
calculated on a country-by-country basis by multiplying the
average per unit Net Sales Price of the Product portion of the
combination when sold separately in the applicable country during
the accounting period in which the sale was made by the number of
units of Product sold as part of such combination product. In the
event no separate sales of the Product were made in the applicable
country during the applicable accounting period, the Net Sales
Price of such Product shall be determined by the Liaison
Committee.
2.20. "Parties" means GTC and B. Braun; "Party" means GTC or B. Braun.
2.21. "Product" means a product consisting of rh[*]-solution(s) and/or
rh[*]-powder (bulk) as a component meeting the Specifications
established by Schedule A.
2.22. "Purchase Price" means the prices per gram for Bulk rh[*] sold by
GTC to B. Braun, as provided in Section 7.2, below.
2.23. "Production Herd" means a line of female Transgenic Goats derived
from a Founder Goat.
2.24. "Project Patent Rights" means (a) all patent applications
established by one or both of the Parties in performance of this
Agreement and hereafter filed or having legal force in any
country, which claim a composition, method or process relating to
Project Technology, together with any and all patents that have
issued or in the future issue therefrom, and (b) all related
divisionals, continuations, continuations-in-part, reissues,
renewals, extensions or additions to any such patents and patent
applications.
2.25. "Project Technology" means information, data, trade secrets,
processes, inventions, improvements and know-how established by
one or both of the Parties in performance of this Agreement.
2.26. "Regulatory Authority" shall mean the United States Food and Drug
Administration (the "FDA") and similar government agencies
throughout the world, including, without limitation, the EMEA
and/or the CPMP, which regulate
4
*Confidential Treatment has been requested for the marked portion.
<PAGE>
the manufacture and marketing of Bulk rh[*] and/or the Product
in Europe, and the Koseisho, which regulates the manufacture
and marketing of Bulk rh[*] and/or the Product in Japan.
2.27. "SOP" has the meaning assigned to it in Section 4.2.
2.28. "Specifications" means the specifications and test methods for
Bulk rh[*] sold by GTC to B. Braun, to be set forth in Schedule A
to this Agreement, which Schedule may be amended from time to
time only by written agreement of the Parties. The
Specifications shall meet the requirements (including, without
limitation, stability and release testing requirements) of each
applicable Regulatory Authorities for import of the Bulk rh[*]
(or any Product properly filled and finished therefrom) into the
applicable country or countries in the Territory for
distribution, sale and use.
2.29. "Territory" means [*]. In the event B. Braun exercises its
Co-Marketing Option set forth in Section 8.1, below, the
Territory shall include [*], on a co-exclusive basis.
2.30. "Transgenic Goat" means a goat whose genome has been modified by
the incorporation of exogenous DNA, including, but not limited
to, DNA encoding rh[*], and which meets the Specifications set
forth in Schedule A.
2.31. "Pivotal Clinical Trial " meansthe final clinical trial which is
deemed necessary by the applicable Regulatory Authority in a
country in the Territory to support the filing of a BLA for
approval to market and sell the Product in such country.
2.32. Singular/Plural. The singular shall include the plural and the
plural the singular for the terms defined in this Section 2.
3. Liaison Committee. Within thirty (30) days of the Effective Date, GTC and
B. Braun shall form a committee (the "Liaison Committee") to coordinate and
communicate the results of the Parties' activities under this Agreement.
The Liaison Committee shall consist of four (4) members, two (2) of whom
shall be designated by GTC and two (2) of whom shall be designated by B.
Braun. Each Party may assign its members to the Liaison Committee as it
deems appropriate, and designated substitutes may represent Liaiso
Committee members at regularly scheduled meetings at the discretion of the
substituting Party. The Liaison Committee will meet at least once per
calendar quarter, alternating between GTC and B. Braun locations, to assess
the progress under this Agreement. In addition to reports to, and meetings
of, the Liaison Committee, there will be frequent communications among the
scientists and project managers to keep B. Braun and GTC advised of current
activities, research, testing and achieved results of the Parties under
this Agreement.
4. Development and Manufacture of Bulk rh[*].
4.1. Agreement to Develop and Manufacture. GTC agrees to use commercially
5
*Confidential Treatment has been requested for the marked portion.
<PAGE>
reasonable and diligent efforts to (a) develop a Production Herd of
Transgenic Goats to produce rh[*] in their milk, (b) meet the
milestones and perform the activities set forth in Section 4.7 and, if
B. Braun exercises its co-marketing option under Section 8.1, below,
in Section 8.3 of this Agreement, and undertake the activities shown
in Schedule C to this Agreement, and (c) supply B. Braun with its
requirements of Bulk rh[*], on the terms and conditions set forth in
this Agreement. Schedule C to this Agreement sets forth a schematic
estimated timeline of GTC's development plan. In the event of any
conflict between the text of this Agreement and the schematic
timeline, the text of this Agreement shall control. In performing
their obligations under this Agreement, the Parties shall keep each
other informed, via the Liaison Committee, of Project Patent Rights
and Project Technology developed during the term of this Agreement.
4.2. Good Agricultural Practices. GTC shall use Good Agricultural
Practices ("GAP") in the development of Transgenic Goats pursuant to
this Agreement. GAP shall be defined as a series of standard
operating procedures ("SOPs") covering recovery of fertilized eggs,
pronuclear microinjection, embryo transfer, pregnancy, delivery,
rearing and milking of the Transgenic Goats.
4.3. In Accordance with Specifications. All Bulk rh[*] ordered by B. Braun
under this Agreement shall conform to Specifications. With respect to
the countries in the Territory, GTC shall be responsible for ensuring
that the Specifications comply with any licenses and approvals
including, without limitation, the licenses and approvals necessary to
export the Bulk rh[*] and any outright Product in such countries on a
country-by country basis, including all then-current licenses and
approvals granted or issued to GTC by the relevant Regulatory
Authorities.
4.4. Establishment of and Changes to Specifications. As set forth in
Section 2.28, the Specifications may be modified from time to time
only by written agreement of the Parties. B. Braun shall not propose
to any Regulatory Authority the establishment of any Specification, or
any changes to the Specifications, or in any methods for testing the
Bulk rh[*] and/or the Product to assess conformity thereof with the
Specifications (e.g., the Acceptance Assays), without GTC's prior
written consent, which consent shall not be unreasonably withheld.
GTC shall have the right to consult in advance with B. Braun for, and
to participate with B. Braun in, any such discussions with Regulatory
Authorities which could lead to the establishment of any
Specifications, or any required or recommended changes in the
Specifications or associated testing methods.
4.5. Quality Control and Analysis.
a. GMP Compliance. All Bulk rh[*] supplied by GTC shall meet the
GMP guidelines required by the applicable Regulatory Authorities
and shall meet the Specifications, on a country-by country basis,
and such other specifications as are mutually agreed upon by GTC
and B. Braun. The facilities and Transgenic Goats utilized by
GTC to make Bulk rh[*] shall comply with the Regulatory Authority
license requirements. GTC shall
6
*Confidential Treatment has been requested for the marked portion.
<PAGE>
maintain such records and data as are necessary to ensure that
the manufacture of such Bulk rh[*] can be demonstrated to comply
with such guidelines and requirements. GTC agrees to furnish to
B. Braun certification in such form as is required by the
applicable Regulatory Authorities and other governmental agencies
with proper jurisdiction that the manufacture of such Bulk rh[*]
complies with such guidelines and requirements.
b. Release Testing. GTC shall be solely responsible for performing
stability and release testing for the Bulk rh[*] available for
purchase by B. Braun. As part of its fill/finish activities
under this Agreement, B. Braun shall be solely responsible for
stability and release testing of all final Product available for
distribution and/or sale by B. Braun.
c. Documentation and Inspections.
i. Documents. GTC shall provide B. Braun with copies of any
records, documentation and technical assistance which may be
reasonably required for B. Braun or any of its Affiliates or
Sublicensees of the Product to obtain from the appropriate
Regulatory Authorities approval to import and use the Bulk
rh[*], based on GTC's manufacture of such Bulk rh[*]. B.
Braun shall provide GTC with copies of all documentation
pertaining to Bulk rh[*] and/or the Product prior to
submission of such documentation to the applicable
Regulatory Authorities. Each Party shall promptly review
such documentation and provide the other Party with any
comments it may have concerning such documentation and/or
the form in which any such information is delivered to such
Regulatory Authorities.
ii. Right to Inspect. B. Braun, at its own expense, shall have
the right, from time to time, to send its technical and
quality personnel to GTC's manufacturing facilities to
inspect and audit the manufacturing and storage facilities
allotted to the Bulk rh[*] and to inspect and audit the
records (except for financial records) and documentation
related to the Bulk rh[*]. Upon prior notice to GTC, all
such personnel and representatives shall be freely admitted
by GTC for such purposes during reasonable and regular
business hours. All such personnel shall be required to
sign usual and customary confidentiality agreements and to
follow GTC's safety rules and procedures in effect at the
production facility.
4.6. Subcontracting. GTC's obligations under this Agreement may be
delegated to and fulfilled by Affiliate and/or non-Affiliate
subcontractors (i.e., by third party designees); provided, however,
(a) B. Braun shall have the right to consent to such subcontractors,
(b) such subcontracting shall be on terms and conditions fully
consistent with the terms and conditions of this Agreement and (c) GTC
7
*Confidential Treatment has been requested for the marked portion.
<PAGE>
shall remain fully responsible for the performance of all of its
obligations under this Agreement, notwithstanding any such
subcontracting.
4.7. Development Compensation. In accordance with the following schedule,
B. Braun shall pay GTC the following payments in consideration of
GTC's development of rh[*]:
Estimated
Milestone Completion Date
a. Base Fee. [*] within [*].
b. [*] within [*]. The successful transgenic
identification of the Transgenic Goats will be
determined by polymerase chain reaction ("PCR")
of goat blood and ear biopsy. Transgenic
identification will be confirmed and
characterized by Southern blotting.
c. [*].
d. [*]. GTC shall update this commercial report
at each separate stage/milestone under this
Agreement.
e. [*].
f. [*]. The Liaison Committee shall consider
using McGaw, Inc. of Irvine, California as
the contract research organization for the
performance of such preclinical studies.
g. [*].
h. [*]. The clinical plan for such trial shall
be developed in consultation with the Liaison
Committee.
i. [*].
[*]. The estimated completion date for the milestones set
forth above refer to the last day of the specified month.
[*].
4.8. Payments. All payments to GTC under this Agreement
will be made in U.S. Dollars by wire transfer of good
and immediately available funds to GTC's bank account
at [*], or by any other means agreed upon by the
Parties. Payments
8
*Confidential Treatment has been requested for the marked portion.
<PAGE>
made to GTC under this Section 4 shall be made in United States
Dollars without regard to changes in exchange rates.
4.9. Capital, Facilities and Personnel. To the extent commercially
reasonable, GTC shall at all times possess sufficient capital,
facilities (directly or through third parties)(including warehouse
facilities) and administrative personnel to support GTC's obligations
under this Agreement.
4.10. Inventory. GTC shall maintain a sufficient inventory of Bulk
rh[*] and/or components thereof to provide delivery of Bulk rh[*]
to B. Braun under the terms and conditions of this Agreement.
5. Purchase and Supply Terms and Conditions. B. Braun agrees to purchase all
of its requirements of Bulk rh[*] from GTC, and GTC agrees to supply B.
Braun with such requirements, on the terms and conditions set forth in this
Agreement. The obligations of the Parties with respect to projections,
forecasts and purchase orders are set forth in Sections 5.1 through 5.5,
below.
5.1. Initial Five Year Sales Projection and Updates. Promptly following
the Effective Date, B. Braun will provide GTC with an initial
projection of the amount of Product B. Braun expects to sell during
[*] (or such other launch date as specified by the Liaison Committee)
and each of the next four (4) successive calendar years, subject to
applicable Regulatory Authority approvals in the Territory.
Thereafter, on or before January 1st in each year, B. Braun will
provide GTC with an updated projection of the amount of Product B.
Braun expects to sell during the subsequent calendar year and each of
the next four (4) successive calendar years. Such projections shall
be used by GTC for planning purposes only and shall not create binding
sales or purchase obligations for either Party hereto. GTC and B.
Braun will meet periodically to review B. Braun's projected
requirements for Bulk rh[*].
5.2. Initial Four Quarter Forecast. Within fifteen (15) business days of
the date GTC or B. Braun notifies the other Party that it (or its
Affiliate or third party designee) has completed a Pivotal Clinical
Trial of rh[*], B. Braun will provide GTC with an initial, non-binding
four-quarter forecast of the amount of Bulk rh[*] B. Braun expects to
purchase from GTC during the four (4) calendar quarters commencing
nine (9) months following completion of such Pivotal Clinical Trial.
5.3. First Purchase Order and Updated Forecast. At a time to be determined
by B. Braun, B. Braun will provide GTC with:
a. First Purchase Order. A first purchase order specifying the
amount of Bulk rh[*] to be delivered to B. Braun nine (9) months
after such purchase order; and
b. Updated Four-Quarter Forecast. An updated four-quarter forecast
of
9
*Confidential Treatment has been requested for the marked portion.
<PAGE>
the amount of Bulk rh[*] B. Braun expects to purchase from GTC
during each of the second, third and fourth calendar quarters
covered by, and the next calendar quarter following, the
preceding four-quarter forecast.
5.4. Subsequent Purchase Orders and Updated Forecasts. On or before the
first day of each subsequent calendar quarter, B. Braun will provide
GTC with:
a. Quarterly Purchase Orders. A purchase order specifying the
amount of Bulk rh[*] to be delivered to B. Braun during the
calendar quarter which begins nine (9) months from the date of
such purchase order; and
b. Updated Four-Quarter Forecasts. An updated four-quarter forecast
of the amount of Bulk rh[*] B. Braun expects to purchase from GTC
during each of the second, third and fourth calendar quarters
covered by, and the next calendar quarter following, the
preceding four-quarter forecast.
5.5. Good Faith Projecting and Forecasting. In preparing the projections
and forecasts, B. Braun shall use commercially reasonable and diligent
efforts to accurately predict its Product sales and actual
requirements for Bulk rh[*].
5.6. Minimum Purchase and Maximum Supply Commitments. For each calendar
quarter commencing six (6) months following filing by GTC or B. Braun
(or their respective Affiliates or third party designees) of a BLA
for rh[*], B. Braun shall be obligated to purchase at least eighty
percent (80%) of the amount of Bulk rh[*] forecasted for such quarter
in the most recent four-quarter forecast, subject to ongoing
Regulatory Authority approval (and any other necessary approvals) to
sell Products; and GTC shall be obligated to supply up to, but not
more than, one hundred twenty percent (120%) of the amount forecasted
for such quarter in the most recent four-quarter forecast. B. Braun's
minimum purchase obligations under this Section shall be reduced
adequately in the event that a Regulatory Authority in a country in
the Territory has prohibited B. Braun from selling Product in such
country.
5.7. Purchase Orders.
a. Submission by B. Braun. All orders for Bulk rh[*] by B. Braun
shall be made by submission to GTC of a purchase order specifying
the quantity of Bulk rh[*] ordered and the requested delivery
date(s), and shall be consistent with the terms of this
Agreement.
b. Acceptance by GTC. Subject to the terms and conditions of this
Agreement, GTC shall be required to accept purchase orders which
conform to the limitations and requirements of Section 5.6 of
this Agreement. GTC shall notify B. Braun within ten (10)
working days of receipt regarding the acceptance or permitted
rejection of a purchase order.
10
*Confidential Treatment has been requested for the marked portion.
<PAGE>
c. Order Lead Time. A nine (9) month period is required from the
date GTC receives an accepted purchase order to the availability
of Bulk rh[*] for delivery under such purchase order to allow for
scheduling, preparation and testing of the Bulk rh[*] for
delivery to B. Braun. This order lead time is required for all
purchase orders, no matter what their magnitude.
5.8. Delivery. GTC shall deliver Bulk rh[*] to B. Braun or its designated
carrier at the times and in the amounts specified in each accepted
purchase order, provided that the lead times and quantities specified
in the purchase order conform with this Agreement.
5.9. Documentation. Each shipment of Bulk rh[*] shall be accompanied by a
Certificate of Analysis, in a form required for release of the Product
in the Territory following fill and finish by B. Braun, together with
such other documentation, if any, that is required by customs
regulations for export/import of the Bulk rh[*] into countries in the
Territory where the Product will be filled and finished in final
dosage form suitable for sale. B. Braun shall be responsible for
conducting tests and submitting results which may be required by
Regulatory Authorities for import of Bulk rh[*] into the Territory.
5.10. Terms and Conditions of Sale. All sales of Bulk rh[*] under this
Agreement shall be X WORKS ("EXW", as defined in INCOTERMS,
International Chamber of Commerce, 1990 edition) GTC's designated
production facility. Notwithstanding any proposed variation from
or addition to such terms and conditions appearing on any
purchase order, invoice or any other directions, notices or
instructions submitted by B. Braun, the terms and conditions of
this Agreement shall prevail, unless otherwise agreed to in
writing by the Parties. All freight, insurance and other
shipping arrangements, and the costs and expenses thereof, shall
be made and borne by B. Braun; and all packaging arrangements
necessary to ship the Bulk rh[*] safely and properly, and the
costs and expenses thereof, shall be made and borne by GTC. All
required shipping conditions and methods will be established and
validated by GTC in collaboration with B. Braun. Subject to the
foregoing, title to, and ownership and risk of loss of, the Bulk
rh[*] shall pass to B. Braun upon delivery of the Bulk rh[*] to
the custody and control of B. Braun's designated carrier at GTC's
designated production facility.
6. Acceptance Testing; Filling and Finishing.
6.1. Testing. For each shipment of Bulk rh[*], B. Braun shall have the
right, within thirty (30) business days of receipt of a shipment, to
test each shipment, using the Acceptance Assay, in order to verify
that the material received by B. Braun meets the Specifications for
such Bulk rh[*], consistent, within the expected variability of such
Acceptance Assay. All Bulk rh[*] which is found by B. Braun, in its
performance of the Acceptance Assay, to be in conformance with the
Specifications, notwithstanding any variations between the results of
GTC's
11
*Confidential Treatment has been requested for the marked portion.
<PAGE>
release testing and B. Braun's Acceptance Assay, shall be held
to comply with the Specifications. B. Braun shall promptly inform GTC
of any discrepancies outside of the expected variability of the
Acceptance Assay discovered by B. Braun in performing such Acceptance
Assay. Such shipment shall be held to comply with the Specifications,
unless, within such thirty (30) day period, B. Braun gives GTC written
notice, together with supporting documentation, of non-conformance
with the Specifications discovered by B. Braun. Upon receipt of such
notice, GTC will be given access to such shipment in order to conduct
its own inspection thereof (which inspection shall be conducted within
thirty (30) days of such notice), and the Parties will endeavor to
agree in good faith as to whether such shipment complies with the
Specifications for such Bulk rh[*].
Notwithstanding the foregoing, in the event the Bulk rh[*] delivered
to B. Braun under this Agreement is determined, within one (1) year
from B. Braun's receipt of the Certificate of Analysis including the
release for such Bulk rh[*] (using the procedures set forth in Section
6.1, above) not to comply with the Specifications, and such
non-compliance was not detected at the time of delivery (a "hidden
defect"), then GTC shall reimburse B. Braun for its direct
out-of-pocket costs associated with the manufacture and any recall of
such Product resulting from such hidden defect.
6.2. Dispute Resolution. If the Parties are unable, after good faith
efforts, to agree within a reasonable time as to any matter set forth
in Sections 6.1 of this Agreement, such matter will be submitted to an
independent quality control laboratory agreed upon by the Parties.
With respect to conformance with the Specifications, if either GTC
concedes or the independent laboratory finds that the Bulk rh[*]
shipped to B. Braun does not conform with the Specifications
applicable for such shipment, GTC, at B. Braun's option, either shall
supply B. Braun, as soon as possible and at no additional cost to B.
Braun, with an equivalent quantity of Bulk rh[*] which meets the
Specifications, or refund to B. Braun the purchase price for such
non-conforming Bulk rh[*]. In such event, B. Braun will return to GTC
all non-conforming Bulk rh[*] in accordance with GTC's instructions,
at GTC's cost and expense. If either B. Braun concedes or the
independent laboratory finds that GTC's release testing results are
determinative and that such batch complies with the Specifications,
GTC shall have no replacement or refund obligations with respect to
such shipment. The cost of inspections and/or testing conducted by
the independent laboratory shall be borne by the Party whose
determinations with respect to such batch are contrary to the findings
of the independent laboratory.
6.3. Returns. Transfer of title and risk of loss for Bulk rh[*] returned
to GTC pursuant to this Section 6 shall pass to GTC when such returned
Bulk rh[*] is placed in the custody and control of GTC's designated
carrier, consistent with GTC's instructions. The cost of freight,
insurance and handling and other similar costs shall be paid by GTC.
All amounts due by one Party to the other by virtue of this subsection
shall be paid within forty-five (45) days of the end of the month in
which they were invoiced.
12
*Confidential Treatment has been requested for the marked portion.
<PAGE>
6.4. B. Braun to Fill, Finish and Label Product. B. Braun shall fill,
finish and label the Product in final dosage form suitable for sales
in the Territory, from the Bulk rh[*] supplied to B. Braun by GTC
under this Agreement.
6.5. Expense and Damage Reimbursement. In the event GTC is held to have
willfully breached its manufacturing and delivery obligations under
this Agreement or is held to have been negligent in the manufacture
and delivery of Bulk rh[*] under this Agreement, GTC shall reimburse
and compensate B. Braun for its direct damages and expenses incurred
by B. Braun as a result thereof, unless otherwise stipulated in
Section 12, below.
7. Purchase Price and Payment Terms.
7.1. Bulk rh[*] for Pivotal Clinical Trials. GTC will sell Bulk rh[*] to
B. Braun for use in clinical trials at a Purchase Price (per gram)
equal to GTC's Direct Costs or manufacturing, EX WORKS ("EXW", as
defined in INCOTERMS, International Chamber of Commerce, 1990 edition)
GTC's designated production facility.
7.2. Bulk rh[*] Intended for Commercial Sale.
a. Purchase Price. GTC will sell Bulk rh[*] to B. Braun for
filling, finishing, labeling and sale as a commercial Product
after B. Braun obtains Regulatory Authority approval necessary to
sell the Product, at a Purchase Price (per gram) set forth below:
Quantity Purchased
in Calendar Year Purchase Price (U.S. Dollars)
[*]
b. Minimum Annual Purchase Requirement; Conversion to Co-Exclusive
Rights in Territory. B. Braun has investigated the market
potential in the Territory for the Product, taking into account
all relevant factors. Based on this investigation, B. Braun has
agreed to purchase [*]. For purposes of calculating minimum
annual purchase requirements, the Parties shall consider on
purchases of Bulk rh[*] from GTC for sale in the Territory (i.e.,
not for sales in [*] pursuant to B. Braun's Co-Marketing Option).
In the event B. Braun fails to purchase the applicable minimum
annual purchase requirement in any calendar year after utilizing
commercially reasonable efforts, GTC's sole remedy shall be to
appoint itself (or its designee) as a co-exclusive distributor
(with B. Braun) of the Product in the Territory; provided,
however, B. Braun may, at its option, preserve exclusivity if,
prior to the end of the calendar in which additional minimum
annual purchase requirement payments are due, it pays to GTC the
balance of the applicable annual minimum purchase requirement
then due for such calendar year. B. Braun's minimum purchase
obligations under this Section shall be subject to reduction or
suspension, as determined in good
13
*Confidential Treatment has been requested for the marked portion.
<PAGE>
faith by the Liaison Committee, in the event of force majeure
or legal or Regulatory Authority prohibition or registration
schedule delay to sell Product in a country in the Territory.
7.3. Invoice and Payment. GTC shall invoice B. Braun for the purchase
price associated with each shipment of Bulk rh[*] at the time of
shipment. B. Braun shall make such payments to GTC within forty-five
(45) days of receipt of the applicable invoice. B. Braun will pay GTC
by wire transfer of good and immediately available funds to a bank and
account, as specified in writing by GTC, or by any other means agreed
upon by the Parties. In the event the exchange rate of the German
Mark (and subsequently the EURO currency) and the United States Dollar
increases or decreases from the exchange rate applicable on the
Effective Date of this Agreement (in the case of conversion from the
EURO currency, from fixation of the exchange rate between the
applicable currency to the EURO) by more than ten (10) percent, an
adjustment in the payment due GTC under this Section 7 shall be made
on a payment-by-payment basis, whereby each Party will equally share
such increase or decrease. The basis for determining the exchange
rates in effect for the purposes of this Section shall be the exchange
rate for the average of the "buy and sell" rates as published in the
European Edition of the Wall Street Journal on the date of shipment of
the applicable order of Bulk rh[*].
7.4. Taxes. All sales, use, transfer and other taxes and duties imposed
with respect to the Bulk rh[*] or their sale by GTC to B. Braun by any
governmental authority (but excluding any income or franchise taxes of
any kind imposed on GTC) shall be paid by B. Braun, as adjusted if
necessary. The Parties shall cooperate in obtaining and providing to
each other any certificates of exemption or similar document required
to exempt any sales, use or similar tax liability.
8. [*] Co-Marketing Option.
8.1. Exercise by B. Braun. GTC grants to B. Braun an option (the
"Co-Marketing Option") to appoint itself (or a wholly-owned
subsidiary) as a co-exclusive distributor (with GTC) of the Product in
[*], by giving GTC written notice at any time prior to October 2,
1998. If B. Braun exercises the Co-Marketing Option, B. Braun and GTC
shall co-market the Product in [*]; and GTC shall continue to supply
B. Braun with its requirements of Bulk rh[*] under the terms and
conditions of this Agreement. The form of the co-marketing
arrangement shall be agreed upon by the Parties.
8.2. No Right to Sublicense or Appoint Subdistributors. B. Braun's right
to market, distribute and sell the Product in [*] (itself or through
an Affiliate) may not be sublicensed to third parties which are not
Affiliates, nor may B. Braun appoint a subdistributor for such
Product, without GTC's prior written consent.
14
*Confidential Treatment has been requested for the marked portion.
<PAGE>
8.3. Consideration. In consideration of the grant of the Co-Marketing
Option and in accordance with the following schedule, B. Braun shall
pay GTC the following payments:
Estimated
Milestone Completion Date
[*]
d. [*]. The Liaison Committee shall consider
using McGaw, Inc. of Irvine, California as the
contract research organization for the
performance of such preclinical studies.
e. [*].
f. [*]. The clinical plan for such trial shall
be developed in consultation with the Liaison
Committee.
g. [*].
8.4. Payments. All payments to GTC under this Agreement will be made by
wire transfer of good and immediately available funds to a bank and
account, as specified in writing by GTC, or by any other means agreed
upon by the Parties. Payments made to GTC under this Section 8
shall be made in United States Dollars without regard to changes in
exchange rates.
9. B. Braun Obligations to Purchase, Market and Sell Product.
9.1. Purchase Obligation. B. Braun shall be obligated to purchase from GTC
one hundred percent (100%) of its and its Affiliates and distributors
requirements of rh[*] for filling, finishing, labeling and sales as a
commercial Product. Preclinical studies of such rh[*] shall be
conducted by or on behalf of GTC. B. Braun, at its cost and expense,
will process the Bulk rh[*] supplied by GTC and formulate Products
therefrom. With the exception of GTC's obligations hereunder, B.
Braun shall conduct all necessary testing, and shall make all
regulatory filings, necessary to market and sell Products in the
Territory. GTC shall provide B. Braun with all data which relates to
Bulk rh[*] produced under this Agreement and GTC's performance of its
obligations under this Agreement which is reasonably necessary to
support such regulatory filings.
9.2. Area of Activity. B. Braun shall concentrate its activities in
respect of the Product within the Territory. B. Braun shall not,
outside the Territory: (a) seek customers for the Product; (b)
establish any branch or facility to sell the Product; or (c) maintain
any distribution depot for the Product. B. Braun shall not be in
breach of this Section, nor of its obligation to sell Product only in
the Territory, if a third party which is not an Affiliate or
subdistributor of B. Braun sells Product outside the
15
*Confidential Treatment has been requested for the marked portion.
<PAGE>
Territory.
9.3. Activities. With regard to the final manufacture and marketing of
Product, B. Braun's obligations under this Agreement shall include,
but shall not be limited to, the activities set forth in this Section
9.3:
a. Product Testing, Labeling and Packaging; Reimbursement of Direct
Costs.
i. Testing for Import, Distribution and Sale. B. Braun shall
perform all testing required to import the Bulk rh[*] to the
Territory and distribute and sell the Product in the
Territory. GTC shall have the right, from time to time, to
send its technical and quality personnel to B. Braun's
facility to inspect such testing facilities and to inspect
and audit the records and documentation related thereto. B.
Braun shall not subcontract such testing to a third party
which is not a B. Braun Affiliate, without GTC's prior
written consent.
ii. Labeling and Packaging. B. Braun shall label and package
all Product for marketing, distribution and sale in the
Territory.
iii. Inspection and Release of Product. B. Braun shall be
responsible for and shall perform all inspections required
to release, distribute and sell the Product in the
Territory.
b. Promotion and Advertising. B. Braun shall conduct commercially
reasonably educational, promotional and advertising activities
with respect to the Product in the Territory, and in so doing B.
Braun shall perform the following activities:
i. Country Symposia and Trade Shows. B. Braun may provide
representatives from within its organization to participate
in country and local trade and industry meetings,
conventions, shows, symposia and congresses to advance the
sales of the Product.
ii. Advertising. To the extent commercially reasonable, B.
Braun will actively advertise and promote the Product in the
Territory utilizing media and other means of communication
commonly employed in the industry.
c. Distribution, Marketing and Sales. To the extent commercially
reasonable, B. Braun will distribute, market and sell the Product
throughout the Territory, and in so doing will establish, train,
manage and fund a sales force to cover the Territory. The
selection of qualified technical and other personnel for the
sales force shall be at B. Braun's sole discretion. The sales
force will offer support to health care professionals and
customers of the Product, including, without limitation, such
technical advice, assistance, training and field services as will
promote customer satisfaction with the Product. The sales force
will be conversant in the conventional technical language of the
Product, and shall
16
*Confidential Treatment has been requested for the marked portion.
<PAGE>
develop sufficient knowledge of the industry and any competitive
products so as to be able to explain to potential customers the
difference between the Product and any such competitive products.
Training and support provided by the sales force shall be rendered
in the language or languages customarily employed in countries in
the Territory.
9.4. Capital, Facilities and Personnel. To the extent commercially
reasonable, B. Braun shall possess sufficient capital, facilities
(including warehouse facilities) and administrative personnel to
support B. Braun's obligations to test, label, package, market,
transport, store, distribute and sell the Product in the Territory.
9.5. Inventory. B. Braun shall maintain, subject to availability and
delivery of Bulk rh[*] from GTC, a sufficient inventory of the Product
to provide prompt delivery of the Product to its customers in the
Territory.
9.6. Books and Records. For a period of not less than two (2) years, B.
Braun shall maintain and preserve distinct, complete and accurate
books of accounts and inventories (including, without limitation, lot
records) related to all of its activities as a distributor under this
Agreement, and shall make such books and records available to an
independent accountant designated by GTC not more than one (1) time
per year, upon GTC's request and at GTC's cost, for the limited
purpose of confirming the completeness and accuracy of such books and
records.
10. Clinical Trials.
10.1. In the Territory. B. Braun, at is cost and expense, shall be
responsible for all Pivotal Clinical Trials and registration
activities for the Product in the Territory, except for Phase
I/II clinical trials, which are GTC's responsibility.
10.2. In [*]. GTC, at is cost and expense, shall be responsible for
all worldwide Phase I/II clinical trials and clinical development
and registration activities for the Product in [*].
10.3. Cost-Sharing upon Exercise of Co-Marketing Option. Upon exercise
by B. Braun of the Co-Marketing Option set forth in Section 8,
above, the Parties will agree upon budgets of [*] Pivotal
Clinical Trials and the initial regulatory registration of the
Product in [*]. B. Braun shall pay fifty percent (50%) of the
costs of such Pivotal Clinical Trials up to a maximum payment by
B. Braun of [*]. B. Braun shall pay GTC fifty percent (50%) of
this amount as costs of the Pivotal Clinical Trials are incurred,
if the initial costs of such Pivotal Clinical Trials are less
than [*], with the balance due upon completion of such trials and
analysis of the data therefrom.
10.4. Clinical Data and Regulatory Filings. Each Party shall make
available to the other all of its clinical and formulation data
and regulatory filings free of charge. The Parties shall discuss
and coordinate the further exchange of information and data as is
necessary to obtain and maintain regulatory approval of the
Product. Each party shall have a royalty-free, non-exclusive
license, with the right to sublicense, to use
17
*Confidential Treatment has been requested for the marked portion.
<PAGE>
all of the data and information furnished under this Section for
the sole and exclusive purposes of conducting clinical testing
and obtaining or maintaining regulatory approval of the Product,
in the Territory in the case of B. Braun, and in [*] in the case
of GTC. GTC may share such clinical data and regulatory filings
with its [*] designee, under appropriate confidentiality
restrictions, for such designee to obtain and maintain regulatory
approval of the Product in [*]. Each Party agrees, to the extent
practical, to provide the other Party with the opportunity to
review and comment on all regulatory filings and material
correspondence with regulatory agencies. Each Party shall have
the right to attend meetings the other Party has with regulatory
authorities which relate to the Product.
11. Licenses and Royalties.
11.1. Grant. Subject to the fulfillment of the terms and conditions of
this Agreement, GTC grants to B. Braun:
a. an exclusive license under the GTC Patent Rights and GTC's
interest in the Project Patent Rights; and
b. an exclusive license to use the GTC Technology and GTC's
interest in the Project Technology,
with the right to grant sublicenses (except as provided below),
for the sole and exclusive purposes, restricted to the Field, of
(i) filling, finishing and labeling Product from Bulk rh[*]
supplied by GTC under this Agreement, (ii) conducting Pivotal
Clinical Trials on the rh[*], and (iii) using, importing and
exporting, marketing and selling the Products, in the Territory.
The license granted pursuant to Section 11.1.a. shall continue in
effect until the expiration of the last patent licensed to
B. Braun hereunder. The license granted pursuant to
Section 11.1.b. shall continue in effect for ten (10) years from
the date of first commercial sale of a Product within the
Territory; provided, however, B. Braun shall have a renewable
right to extend such license for successive terms by delivery of
written notice to GTC.
In the event B. Braun exercises the Co-Marketing Option set forth
in Section 8, above, the license set forth in this Section 11.1
shall be expanded to include a non-exclusive license under the
GTC Patent Rights and Project Patent Rights and a non-exclusive
license to use the GTC Technology and Project Technology in [*],
under the terms and conditions set forth above, except that
B. Braun shall not be permitted to sublicense such rights to
third parties which are not Affiliates in [*].
11.2. Reservation of Rights. GTC reserves for itself, its Affiliates,
other corporate partners, sublicensees and third party designees
the right under the GTC Patent Rights and the GTC Technology and
its interest in the Project Patent Rights and Project Technology
to (a) produce Bulk rh[*], (b) conduct clinical trials on such
Product in [*], and (c) use, import and sell such Products in
[*]. With respect to GTC's retained rights to market and sell
Products in [*], GTC's sublicense rights
18
*Confidential Treatment has been requested for the marked portion.
<PAGE>
shall be limited to the right to license a single entity.
11.3. Conversion to Non-Exclusive Licenses. In the event that B. Braun
fails to meet the minimum annual purchase requirements set forth
in Section 7.2(b), above, after using commercially reasonable
efforts, GTC shall have as its sole remedy the right, in its sole
discretion and upon thirty (30) days prior written notice to B.
Braun, to convert the license set forth in Section 11.1, above,
from exclusive to non-exclusive; provided, however, B. Braun may,
at its option, preserve the exclusivity of such license if,
within said thirty (30) day period, it pays to GTC the balance of
the annual minimum purchase requirement then due for such
calendar year. This provision shall be subject to suspension, as
determined in good faith by the Liaison Committee, in the event
of force majeure or legal or Regulatory Authority prohibition or
registration schedule delay to sell Product in a country in the
Territory.
11.4. Exclusivity. During the term of this Agreement, and for as long
as the license set forth in Section 11.1, above, has not been
terminated or converted to non-exclusive, B. Braun and GTC agree
that each will work exclusively with the other with respect to
the development, production and manufacture of any recombinant
human [*], and agree not to develop, produce, manufacture or sell
(or collaborate or work with any third party to develop,
manufacture or sell), any form of recombinant human [*] except as
provided in this Agreement, nor have this done by third parties.
Notwithstanding the foregoing, and subject to the other
provisions of this Agreement, GTC may subcontract to, and work
and/or collaborate with, third parties with respect to the
development and manufacture of Transgenic Goats which produce
rh[*] in their milk, and for the production of such rh[*] from a
Production Herd only for the purposes of this Agreement.
11.5. GTC Rights in Territory. In the event that B. Braun elects not
to file for regulatory approval for a Product in a country in the
Territory within one (1) year following completion of a Pivotal
Clinical Trial, or if approval is obtained in a country and B.
Braun elects within a commercially reasonable period not to
market and sell a Product in such country, then GTC shall have
the non-exclusive right itself or through an Affiliate or
sublicensee to use, import and sell the Product in such country.
11.6. Royalties. Royalty payments to GTC under this Section 11.6 are
subject to the existence of one or more valid claims under the
GTC Patent Rights or Project Patent Rights, or the existence of
GTC Technology or Project Technology which is not available to
third parties (other than permitted third parties under this
Agreement).
a. Sales of Products in Territory. Beginning one (1) year
following commercial launch of the Product, and following
Regulatory Authority approval in a country in the Territory
to market and sell Products, B. Braun shall pay to GTC
royalties on Net Sales Price of each Product sold by
B. Braun, its Affiliates and/or sublicensees in such
countries in the Territory, as follows:
19
*Confidential Treatment has been requested for the marked portion.
<PAGE>
Annual Net Sales Percentage
[*]
b. Sales of Products in [*]. In addition to the foregoing
royalties, in the event B. Braun exercises its Co-Marketing
Option, B. Braun shall pay to GTC royalties on Net Sales
Price of each Product sold by B. Braun and/or its Affiliates
in [*], as follows:
Annual Net Sales Percentage
[*]
11.7. Reports and Payment. B. Braun shall deliver to GTC, within sixty
(60) days after the end of each calendar quarter, a written
report showing its computation of royalties due under this
Agreement upon Net Sales during such calendar quarter. All Net
Sales shall be segmented in each such report according to sales
on a country-by-country basis, including the rates of exchange
used to convert such royalties to United States Dollars from the
EURO-currency or other currency in which such sales were made
(in the case of conversion from the EURO currency, from fixation
of the exchange rate between the applicable currency to the
EURO). Simultaneously with the delivery of each such report, B.
Braun shall tender payment in United States Dollars of all
royalties shown to be due therein.
In the event the exchange rate of the German Mark (and
subsequently the EURO currency) and the United States Dollar
increases or decreases from the exchange rate applicable on the
Effective Date of this Agreement by more than ten (10) percent,
an adjustment in the payment due GTC under this Section 11 shall
be made on a payment-by-payment basis, whereby each Party will
equally share such increase or decrease. The basis for
determining the exchange rates in effect for the purposes of this
Section shall be the exchange rate for the average of the "buy
and sell" rates as published in the European Edition of the Wall
Street Journal on the first and last days of the calendar quarter
for which payment is due.
11.8. Foreign Royalties. Where royalties are due hereunder for sales
of Products in a country where, by reason of currency regulations
or taxes of any kind, it is impossible or illegal for B. Braun to
transfer royalty payments to GTC for Net Sales in that country,
such royalties shall be deposited in whatever currency is
allowable by the person or entity not able to make the transfer
for the benefit or credit of GTC in an accredited bank in that
country that is reasonably acceptable to GTC.
11.9. Taxes. Any and all income or similar taxes imposed or levied on
account of the receipt of royalties payable under this Agreement
which are required to be withheld by B. Braun shall be paid by B.
Braun on behalf of GTC and shall be paid to the proper taxing
authority. Proof of payment shall be secured and sent to GTC by
B. Braun as evidence of such payment in such form as required by
the tax authorities having jurisdiction over B. Braun. Such
taxes shall be deducted from the royalty that would otherwise be
remittable by B. Braun.
20
*Confidential Treatment has been requested for the marked portion.
<PAGE>
11.10. Records. B. Braun shall keep, and shall require all Affiliates
and any permitted sublicensees to keep, for a period of at least
two (2) years, full, true and accurate books of accounts and
other records containing all information and data which may be
necessary to ascertain and verify the royalties payable
hereunder. During the term of this Agreement and for a period of
two (2) years following its termination, GTC, at its costs,
shall have the right from time to time (not to exceed once during
each calendar year) during normal business hours to have an
independent agent, accountant or other representative inspect in
confidence, such books, records and supporting data.
11.11. Payment Method. B. Braun will pay GTC by wire transfer of good
and immediately available funds to a bank and account, as
specified in writing by GTC, or by any other means agreed upon by
the Parties.
12. Representations, Warranties, Indemnities and Insurance.
12.1. Representations and Warranties by GTC. GTC hereby represents and
warrants to B. Braun as follows:
a. Organization and Good Standing. GTC is a corporation duly
organized, validly existing and in good standing under the
laws of the Commonwealth of Massachusetts and has full
corporate power and authority to conduct its business as
presently conducted and as proposed to be conducted by it
and to enter into and perform this Agreement, and to carry
out its obligations hereunder and the other transactions
contemplated by this Agreement.
b. Authority for Agreement. The execution, delivery and
performance by GTC of this Agreement has been duly
authorized by all necessary corporate action. The execution
and performance of the transactions contemplated by this
Agreement and compliance with its provisions by GTC will not
conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute a default under
any indentures lease, agreement or other instrument to which
GTC is a party or by which it or any or its properties is
bound, or any decree, judgment, order, statute, rule or
regulation known by GTC to be applicable to it.
c. Governmental Consents. To GTC's knowledge no consent,
approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any
governmental authority is required on the part of GTC in
connection with the execution of this Agreement or the
transactions contemplated by this Agreement.
d. No Known Infringement. Following diligent inquiry, including
worldwide patent searches conducted by outside patent
counsel, GTC is unaware of any infringement of the perfected
and valid intellectual property rights of any third party,
or any claim of such infringement by any third party, that
would arise
21
<PAGE>
upon the immediate use of any gene construct or other
material presently contemplated to be furnished by GTC to
B. Braun pursuant to this Agreement, or from the presently
contemplated and proposed activities of GTC pursuant to this
Agreement, including, without limitation, the production of
Bulk rh[*] and its sale as part of the Product. The Parties
acknowledge that the perfected and valid intellectual
property rights of third parties relating to recombinant
human [*] materially vary from country to country (for
example, third party patent rights exist in some countries
but not in others; and such patent rights will expire at
different times in different countries). Therefore, GTC's
representation and warranty to B. Braun under this
Subsection (d) is applicable as of the Effective Date only
with respect to those countries in which perfected and valid
third party intellectual property rights do not exist (for
example, without limitation, in [*]). GTC will provide
B. Braun with a copy of the report from its outside patent
counsel within fifteen (15) business days following the
Effective Date, confirming GTC's warranty under this
Subsection (d) with respect to patent rights of third
parties. GTC further represents and warrants to B. Braun
that the relevant intellectual property rights of third
parties which do exist as of the Effective Date should
expire in time for B. Braun to have broad marketing rights
for the Product in the Territory, consistent with the
commercialization schedule set forth in this Agreement.
e. Production of Bulk rh[*]. GTC represents and warrants to B.
Braun that GTC's production of the Bulk rh[*] shall be
performed in accordance with GTC's standard operating
procedures under the supervision and control of its qualified
personnel. GTC further warrants that the Bulk rh[*] supplied
to B. Braun under this Agreement shall meet the
Specifications at the time of delivery, shall not be
adulterated or misbranded within the meaning of the Federal
Food, Drug and Cosmetic Act in effect at the time of
delivery, and shall meet the applicable Regulatory Authority
requirements.
f. No Other Licenses. GTC represents and warrants to B. Braun
that GTC has not granted rights to the GTC Patent Rights or
GTC Technology to third parties for use in the Field in the
Territory [*]. GTC further represents and warrants to
B. Braun that, following diligent inquiry, including
worldwide patent searches conducted by outside patent
counsel, GTC is unaware of any infringement of the perfected
and valid intellectual property rights of [*], or any claim
of such infringement by [*], which would arise by the
performance of the rights granted to B. Braun under this
Agreement, and GTC will defend, indemnify and hold harmless
B. Braun and its Affiliates, permitted subdistributors,
agents, directors, officers and employees, at GTC's cost and
expense, from and against any and all losses, costs,
liabilities, damages, fees and expenses, including reasonable
attorneys' fees and expenses, incurred in connection with
any claim, action or proceeding brought by [*] and arising
out of or in connection a breach of GTC's representation and
warranty contained in this Subsection (f).
g. GTC Patent Rights. GTC represents and warrants to B. Braun
that the issued
22
*Confidential Treatment has been requested for the marked portion.
<PAGE>
patents listed in Schedule B to this Agreement are valid
and effective as of the Effective Date.
h. Exclusivity of Warranty and Limitation of Remedies. The
warranties made by GTC in this Section 12.1 are in lieu of
all other representations and warranties, express or
implied, including, but not limited to, implied warranties
of merchantability or fitness for a particular purpose.
12.2. Representations and Warranties by B. Braun. B. Braun hereby
represents and warrants to GTC as follows:
a. Organization. B. Braun is a German corporation duly
organized and validly existing under the laws of Germany
and has full power and authority to enter into and perform
this Agreement, and to carry out the transactions
contemplated by this Agreement.
b. Authority for Agreement. The execution, delivery and
performance by B. Braun of this Agreement has been duly
authorized by all necessary corporate action, and has been
duly executed and delivered by B. Braun. The execution
and performance of the transactions contemplated by this
Agreement and compliance with its provisions by B. Braun
will not conflict with or result in any breach of any of
the terms, conditions or provisions of, or constitute
default under, any indentures, lease, agreement or other
instrument to which B. Braun is a party or by which it or
any or its properties is bound, or any decree, judgment,
order, statute, rule or regulation known by B. Braun to be
applicable to it.
c. Governmental Consents. To B. Braun's knowledge, except as
provided herein, no consent, approval, order or
authorization of, or representation, qualification,
designation, declaration, or filing with any governmental
authority is required on the part of B. Braun in
connection with the execution of this Agreement or the
transactions contemplated by this Agreement.
d. No Infringement. B. Braun is unaware of any infringement
of the perfected and valid rights of any third party, or
any claim of such infringement by any third party, that
would arise upon the use of any gene construct or other
material presently contemplated to be furnished or
obtained by B. Braun pursuant to this Agreement, or from
the contemplated activities of B. Braun pursuant to this
Agreement.
e. Exclusivity of Warranty and Limitation of Remedies. The
warranties made by B. Braun in this Section 12.2 are in
lieu of all other representations and warranties, express
or implied, including, but not limited to, implied
warranties of merchantability or fitness for a particular
purpose.
12.3. Limitation of Liability. Unless otherwise specifically provided
for in this Agreement, neither Party will be liable for any lost
profits arising out of the such
23
<PAGE>
Party's performance or non-performance of its obligations under
this Agreement, whether any such damages are based on a claim
of negligence, strict liability, breach of warranty or
otherwise. Neither Party will be liable for any other
indirect, incidental, consequential or special damages arising
out of such Party's performance or non-performance of its
obligations under this Agreement, whether any such damages are
based on a claim of negligence, strict liability, breach of
warranty or otherwise; provided, however, a Party may be liable
for such other indirect, incidental, consequential or special
damages in the event such Party is held to have willfully
breached its material obligations under this Agreement or is
held to have been negligent in its performance of its
obligations hereunder.
12.4. Indemnification by B. Braun. B. Braun agrees to defend,
indemnify and hold harmless GTC and its Affiliates, agents,
directors, officers and employees, at B. Braun's cost and
expense, from and against any and all losses, costs, liabilities,
damages, fees and expenses, including reasonable attorneys' fees
and expenses (collectively, "Liabilities") incurred in connection
with any claim, action or proceeding brought by a third party and
arising out of or in connection with any and all import testing,
filling, finishing, labeling, packaging, registration,
inspection, marketing, sale, distribution or any other activities
related to the Product which are performed by or on behalf of B.
Braun, including, but not limited to, any actual or alleged
injury, damage, death or other consequence occurring to any
person as a result, directly or indirectly, of the possession,
consumption or use of the Product, regardless of the form in
which any such claim is made.
B. Braun's obligation to defend and indemnify GTC under this
Section 12.4 shall not apply to the extent that the existence
or incurrence of any such Liabilities is attributable to the
negligence, breach of warranty, recklessness, fault, errors or
omissions, misconduct, or otherwise of GTC or its Affiliates,
subdistributors, agent, directors, officers and employees.
12.5. Indemnification by GTC. GTC agrees to defend, indemnify and hold
harmless B. Braun and its Affiliates, permitted subdistributors,
agents, directors, officers and employees, at GTC's cost and
expense, from and against any and all Liabilities incurred in
connection with any claim, action or proceeding brought by a
third party and arising out of or in connection with any actual
or alleged injury, damage, death or other consequence occurring
to any person as a result, directly or indirectly, of a Product
defect arising from GTC's production of Bulk rh[*], regardless of
the form in which any such claim is made.
GTC's obligation to defend and indemnify B. Braun under this
Section 12.5 shall not apply to the extent that the existence
or incurrence of any such Liabilities is attributable to the
negligence, breach of warranty, recklessness, fault, errors or
omissions, misconduct, or otherwise of B. Braun or its
Affiliates, subdistributors, agent, directors, officers and
employees.
12.6. Defense of Claims. In the event of any such claim against a
Party or its Affiliates, subdistributors, agents, directors,
officers or employees, the indemnified Party shall
24
*Confidential Treatment has been requested for the marked portion.
<PAGE>
promptly notify the indemnifying Party in writing of the claim
and the indemnifying Party shall manage and control, at its sole
expense, the defense of the claim and its settlement. The
indemnified Party shall cooperate with the indemnifying Party
and may, at its option and at its own expense, be represented
in any such action or proceeding. The indemnifying Party shall
not be liable for any settlements, litigation costs, or expenses
incurred by the indemnified Party without the indemnifying
Party's written consent, such consent to be promptly given and
not unreasonably withheld.
12.7. Liability Insurance. Each Party shall secure and maintain at its
own expense during the term of this Agreement an adequate
insurance policy or policies with an insurer or insurers,
protecting the Party against any and all risks typically insured
against by businesses comparable to the Party, including without
limitation general and products liability, arising or occurring
upon or in connection with each Party's business. Such policy or
policies or program shall include general and products liability
coverage in an amount typically secured by businesses comparable
to the Party. Each Party shall furnish the other Party with
certificates evidencing all such insurance.
13. Pharmacovigilance Programs. If either Party receives any complaints
(excluding customer service-related complaints) relating to the
manufacture and use of Product, including adverse reaction reports, it
promptly shall notify the other Party of such complaints and reports;
provided, however, that in the case of adverse reaction reports
concerning "serious adverse experiences" (as such term, or analogous
terms, are defined by the Regulatory Authorities in any country in the
Territory, as applicable), such Party immediately shall notify the other
Party by telefax and/or telephone of such report, but in no event more
than two (2) working days after receipt of such report. Following
execution of this Agreement, GTC and B. Braun promptly shall agree upon a
written policy for reporting adverse experiences which will comply with
all applicable Regulatory Authority requirements.
14. Proprietary Rights.
14.1. Ownership. GTC shall own for itself all GTC Patent Rights and
GTC Technology. The Parties shall jointly own all Project Patent
Rights and Project Technology. Either Party is free to use its
ownership interest in the Project Patent Rights and Project
Technology outside the scope of this Agreement; provided,
however, neither Party shall use such ownership interest in
collaboration with a third party, or license such ownership
interest to a third party, without notifying the other Party, and
the other Party may object to such collaboration or license
within thirty (30) days of notice thereof, if it can be
reasonably demonstrated that such collaboration or license would
materially disadvantage such Party's business interests.
14.2. Filing and Maintenance of Patents.
a. Project Patent Rights. The Parties shall cooperate with
respect to decisions whether or not to seek or continue to
seek or maintain patent protection on the Project Patent
Rights in any country in the world, and shall have the
right, jointly in both their names, to file for, procure,
and maintain patents on any
25
<PAGE>
such Project Patent Rights in any country in the world,
with the expenses being shared equally by the Parties. If
one Party elects not to seek or continue to seek or
maintain patent protection on any Project Patent Rights in
any country in the world, the other Party shall have the
right, in its name, to file, procure and maintain in such
countries patents on such Project Patent Rights, with the
expenses being borne by such Party.
b. GTC Patent Rights. GTC shall have the right and
responsibility to decide whether or not to seek or
continue to seek or maintain patent protection on the GTC
Patent Rights in any country in the world, and shall have
the right to file for, procure, and maintain patents on
any such GTC Patent Rights in any country in the world,
with the expenses being borne by GTC. If GTC elects not
to seek or continue to seek or maintain patent protection
on any GTC Patent Rights in any country in the world, and
GTC has the right to permit B. Braun to file, procure and
maintain in such countries patents on such GTC Patent
Rights, B. Braun shall have the right, in its name, to
file, procure and maintain in such countries patents on
such GTC Patent Rights, with the expenses being borne by
B. Braun, and the rights under such GTC Patent Rights
thereafter shall be transferred to B. Braun. GTC agrees
to advise B. Braun of all decisions taken under this
Subsection in a timely manner, but in any case at least
ninety (90) days prior to the time any action is required,
in order to allow B. Braun to protect the Parties'
ownership and license interests in the GTC Patent Rights.
14.3. Patent Cooperation. Each Party shall provide the other Party
with copies of all substantive communications from all patent
offices regarding applications or patents on any Project Patent
Rights and Project Technology promptly after the receipt
thereof. Each Party shall provide the other Party with copies of
all proposed substantive communications to such patent offices
regarding applications or patents on any such Project Patent
Rights in sufficient time before the due date in order to enable
the other Party an opportunity to comment on the content thereof.
Each Party shall make available to the other Party or its
authorized attorneys, agents, or representatives, such of its
employees whom the other Party in its reasonable judgment deems
necessary in order to assist it in obtaining patent protection
for the Project Patent Rights. Each Party shall sign or use its
best efforts to have signed all legal documents necessary to file
and prosecute patent applications or to obtain or maintain
patents at no cost to the other Party.
14.4. Infringement.
a. Each Party shall promptly report in writing to the other
Party during the term of this Agreement any known (1)
infringement or suspected infringement or (2) unauthorized
use or misappropriation of any of the GTC Patent Rights or
Project Patent Rights in the Territory, and shall provide
the other Party with all available evidence supporting
said infringement, suspected infringement or unauthorized
use or misappropriation.
26
<PAGE>
b. GTC Patent Rights.
i. GTC shall have the sole and exclusive right to
initiate an infringement or other appropriate suit
anywhere in the Territory against any third party who
at any time has infringed or misappropriated, or is
suspected of infringing or misappropriating, any of
the GTC Patent Rights. GTC shall give B. Braun
sufficient advance notice of its intent to file said
suit and the reasons therefore, and shall provide B.
Braun with an opportunity to make suggestions and
comments regarding such suit. GTC shall keep B.
Braun promptly informed, and shall from time to time
consult with B. Braun regarding the status of any
such suit. In the event that GTC decides not to
initiate an infringement or other appropriate suit
pursuant to this Subsection (b)(i), GTC shall
promptly advise B. Braun of its intent not to
initiate such suit; provided, however, GTC shall
bring infringement or other appropriate actions
against third parties against which a credible claim
of infringement or misappropriation may be asserted,
unless GTC can reasonably demonstrate to B. Braun
that the consequences of such action against such
third parties could materially injure GTC's
intellectual property or other business interests.
In any event, upon written request by B. Braun to
make an election, GTC shall elect to file a suit no
later than one hundred twenty (120) days following
such request, and if GTC has failed to initiate suit
within said one hundred twenty (120) day period, B.
Braun shall have the right to the remedies set forth
in Subsection (b)(iii), below.
ii. GTC shall have the sole and exclusive right to select
counsel for any suit referred to in Subsection
(b)(i), above, and shall, except as provided below,
pay all expenses of the suit, including without
limitation attorneys' fees and court costs. If
necessary or desirable in GTC's sole opinion, B.
Braun or its Affiliates shall join as a party to the
suit but shall be under no obligation to participate
except to the extent that such participation is
required as the result of being a named party to the
suit. B. Braun shall offer reasonable assistance to
GTC in connection therewith at no charge to GTC
except for reimbursement of reasonable out-of-pocket
expenses, including reasonable attorneys' fees,
incurred in rendering such assistance. B. Braun
shall have the right to participate and be
represented in any such suit by its own counsel at
its own expense. If GTC requires B. Braun to join in
such suit, GTC shall defend, indemnify and hold
harmless B. Braun against any claim arising out of
such suit or any claim for injunctive or other
relief.
iii. In the event GTC decides not to initiate a suit or
fails to elect to file a suit within the one hundred
twenty (120) day time period set forth in Subsection
(b)(ii), above, where GTC has the legal right and
standing to bring such suit, and such election has a
material and adverse affect on B. Braun's market
share with respect to sales of the Product in one or
more of the countries in the Territory in which B.
Braun is exercising commercially reasonable and
diligent efforts to distribute and sell the Product,
then B. Braun may be relieved of a percentage of its
annual
27
<PAGE>
minimum purchase requirements, with such percentage
being equal to the percentage of B. Braun's
Territory-wide sales of Product which occurred in
such country or countries during the prior annual
sales period.
c. Project Patent Rights.
i. The Parties shall cooperate in electing whether or
not to initiate an infringement or other appropriate
suit against any third party who at any time has
infringed, or is suspected of infringing, any of, or
of using without proper authorization all or any
portion of, the Project Patent Rights. Each Party
shall decide, no later than ninety (90) days
following written notice from the other Party of
infringement pursuant to Subsection (a), above,
whether to participate in such infringement or other
appropriate suit.
ii. The Parties shall have the joint right to select
counsel for any suit referred to in Subsection
(c)(i), above and shall, except as provided below,
jointly pay in equal parts all expenses of the suit,
including without limitation attorneys' fees and
court costs. Each Party (except as provided below)
shall be entitled to retain fifty percent (50%) of
any damages, royalties, settlement fees, or other
consideration for infringement resulting therefrom.
iii. In the event that one Party elects not to participate
in such infringement or other appropriate suit
pursuant to subsection (c)(ii), above, that Party
shall promptly advise the other Party of its intent
not to participate in such suit, and the other Party
shall have the right, at its own expense, of
initiating an infringement or other appropriate suit
against any third party who at any time has
infringed, or is suspected of infringing, or of using
without proper authorization all or any portion of
such Project Patent Rights. In exercising its rights
pursuant to this subsection (c)(iii), the
participating Party shall have the sole and exclusive
right to select counsel and shall, except as provided
below, pay all expenses of the suit including without
limitation attorneys' fees and court costs. The
participating Party shall be entitled to retain any
damages, royalties, settlement fees, or other
consideration which are attributable to infringement
resulting therefrom. If necessary, the other Party
shall join as a party to the suit but shall be under
no obligation to participate except to the extent
that such participation is required as a result of
being a named party to the suit. At the
participating Party's request, the other Party shall
offer reasonable assistance to the participating
Party in connection therewith at no charge to the
participating Party except for reimbursement of
reasonable out-of-pocket expenses incurred in
rendering such assistance. The participating Party
shall not settle any such suit involving rights of
the other Party in the Project Patent Rights without
obtaining the prior written consent of the other
Party, which consent shall be promptly given and
shall not be unreasonably withheld.
28
<PAGE>
14.5. Claimed Infringement.
a. In the event that a third party at any time provides
written notice of a claim to, or brings an action, suit or
proceeding against, either Party or any of their
respective Affiliates, claiming infringement of its patent
rights or unauthorized use or misappropriation of its
know-how, based upon an assertion or claim arising out of
the development, manufacture and/or sale of the Bulk rh[*],
such Party shall promptly notify the other Party of the
claim or the commencement of such action, suit or
proceeding, enclosing a copy of the claim and/or all
papers served.
b. GTC shall attempt, at its costs, to resolve the problem
raised by the asserted infringement in one of the
following ways:
i. obtain a license permitting GTC and B. Braun to make,
have made, use and sell Bulk rh[*] as part of the
Product in the country or countries in question; or
ii. obtain a written statement from such third party
that:
(1) no action will be taken against GTC or B. Braun
and their respective Affiliates, sublicensees or
distributors for the manufacture, use or sale of
Bulk rh[*] as part of the Product; or
(2) the patent or other third party right is not
infringed by the formulation, manufacture, use
or sale of Bulk rh[*] as part of the Product; or
(3) obtain a holding that the third party patent is
invalid or the third party patent or other right
is unenforeceable or not infringed by a court of
competent jurisdiction from which no appeal has
or can be taken.
In the event that B. Braun has given written notice to GTC
that a third party has claimed or alleged that the
manufacture, use or sale of Bulk rh[*] as part of the
Product constitutes an infringement of its patent or
patents or industrial property rights against B. Braun,
its Affiliates, sublicensees or distributors and GTC does
not undertake, within sixty (60) days of such notice, to
defend and/or settle such claim or allegation as described
above, B. Braun shall have the right to retain the
royalties otherwise payable to GTC under this Agreement
and to use such royalties to pay for or defray the actual
expended costs of defending each such claim or allegation,
including the costs of settling or satisfying said claim
or allegation. B. Braun shall not settle or satisfy such
claim or allegation in a manner which affects GTC's rights
under the GTC Patent Rights, GTC Technology, Project
Patent Rights or Project Technology without GTC's prior
written consent. During the defense of such claims or
allegations, B. Braun shall submit documentation showing
royalties accruing to
29
*Confidential Treatment has been requested for the marked portion.
<PAGE>
GTC and the expenses of defending against the claims or
allegations of infringement. In the event such claim or
allegation is resolved, B. Braun shall promptly return to
GTC any amount of withheld royalties in excess of the
costs expended by B. Braun in resolving such claim or
allegation.
If, under the preceding paragraph, GTC settles or
satisfies such claim or allegation of patent or industrial
property right infringement, then GTC shall be responsible
for any payments to third parties to settle or satisfy
such claim or allegation. If, under the preceding
paragraph, B. Braun settles or satisfies such claim or
allegation of patent or industrial property right
infringement, then B. Braun shall be entitled to deduct
fifty percent (50%) of those payments or royalties paid to
such third party from the royalties due to GTC under this
Agreement, up to a maximum of fifty percent (50%) of the
royalties otherwise due GTC hereunder.
15. Confidential Information.
15.1. Treatment of Confidential Information. Each Party shall maintain
the Confidential Information of the other Party in confidence,
and shall not disclose, divulge or otherwise communicate such
Confidential Information to others, or use it for any purpose,
except pursuant to, and in order to carry out, the terms and
objectives of this Agreement, and hereby agrees to exercise every
reasonable precaution to prevent and restrain the unauthorized
disclosure of such Confidential Information by any of its
directors, officers, employees, consultants, subcontractors,
sublicensees or agents. The Parties' confidentiality obligations
shall expire ten (10) years following termination of this
Agreement.
15.2. Release from Restrictions. The provisions of Section 15.1 shall
not apply to any Confidential Information disclosed hereunder
which:
a. was known or used by the receiving Party or its Affiliates
prior to its date of disclosure to the receiving Party, as
evidenced by the prior written records of the receiving
Party or its Affiliates; or
b. either before or after the date of the disclosure to the
receiving Party is lawfully disclosed without restriction
to the receiving Party or its Affiliates by an
independent, unaffiliated third party rightfully in
possession of the Confidential Information (but only to
the extent of the rights received from such third party);
or
c. either before or after the date of the disclosure to the
receiving Party becomes published or generally known to
the public through no fault or omission on the part of the
receiving Party or its Affiliates; or
d. is required to be disclosed by the receiving Party or its
Affiliates to comply with applicable laws, to defend or
prosecute litigation or to comply with governmental
regulations, provided that the receiving Party provides
prior
30
<PAGE>
written notice of such disclosure to the other Party and
takes reasonable and lawful actions to avoid and/or
minimize the degree of such disclosure.
15.3. Publications. The following restrictions shall apply with
respect to the disclosure in scientific journals or
publications by either Party or any employee or consultant of
either Party relating to any scientific work relating to the
Product and/or Final Product:
a. The publishing Party shall provide the other Party with an
advance copy of any proposed publication (which may be in
draft form) relating to the Product/Final Product, and the
other Party shall have a reasonable opportunity to
recommend any changes it reasonably believes are necessary
to preserve patent rights or know-how licensed to or owned
in whole or in part by the other Party, or are otherwise
necessary to promote or protect the interests of the other
Party, and the incorporation of such recommended changes
shall not be unreasonably refused;
b. if the other Party informs the publishing Party, within
thirty (30) days of receipt of an advance copy of a
proposed publication, that such publication in its
reasonable judgment could be expected to have a material
adverse effect on any patent rights or know-how licensed
to or owned in whole or in part by the other Party, the
publishing Party shall, to the extent permitted by its
agreements with its employees and consultants, delay or
prevent such publication as proposed. In the case of
inventions, the delay shall be sufficiently long to permit
the timely preparation and filing of a patent
application(s) or application(s) for a certificate of
invention on the information involved; and
c. if the other Party informs the publishing Party, within
thirty (30) days of receipt of an advance copy of a
proposed publication, that such publication in its
reasonable judgement could be expected to have a material
adverse effect on the interests of the other Party, the
Parties shall discuss the publication and, if mutually
agreeable, the publishing Party shall, to the extent
permitted by its agreements with its employees and
consultants, delay or prevent such publication as agreed.
15.4. Permissible Uses of Confidential Information. The foregoing
provisions shall not preclude the disclosure of Confidential
Information as necessary for (a) the Parties' performance of this
Agreement, (b) the manufacture of Bulk rh[*] by GTC, (c) the
manufacture and marketing of the Product by B. Braun pursuant to
this Agreement or (d) B. Braun's filing and prosecution of
applications with Regulatory Authorities for the manufacture,
sale and use of the Product in the Territory or the manufacture
of the Bulk rh[*] by GTC.
16. Termination.
16.1. Term. The term of this Agreement (the "Term") will commence on
the Effective Date and will continue for so long as one or more
valid claims under the GTC Patent
31
*Confidential Treatment has been requested for the marked portion.
<PAGE>
Rights or Project Patent Rights, or GTC Technology or Project
Technology which is not available to third parties (other than
permitted third parties under this Agreement), exists, unless
terminated sooner pursuant to the express provisions of this
Agreement.
16.2. Termination for Breach.
a. General Provision. Each Party shall be entitled to
terminate this Agreement by written notice to the other
Party in the event that the other Party shall be in
material default of any of its obligations hereunder, and
shall fail to remedy any such default within sixty (60)
days after notice thereof by the non-breaching Party. Any
such notice shall specifically state that the
non-breaching Party intends to terminate this Agreement in
the event that the breaching Party shall fail to remedy
the default in said period. Upon termination of this
Agreement pursuant to this Section 16.2, neither Party
shall be relieved of any obligations incurred prior to
such termination. The Parties acknowledge that material
breach by B. Braun or GTC of its obligations hereunder
shall be considered valid grounds for termination under
this Section 16.2.
b. Partial Termination Where B. Braun is the Breaching Party.
Notwithstanding anything contained in this Section 16.2 to
the contrary, if B. Braun is the breaching Party and if B.
Braun's default (a) primarily occurred in or primarily
affects a particular country or group of countries which
are part of the Territory and (b) does not materially
adversely affect (i) B. Braun's ongoing ability to fully
perform its obligations under this Agreement in the other
countries specified in this Agreement or (ii) GTC's
reputation or its ongoing ability to perform its
obligations under this Agreement, then GTC shall have the
right to terminate B. Braun's rights under this Agreement
with respect to the country or group of countries in which
the default occurred or primarily affects. Upon such
partial termination of B. Braun's rights under this
Agreement pursuant to this Section 16.2, (x) neither Party
shall be relieved of any obligations incurred prior to
such termination or thereafter in the country or countries
specified in this Agreement not subject to such
termination, (y) B. Braun's rights under this Agreement
will terminate in such country or countries according to
the notice, opportunity to cure and other procedures
specified for general termination of this Agreement under
this Section 16 and (z) such rights will revert to GTC.
c. GTC Willful Breach or Gross Negligence. Notwithstanding
anything contained in this Section 16 to the contrary, if,
following the filing of the first BLA by either of the
Parties under this Agreement, GTC has willfully breached
this Agreement or has been grossly negligent in its
performance of its obligations hereunder, and GTC has not
corrected such breach within three (3) months of B.
Braun's written request (which three (3) month period may
be extended by agreement of the Parties, if GTC is
diligently attempting to correct such breach), then B.
Braun may, at its sole option and without prejudice to any
other remedy it may have, produce itself or have produced
all or any part
32
<PAGE>
of its requirements for Bulk rh[*] for use in the Product,
utilizing the GTC Patent Rights, the Project Patent
Rights, the GTC Technology and the Project Technology.
GTC, at its own cost and expense, promptly shall transfer
to B. Braun the non-exclusive right to use the GTC Patent
Rights, Project Patent Rights, GTC Technology and Project
Technology to make and have made the Bulk rh[*] for use in
the Product. In addition, GTC, at its own cost and
expense, will provide B. Braun with reasonable production
assistance, so that B. Braun may use the GTC Patent
Rights, Project Patent Rights, GTC Technology and Project
technology to produce Bulk rh[*] for such purpose. In the
event B. Braun elects to produce or have a third party
produce Bulk rh[*] for such purpose, B. Braun shall pay
GTC a fee equal to fifty percent (50%) of the royalty
rates set forth in Section 11.6(b), above, on B. Braun's
sales of Product filled and finished from Bulk rh[*]
produced by B. Braun under this Subsection (c).
16.3. Termination by B. Braun. In addition, B. Braun may terminate
this Agreement, or its rights and obligations in a country or
countries under this Agreement, as specified below:
a. In the event GTC is acquired by a major competitor of B.
Braun, B. Braun shall be entitled to terminate this
Agreement by giving not less than ninety (90) days prior
written notice to GTC.
b. B. Braun may terminate its rights and obligations under
this Agreement with respect to any country at any time by
giving not less than ninety (90) days prior written notice
to GTC if, due to any governmental or regulatory action in
such country or countries, B. Braun is unable to market
the Product in such country; in such event, all rights to
manufacture, import, market, sell and use the Product in
such country or countries shall revert to GTC.
c. B. Braun may terminate this Agreement at any time by
giving not less than ninety (90) days prior written notice
to GTC if B. Braun determines that it does not desire that
development and/or commercialization of the rh[*] and/or
the Product shall be continued; provided, however, in such
event B. Braun shall pay GTC for all reasonable costs and
obligations incurred by GTC (with the Liaison's
Committee's consent) under this Agreement through the date
of such termination. Thereafter, all of B. Braun's rights
under this Agreement shall revert to GTC, except that B.
Braun shall retain the rights set forth in Section 14.1,
above.
d. B. Braun may terminate this Agreement by giving not less
than ninety (90) days prior written notice to GTC if a
development milestone as set forth in Section 4.7 and
Schedule C of this Agreement is not met within ninety (90)
days of the date specified for completion of such
milestone; B. Braun also may terminate its rights and
obligations with respect to [*] only, by giving not less
than ninety (90) days prior written notice to GTC, if a
development milestone as set forth in Section 8.3 and
Schedule C of this Agreement is not met within one ninety
33
*Confidential Treatment has been requested for the marked portion.
<PAGE>
(90) days of the date specified for completion of such
milestone; provided, however, GTC shall have the
opportunity during such ninety-day notice period to meet
such milestone, in which case this Agreement may not be
terminated. In the event of termination by B. Braun under
his Subsection (d), B. Braun shall pay GTC for all
reasonable costs and obligations incurred by GTC with the
Liaison Committee's consent) under this Agreement through
the date of such termination.
16.4. Termination by Either Party. Either Party may terminate this
Agreement in the event the other Party shall enter into
liquidation or become insolvent or have a receiver appointed with
respect to any of its assets or takes or suffers any other
similar or equivalent action by reason of insolvency or in
consequence of debt, such termination to be effective immediately
upon written notice to such other Party.
16.5. Effect of Termination.
a. In the event B. Braun terminates this Agreement, other
than pursuant to breach by GTC under Section 16.2 or for
the reasons set forth in Sections 16.3(a) or (d) or 16.4,
above, then for a period of four (4) years following such
termination, B. Braun shall first offer GTC the
opportunity to supply B. Braun with all if its
requirements, if any, of bulk-form recombinant human [*]
(or any modification or formulation thereof), on
commercially reasonable and competitive terms and
conditions to be agreed to by the Parties.
b. Termination of this Agreement shall not affect the rights
and obligations of the Parties accrued under this
Agreement prior to such termination and, other than as
specified in Section 16.3, B. Braun shall be obligated to
make milestone payments under Sections 4.7 and 8.3 in the
event of completion of such milestones prior to
termination of the Agreement.
c. B. Braun shall have the right to sell its remaining
inventory of Product under the obligation to pay to GTC
the running royalties due thereon.
d. In the event GTC terminates this Agreement as provided for
herein or Braun terminates this Agreement other than
pursuant to Sections 16.2, 16.3(d) or 16.4, above, or
terminates its rights and obligations with respect to any
country or countries under this Agreement, B. Braun shall
cancel all rights of regulatory approvals with the health
authorities for the Product, if any, in the Territory or
in such country or countries, as applicable, or upon GTC's
request, transfer the same to GTC or an entity to be named
by GTC, with the costs of such transfer being borne by
GTC.
e. Following termination, each Party shall be free to
non-exclusively use its interest in the Project Patent
Rights and Project Technology without restriction or
obligation to the other Party; provided, however, the
restrictions set forth in Section 14.1 shall be applicable
analogously (other than in the event of termination
pursuant to Sections 16.2, 16.3(d) or 16.4, above) and
shall survive
34
*Confidential Treatment has been requested for the marked portion.
<PAGE>
any such termination, as provided for therein.
16.6. Survival of Obligations; Return of Confidential Information.
Notwithstanding any termination or expiration of this Agreement,
the obligations of the Parties under Sections 6.2, 12, 14, 15, 16
and 17 of this Agreement shall survive and continue to be
enforceable. Upon any termination of this Agreement, each Party
shall promptly return to the other Party all written Confidential
Information, and all copies thereof, of the other Party, but may
retain one (1) copy for archival purposes.
17. Miscellaneous.
17.1. Public Announcements. Neither Party shall make any public
disclosure regarding this Agreement without the prior written
consent of the other Party. Each Party hereby covenants and
agrees to collaborate with the other Party within reason
concerning disclosures which are or may be expected to be
publicly disseminated regarding the existence of this Agreement.
Notwithstanding the foregoing, neither Party shall be required to
obtain the consent of the other Party regarding a disclosure of
this Agreement for purposes of disclosures which such Party
reasonably believes to be required by law; provided, however,
that the Party intending to disclose such Confidential
Information provides advance written notice to the other Party,
and that such disclosing party takes all reasonable and lawful
actions to obtain confidential treatment for such disclosure and,
if possible, to minimize the extent of such disclosure.
17.2. Good Faith Effort to Resolve Disputes. Any controversy or claim
arising out of, or relating to, any provisions of this Agreement,
or breach thereto, shall be referred for resolution to GTC's
president, and to B. Braun's president ("Vorstandsvorsitzender").
If the Parties respective officers, or their designees cannot
reach a resolution of the dispute within sixty (60) days after
referring such dispute to the Parties respective presidents, then
the dispute shall be resolved by binding arbitration pursuant to
the provisions of Section 17.3.
17.3. Arbitration. Any dispute arising between the Parties in
connection with this Agreement which cannot be resolved pursuant
to the provisions of Section 17.2 shall be finally settled under
the rules of the International Chamber of Commerce ("ICC"), by a
panel of three (3) arbitrators, one of such arbitrators to be
selected by GTC, one of such arbitrators to be selected by B.
Braun, and a third to be selected by the other two. Both legal
and equitable remedies shall be available to the arbitrators.
Judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. Any such
arbitration shall be held in Boston, Massachusetts, for
arbitration proceedings commenced by B. Braun, and in
Frankfurt/Main, Germany, for arbitration proceedings commenced by
GTC, or at such other location as the Parties may agree, and
shall be conducted in the English language. The losing Party
shall bear all costs of the arbitration. If one Party fails to
select an arbitrator within sixty (30) days after receiving
notice of arbitration from the other Party, then such Party shall
forfeit its right to select an arbitrator, and such arbitrator
shall be selected by the ICC.
35
<PAGE>
17.4. Successors and Assigns. The provisions of this Agreement shall
be binding upon, and inure to the benefit of, the respective
successors and assigns of the Parties hereto.
17.5. Notices. Any notice or other communication in connection with
this Agreement must be in writing and if by mail, by registered
mail, return receipt requested, and if transmitted by telecopier,
with a copy sent by mail in accordance with this Section 17.5,
and shall be effective when delivered to the addressee at the
address or telecopier number listed below or such other address
or telecopier number as the addressee shall have specified in a
notice actually received by the addressor.
If to B. Braun: B. Braun Melsungen AG
Carl-Braun-Strasse 1
34212 Melsungen / Germany
Telecopier: 49/5661/71-3569
Attn: Head of the Pharma Division
If to GTC: Genzyme Transgenics Corporation
Five Mountain Road
Framingham, Massachusetts 01701 USA
Telecopier: 508-370-3797
Attn: Vice President and General Counsel
17.6. Export. The Parties acknowledge that the export of technical
data, materials or products may be subject to the exporting Party
receiving the necessary export licenses. The Parties agree that
regardless of any disclosure made by the Parties receiving an
export of an ultimate destination of any technical data,
materials or products, the receiving Party will not reexport
either directly or indirectly, any technical data, material or
products without first obtaining the applicable validated or
general license from the United States Department of Commerce,
United States Food and Drug Administration and/or any other
agency or department of the United States Government, as
required. The receiving Party shall provide the exporting Party
with any information, certifications or other documents which may
be reasonably required in connection with such exports under the
Export Administration Act of 1979, as amended, its rules and
regulations, the Federal Food, Drug and Cosmetic Act and other
applicable export laws.
17.7. Foreign Corrupt Practices Prohibited. In carrying out its
responsibilities under this Agreement, B. Braun will not pay or
agree to pay, directly or indirectly, any funds or anything of
value to any public official in a foreign country or jurisdiction
within the Territory for the purpose of influencing such
official's official acts or decisions. If B. Braun directly or
indirectly offers, pays, promises, gives or authorizes payment of
any money or anything of value to any government or public
official for the purpose of influencing any official in the
course of carrying out this Agreement, this Agreement will
automatically terminate. B. Braun agrees to notify GTC of any
request that B. Braun receives to take any action that might
constitute a violation of the United States Foreign Corrupt
Practices Act of 1977, as amended.
36
<PAGE>
17.8. Entire Agreement. This Agreement embodies the entire agreement
and understanding between the Parties with respect to the subject
matter hereof and supersedes all prior agreements and
understandings relating to such subject matter.
17.9. Waiver. Except as otherwise expressly set forth in this
Agreement, any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Parties. No
waivers or exceptions to any term, condition or provision of this
Agreement, in any one or more instances, shall be deemed to be,
or construed as, a further or continuing waiver of any such term,
condition or provision.
17.10. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
17.11. Headings. The headings of the sections, subsections, and
paragraphs of this Agreement have been added for convenience only
and shall not be deemed to be a part of this Agreement.
17.12. Force Majeure. Either Party's failure to perform any term or
provision of this Agreement shall be considered an "Excused
Failure" if caused by any reason beyond its reasonable control
(not including, however, financial difficulties), or by reason of
any of the following circumstances: the development of rh[*] or
the manufacture or marketing of the Product is disallowed or
restrained by any statute, rule or regulation or a binding
judgment, order or decree of any court or administrative agency,
or denial of a necessary governmental approval; and to the extent
that any one or more of the following conditions actually disable
the development of rh[*] or the manufacture or marketing of the
Product, labor disturbances or labor disputes of any kind;
accident; disease; failure of utilities, mechanical breakdowns,
material shortages or other similar occurrences; civil disorders
or commotions, acts of aggression, vandalism or other similar
occurrences; or fire, floods, earthquakes, or acts of God.
Neither Party shall be responsible in damages or otherwise for
any delay in the performance of its obligations hereunder (other
than obligations to pay money) caused by any even or occurrence
considered an Excused Failure; and each Party agrees to give
notice of each such delay to the other Party within ten (10)
business days of its inception, together with an estimate of the
length of the delay, and agrees to continue to make all
reasonable efforts to perform its obligations hereunder both
during and after the period of such delay.
17.13. Severability. In the event that any provision of this Agreement
is held by a court of competent jurisdiction to be unenforceable
because it is invalid or in conflict with any law of any relevant
jurisdiction, such provision shall be deemed not to have taken
effect from the date of this Agreement and the validity of the
remaining provisions shall not be affected, and the rights and
obligations of the Parties shall be construed and enforced as if
the Agreement
37
*Confidential Treatment has been requested for the marked portion.
<PAGE>
did not contain the particular provision held to be
unenforceable, and the Parties shall negotiate in good faith with
each other and with such court with a view to modifying this
Agreement in a manner which as closely as is reasonably
practicable reflects the commercial objectives and effect of this
Agreement as originally signed.
17.14. Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned or transferred, in whole or
in part, by either Party, without the prior written consent of
the other Party, except that (a) either Party may assign this
Agreement in whole or in part to an Affiliate, provided that such
Party remains primarily liable and/or responsible for the
performance of such obligations, and provided further that such
Affiliate agrees to be bound to the terms and conditions of this
Agreement, (b) either Party may assign and transfer this
Agreement in connection with the merger, consolidation or sale of
all or substantially all of that Party's assets (other than by
GTC to a major competitor of B. Braun, as provided in Section
16.3(a)), (c) B. Braun may assign this Agreement, without GTC's
prior consent, in the event GTC is acquired by a third party
which is not an Affiliate and (d) B. Braun may assign this
Agreement, with GTC's prior consent, following approval of a BLA
for the Product in a country in the Territory.
17.15. Governing Law. This Agreement shall be exclusively governed by
and construed in accordance with the Laws of Switzerland, without
regard to conflicts of laws principles dictating the application
of the law of another jurisdiction. The Parties expressly reject
any application of the United Nations Convention on Contracts for
the International Sale of Goods.
17.16. Waiver of Immunity. To the extent that either Party may in any
jurisdiction in which proceedings may at any time be taken for
the enforcement of this Agreement claim for itself or its assets
immunity from suit, judgment, execution, attachment (whether in
aid of execution, before judgment or otherwise) or other legal
process, the Parties hereby irrevocably waive any such immunity
to the fullest extent now or hereafter permitted by the law of
such jurisdiction.
17.17. Equitable Remedies. Each Party acknowledges that in certain
cases (as determined by the courts of competent jurisdiction) of
a violation by either Party of any of the provisions of this
Agreement may entitle the other Party to equitable relief in
addition to any other right or remedy, and this relief shall be
available in addition to, and shall not be unavailable by reason
of, the arbitration provisions of Section 17.3 hereof. Such
equitable relief may be in the way of temporary restraining
orders, and preliminary and permanent injunctions, and such other
equitable relief as any court of competent jurisdiction may deem
just and proper.
17.18. Consents Not Unreasonably Withheld. Whenever a provision is made
in this Agreement which requires either Party to secure the
consent or approval of the other, such consent or approval shall
not be unreasonably withheld, and whenever in this Agreement
provisions allow for one Party to object or to disapprove a
matter, such
38
<PAGE>
objection or disapproval shall not be unreasonably exercised.
17.19. Compliance with Laws. The Parties shall comply with all material
laws, regulations and other requirements with regard to the
performance of its obligations under this Agreement. If any law
or regulation in the Territory or any subdivision thereof
requires that any governmental agency receive notice of or
registration of this Agreement, B. Braun and GTC shall cooperate
in the preparation of such registration or notification.
Duly authorized representatives of the parties have signed this Agreement
as of the Effective Date.
GENZYME TRANSGENICS CORPORATION
By /s/ James A. Geraghty By /s/ Michael Young
------------------------------ ------------------------------
Print Name: James A. Geraghty Print Name: Michael Young
Title President and CEO Title Vice President
--------------------------- ---------------------------
duly authorized duly authorized
B BRAUN MELSUNGEN AG
By /s/ Wolfgang Feller By /s/ Klaus Hofer
------------------------------ ------------------------------
Print Name Wolfgang Feller Print Name: Klaus Hofer
Title Member of the Board Title: Member of the Board
--------------------------- ---------------------------
duly authorized duly authorized
Enclosures
39
<PAGE>
Schedule A
Specifications
The Specifications for Bulk rh[*] will be developed and attached to this
Agreement as an integral part thereof by the Parties, via the Liaison
Committee. Preliminary Specifications will be established and agreed upon by
the Liaison Committee within ninety (90) days of the Effective Date.
Additionally, a detailed development plan will be established and adopted by
the Liaison Committee within such 90-day period. The Specifications shall
include the Acceptance Assays and related information, as set forth in the
Agreement. The parameters of the Specifications shall include, without
limitation, specifications for Bulk rh[*] purity, activity, amino acid
sequence information, that the Bulk rh[*] (and Product filled and finished
therefrom) shall be essentially similar to the leading non-transgenic
recombinant human [*] produced in cell culture as of the Effective Date of
this Agreement, anticipated dosing information, the profile of the leading
non-transgenic recombinant human [*]produced in cell culture as of the
Effective Date of this Agreement which has been accepted by Regulatory
Authorities, product quality appropriate for its use in the intended
indications, quality control provisions, cost parameters, and any other
parameters agreed to by the Parties.
40
*Confidential Treatment has been requested for the marked portion.
<PAGE>
Schedule B
GTC Patent Rights
[*]
41
*Confidential Treatment has been requested for the marked portion.
<PAGE>
Schedule C
GTC Development Plan
[*]
42
*Confidential Treatment has been requested for the marked portion.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> SEP-28-1997
<CASH> 5,346
<SECURITIES> 0
<RECEIVABLES> 7,529
<ALLOWANCES> 373
<INVENTORY> 718
<CURRENT-ASSETS> 20,040
<PP&E> 31,471
<DEPRECIATION> 5,889
<TOTAL-ASSETS> 66,671
<CURRENT-LIABILITIES> 26,478
<BONDS> 8,461
0
0
<COMMON> 174
<OTHER-SE> 30,734
<TOTAL-LIABILITY-AND-EQUITY> 66,671
<SALES> 45,266
<TOTAL-REVENUES> 45,266
<CGS> 39,146
<TOTAL-COSTS> 50,493
<OTHER-EXPENSES> (162)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (733)
<INCOME-PRETAX> (5,798)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,798)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,823)
<EPS-PRIMARY> (.34)
<EPS-DILUTED> (.34)
</TABLE>
